SECOND DIVISION [G.R. No. 135657. January 17, 2001] JOSE V. LAGON, petitioner, vs. HOOVEN COMALCO INDUSTRIES, INC., respondent.

D E C I S I O N BELLOSILLO, J.:This petition for review on certiorari seeks to set aside the Decision of the Court of Appeals of 28 April 1997 which in turn set aside the decision of the Regional Trial Court of Davao City and ordered petitioner Jose V. Lagon to pay respondent Hooven Comalco Industries, Inc. (HOOVEN) the amount of P69,329.00 with interest at twelve percent (12%) per annum computed from the filing of the complaint until fully paid, plus attorney’s fees and costs,[1] as well as the Resolution of the appellate court denying reconsideration thereof.[2]

Petitioner Jose V. Lagon is a businessman and owner of a commercial building in Tacurong, Sultan Kudarat. Respondent HOOVEN on the other hand is a domestic corporation known to be the biggest manufacturer and installer of aluminum materials in the country with branch office at E. Quirino Avenue, Davao City.Sometime in April 1981 Lagon and HOOVEN entered into two (2) contracts, both denominated Proposal, whereby for a total consideration of P104,870.00 HOOVEN agreed to sell and install various aluminum materials in Lagon’s commercial building in Tacurong, Sultan Kudarat.[3] Upon execution of the contracts, Lagon paid HOOVEN P48,00.00 in advance.[4]

On 24 February 1987 respondent HOOVEN commenced an action for sum of money with damages and attorney’s fees against petitioner Lagon before the Regional Trial Court of Davao City. HOOVEN alleged in its complaint that on different occasions, it delivered and installed several construction materials in the commercial building of Lagon pursuant to their contracts; that the total cost of the labor and materials amounted to P117,329.00 out of which P69,329.00 remained unpaid even after the completion of the project; and, despite repeated demands, Lagon failed and refused to liquidate his indebtedness. HOOVEN also prayed for attorney’s fees and litigation expenses, and in support thereof, presented its OIC, Alberto Villanueva, and its employee, Ernesto Argente, and other witnesses, as well as several documentary evidence consisting mainly of the two (2) proposals, invoices and delivery receipts.Lagon, in his answer, denied liability and averred that HOOVEN was the party guilty of breach of contract by failing to deliver and install some of the materials specified in the proposals; that as a consequence he was compelled to procure the undelivered materials from other sources; that as regards the materials duly delivered and installed by HOOVEN, they were fully paid. He counterclaimed for actual, moral, exemplary, temperate and nominal damages, as well as for attorney’s fees and expenses of litigation.On 9 October 1987, upon request of both parties, the trial court conducted an ocular inspection of Lagon’s commercial building to determine whether the items alleged in the complaint and appearing in the invoices and delivery receipts had

been delivered and installed on the premises. The result of the ocular inspection was -1) with respect to the items covered by Exhibit “A” and submarkings that there are only seventeen (17) light diffusers, 13 in the ceiling of the ground and 4 on the mezzanine (Ocular Inspection, TSN, pp. 5 to 6); 2) on Exhibit “B” and submarkings, there are only twenty-three (23) light aluminum boxes, 14 aluminum boxes in the ceiling of the mezzanine and 9 on the ceiling of the ground floor (Ocular Inspection, TSN, p. 7); 3) on Exhibit “C-1,” the items are missing in the area where they were supposed to be installed; 4) on Exhibit “C-2,” admitted by defendant Lagon when he stated that “I will admit that these were installed by the plaintiff but I do not know exactly the materials, but I really accept that these were installed sometime in 1981, before the occupation of the DBP. But I have paid that already in 1981. I could not identify the materials delivered in 1981 because I do not know the exact names of those materials.” (Ocular Inspection, TSN, p. 12); 5) on Exhibit “C-2,” the glasses are not tinted but plain white; on Exhibit “C-3,” the materials cannot be formed (sic) in the place where they are supposed to be (Ocular Inspection, TSN, p.7); 6) Exhibit “D” and “D-1,” that the materials were supplied by plaintiff but they did not install them. It was the defendant who caused the installation thereof (Ocular Inspection, TSN, p. 13.); and 7) Exhibit “E-1,” as NU- Main and Cross-Runners and supplied by plaintiff but plaintiff did not install. They had it installed (Ocular Inspection, TSN, p. 14).In due course the trial court rendered a decision partly on the basis of the result of the ocular inspection finding that the total actual deliveries and installations made by HOOVEN cost P87,140.00. Deducting therefrom P48,000.00 which Lagon paid in advance upon execution of their contracts with no further payments appearing to have been made thereafter, only P39,140.00 remained unpaid and where Lagon incurred in delay. The trial court also awarded HOOVEN P3,255.00 as attorney’s fees, but sustained Lagon’s counterclaims and awarded him P26,120.00 as actual damages representing the value of the undelivered and uninstalled materials, and P30,000.00 as attorney’s fees in addition to litigation expenses of P45,534.50. According to the court a quo[5]–As a result of the partial breach of contract on plaintiff's (Hooven Comalco) part, the defendant is entitled to actual damages only to the extent of the undelivered materials and undone labor or to the amount of P26,120.00. This P26,120.00 will be partially offsetted (sic) to the P39,140.00 unpaid balance of the defendant (Lagon), so that the difference that remain (sic) payable to plaintiff is P13,020.00. Evidence is insufficient to show that bad faith existed in the filing of the instant complaint for collection against the defendant. Plaintiff's obstinate conduct in prosecuting its claim spending for litigation expenses and for its lawyers negate the existence of bad faith. The fact alone that the findings of fact show an unpaid account of the defendant is proof that the complaint is not completely unfounded though evidence shows also that plaintiff is guilty of partial breach of contract by reason of failure to completely deliver and install the materials defendant ordered pursuant to the contract so that plaintiff is liable for damages. As plaintiff acted in good faith in the filing of the instant complaint in the

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belief that it has a valid cause of action against the defendant to enforce its claim, engaging a lawyer to prosecute it, plaintiff is entitled to a reasonable attorney’s fees equivalent to 25% of the collectible amount of P13,020.00 or the amount of P3,225.00. Defendant's claim of attorney’s fees in the amount of P152,629.15 is in the opinion of the court clearly unreasonable and unconscionable considering the nature of the action and the amount involved. The court has the power to reduce it to render it reasonable and conscionable whether the contract for attorney's fees is written or oral. The attorney’s fees is fixed at P30,000.00. The defendant presented evidence of litigation expenses incurred in the course of the trial for plane fare of its lawyer in coming to Davao City from Manila from 1987 up to July 1990 in the total amount of P34,730.50 as evidenced by Exhibit “11” to “11-E.” The records show that the defendant’s counsel came to Davao City from Manila to attend eleven (11) hearings of the case and the plane fare from 1987 up to August, 1989 is P2,524.50 and from August 1989 to June 1990 is P3,007.50. Hotel expenses of defendant’s counsel at the Maguindanao Hotel where he was billeted everytime he came to Davao City to attend the trial amounted to P11,824.00 as evidenced by Exhibit “17,” the certification issued by the said hotel management. So that the total amount of the actual damage suffered by defendant is P45,534.50. Said amount of P45,534.50 is partially offsetted (sic) by the amount of P13,020.00 representing the unpaid obligation of the defendant to the plaintiff so that the plaintiff is still liable to pay the defendant the difference in the amount of P32,514.50.Both parties appealed to the Court of Appeals. In its Decision of 28 April 1997, the appellate court set aside the judgment of the trial court and resolved the case in favor of HOOVEN. It held that the trial court erred in relying solely on the results of the ocular inspection since the delivery and installation of the materials in question started as early as 1981, while the ocular inspection was conducted only in 1987 or six (6) years later, after the entire mezzanine was altered and the whole building renovated. The appellate court also stressed that the testimonies of HOOVEN's witnesses were straightforward, categorical and supported by documentary evidence of the disputed transactions, and that all Lagon could offer was a mere denial, uncorroborated and self-serving statements regarding his transactions with HOOVEN. The decretal portion of the assailed decision of the Court of Appeals reads -ACCORDINGLY, finding the decision of August 26, 1991 appealed from afflicted by reversible errors, the same is hereby SET ASIDE, and a new one entered ordering the defendant-appellant (Lagon) to pay plaintiff-appellant (Hooven Comalco):The amount of P69,329.00 plus interest of 12% per annum computed from the date of the filing of the complaint, until fully paid.Fifteen percent (15%) of the amount due, as and by way of attorney’s fees.Defendant-appellant to pay costs.Petitioner's motion for reconsideration having been denied he now hopes to secure relief from this Court by contending that: (a) The Court of Appeals erred in holding that the trial court could not rely on the results of the ocular inspection

conducted on his commercial building in Tacurong, Sultan Kudarat; and, (b) The assailed decision of the appellate court is based on speculations and contrary to the evidence adduced during the trial.The arguments in the petition ultimately boil down to the sole issue of whether all the materials specified in the contracts had been delivered and installed by respondent in petitioner’s commercial building in Tacurong, Sultan Kudarat. The question is basically factual involving as it does an evaluation of the conflicting evidence presented by the contending parties, including the existence and relevance of specific surrounding circumstances, to determine the truth or falsity of alleged facts.While factual issues are not within the province of this Court, as it is not a trier of facts and is not required to examine or contrast the oral and documentary evidence de novo,[6] nevertheless, the Court has the authority to review and, in proper cases, reverse the factual findings of lower courts in these instances: (a) when the findings of fact of the trial court are in conflict with those of the appellate court; (b) when the judgment of the appellate court is based on misapprehension of facts; and, (c) when the appellate court manifestly overlooked certain relevant facts which, if properly considered, would justify a different conclusion.[7] This case falls squarely within the foregoing exceptions.Before delving into the merits of this case, we find it necessary to describe and detail the nature and contents of the vital documentary exhibits upon which respondent HOOVEN based its claims, thus -Exhibit “F” - Undated Proposal:I. For the supply of materials and installation of suspended aluminum ceiling runners:Area: 2,290 sq. ft.Materials: NU- Main & Cross runners, NU-5 Perimeter mouldings G.I. wire hangers, Aluminum straps stiffeners, Blind Rivets and P14,110.00 Labor charge 4,230.00 18,440.00II. One (1) set: 65 x 68 YP aluminum cladding 1,150.00 P19,590.00Delivery and Installation charge 1,860.00 P21,450.00Exhibit “F-1” – Proposal dated 3 April 1981“Hooven” Aluminum Casement Windows Anolok Finish Manually Operated, with 6.0 mm Bronzepane Tinted GlassFive (5) sets: 65” x 126-1/2” (w/ transom), One (1) set: 65” x 126-1/2” (w/ AC provision), Two (2) sets: 39-1/2” x 125-1/2” -do-, One (1) set: 39-1/2” x 87” -do-, One (1) set: 39-1/2” x 223” –do, -One (1) 65” x 57-1/2” (w/ transom), One (1) set: 65” x 4” -do-“Hooven” Aluminum Entrances and Fixed Windows Anolok Finish, with 6.0 mm Bronzepane Tinted GlassOne (1) set: 100-1/2” x 76-1/2”, double sash, double acting swing door, with transom. Two (2) sets: 80” x 278”, fixed panels 21,740.00“Hooven” Aluminum Sliding Windows Fabricated From SD-Sections, Anolok Finish, with 6.0 mm Bronzepane Tinted GlassOne (1) set: 54 x 191 One (1) set: 45 x 302 11,650.00 75,920.00Add: Delivery and Installation charge 7,500.00 P83,420.00Exhibit “A” – Invoice No. 11094 dated 29 December 1982Eighty Six (86) Pieces, 2.0 mm Hishilite P3,440.00 DiffusersExhibit “B” – Invoice No. 11095 dated 29 December 1982Forty-Three Pieces: For the Supply and Installation of Light Boxes Fabricated from GA. 032 Aluminum Plain Sheet Delivery and Installers’ subsistence P5,718.50Exhibit “C” – Invoice No. 14349 dated 29 December 1984 Five (5) sets 1.651m 3.213m Hooven Aluminum Casement windows, Anolok finish, manually operated with 6.0 Bronzepane tinted glass.

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One (1) set 1.651 m 3.367m - do - with a/c provisionTwo (2) sets 1.00 m 3.188m - do - - do -One (1) set 1.00 m 2.210 m - do - - do -One (1) set 1.00 m 5.664 m - do - - do -One (1) set 1.651m 1.461 m - do - - do - with transomOne (1) set 1.651m 1.880 m - do - with transom One (1) set 1.651m 1.524 m - do - - do - One (1) et 2.553m 1.943 m Hooven aluminum double sash, double acting swing door, with transom, with 6.0 mm Bronze-pane tinted glass.Two (2) sets 2.032m 7.061 m Fixed windows, Anolok finish. One (1) set .737 m 7.061 m Aluminum tubulars with aluminum YP-100 cladding, Anolok finish. One (1) set 1.143m 4.851m Hooven aluminum sliding windows fabricated from SD sections, Anolok finish, with 6.0 mm Bronzepane tinted glass, with 1.88 m tubular posts.One (1) set 1.143m 7.671m - do P75,291.83 4% tax 3,011.67 78,303.50 Delivery & Subs. 7,500.00 P85,803.50Exhibit “D” – Invoice No. 14265 dated 29 September 1984 For the supply of materials and installation of aluminum stucco embossed sheet on spiral staircase P5,310.00Exhibit “E” – Invoice No. 14264 dated 29 November 1984For the supply of materials and installation of suspended aluminum ceiling system.Materials: NU-4 main and cross runners, NU-5 perimeter mouldings GI wire hangers, Alum strap stiffeners, Blind rivets and screws P17,057.00Exhibit “A-1” – Delivery Receipt dated 9 June 1981Twenty (20) pieces Light boxes fabricated from aluminum sheets, Forty (40) pieces 2.0 mm x 24” x 24” Hishilite Diffusers, Lump sum cost including discount and Delivery and, Installer ,Subsistence P4,340.00Exhibit “A-2” – Delivery Receipt dated 8 August 1981Twenty (20) pieces Light boxes fabricated from .032” aluminum plain sheetTwenty Seven (27) 2.0 mm x 24” x 24” Hishilite Diffusers, Add: Delivery & Installers Subsistence P180.00Exhibit “A-3” – Delivery Receipt, dated 8 December 198119 pcs. 2.0 mm x 2” x2” Hishilite Diffusers P40.00Exhibit “B-1” – Delivery Receipt dated 25 June 1981 Additional three (3) pcs. Light boxes fabricated from .032 Aluminum sheets P140.00Exhibit “C-1” – Delivery Receipt dated 25 August 1983To change alum tubular frames for sliding windows (item 10 & 11) from 45” L x to 94” x 74.”To change width of one (1) set: item 1 from 126-1/2 to 132-1/2.To add: one (1) set 65”H x 60” aluminum casement windows with 6.0 mm tinted glass.To extend alum tubulars of fixed windows on 2nd floor by 29”L and installation of YP-aluminum cladding P8,640.00Exhibit “C-2” – Delivery Receipt dated 25 August 1983 Hooven Alum Casement Windows Anolok Finish Manually Operated with 6.0 mm Bronzepane Tinted Glass:Five (5) sets: 65” x 126-1/2” with transom, One (1) set: 65” x 126-1/2 with AC provision, Two (2) sets: 39-1/2 x 125-1/2 - do -, One (1) set: 39-1/2” x 87” - do -,One (1) set: 39-1/2” x 223” - do -, One (1) set: 65” x 57-1/2” with transom, One (1) set: 65” x 74” - do - P42,530.00Hooven Alum Entrances & Fixed Windows Anolok Finish with 6.0 mm Bronzepane Tinted Glass:One (1) set: 100-1/2 x 76-1/2, double sash, double acting swing door, with transom, Two (2) sets: 80” x 278” fixed panels P21,740.00Exhibit “C-3” – Delivery Receipt dated 25 August 1983 Hoven Alum Sliding Windows Fabricated from SD Sections Anolok Finish with 6.0 mm Bronzepane Tinted Glass:One (1) set: 45” x 191”One (1) set: 45” x 302” P11,650.00Add: Delivery and Installation 7,500.00Less: 7% Discount 6,256.50 P77,163.50Exhibit “D-1” – Delivery Receipt dated 25 August 1983

For the supply of materials and installation of aluminum stucco embossed sheet on spiral staircase: One (1) set 32” H x 304” WL P5,310.00Exhibit “E-1” – Delivery Receipt dated 25 August 1983NU- main and cross runners, NU-5 Perimeter mouldings G.I. Wire Hangers, Aluminum straps stiffeners, Blind rivets and ,screws P17,057.00We have carefully and diligently considered the foregoing exhibits and we are fully convinced that the mass of documentary evidence adduced by respondent suffers from patent irregularities and material inconsistencies on their faces, raising serious questions requiring cogent explanations. These flaws inevitably deplete the weight of its evidence, with the result that for lack of the requisite quantum of evidence, respondent dismally failed in the lower court to discharge its burden necessary to prevail in this case.Firstly, the quantity of materials and the amounts stated in the delivery receipts do not tally with those in the invoices covering them, notwithstanding that, according to HOOVEN OIC Alberto Villanueva, the invoices were based merely on the delivery receipts.[8] For instance, only eleven (11) items were listed in Exhs. "C-2" and "C-3" with a total worth of P77,163.50. But in Exh. "C," which was the invoice for Exhs. "C-2" and "C-3," there were thirteen (13) items enumerated for a total worth of P85,803.50. If Exh. "C" is supposed to be based on Exhs. "C-2" and "C-3," we cannot understand the apparent discrepancy in the items listed in those documents when they all referred to the same materials.Secondly, the total value of the materials as reflected in all the invoices is P117,329.00 while under the delivery receipts it is only P112,870.50, or a difference of P4,458.00. Moreover, the materials listed in the two (2) Proposals, upon which HOOVEN based its claims, is only for the total sum of P104,870.00. Curiously then, why would the materials supposedly delivered by HOOVEN be more than what was contracted and purchased by Lagon? This circumstance underscores the need to reexamine the strength, if not weakness, of respondent’s cause.Thirdly, under the Proposals HOOVEN bound itself to invoice the materials "when complete and ready for shipment." Oddly, the records show that the invoices were prepared several years after the materials were allegedly delivered and installed completely on petitioner’s building. Alberto Villanueva testified that their project with petitioner was completed sometime in August 1981 and that thereafter no further installation was done in the building.[9] But the disputed invoices marked Exhs. "A" and "B" were prepared only on 29 December 1982; Exhs. "C" and "D" were prepared only on 29 December 1984; and, Exh. "E" was prepared only on 29 November 1984. As for the delivery receipts, Exhs. "C-1," "C-2," "C-3" and "E-1" were prepared only on 25 August 1983 or two (2) years after the completion of the project, while Exh. "A-3" was prepared only on 8 December 1981 or some four (4) months after the date of completion.Even more strange is the fact that HOOVEN instituted the present action for collection of sum of money against Lagon only on 24 February 1987, or more than five (5) years after the supposed completion of the project. Indeed, it is contrary to common experience that a creditor would take its own sweet time in collecting

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its credit, more so in this case when the amount involved is not miniscule but substantial.Fourthly, the demand letter of 25 August 1983[10] sent to petitioner by respondent further betrays the falsity of its claims -Dear Mr. Lagon:The bearer, Mr. Fermin Piñero, is an authorized representative of this company. He will arrange for your acceptance of the complete aluminum and glass installation we have undertaken for your building. He has with him the delivery receipts for your signature so with a statement of account showing your balance. Kindly favor us with a partial payment to cover our operation costs. Also kindly relay to him all other installations you wish us to undertake.Hoping for your favorable action, we shall remain. Very Truly Hooven Comalco Industries, Inc. Davao (Sgd.) Alberto P. VillanuevaIf, as claimed by HOOVEN, all the materials were completely delivered and installed in petitioner’s building as early as August 1981, why then would it demand partial payment only two (2) years later? This circumstance is very significant especially considering that under the Proposals the terms of payment should be 50% down "and the balance to be paid in full" upon completion. Moreover, it is surprising that the partial payment demanded was only "to cover operation costs." As correctly observed by petitioner, demand for payment of operation costs is typical of a still on-going project where the contractor needs funds to defray his expenses. If there was complete installation, why would respondent demand payment for operation costs only? Why not enforce the whole amount of indebtedness? All these clearly suggest that there was no full and complete delivery and installation of materials ordered by petitioner.Fifthly, all the delivery receipts did not appear to have been signed by petitioner or his duly authorized representative acknowledging receipt of the materials listed therein. A closer examination of the receipts clearly showed that the deliveries were made to a certain Jose Rubin, claimed to be petitioner’s driver, Armando Lagon, and a certain bookkeeper. Unfortunately for HOOVEN, the identities of these persons were never been established, and there is no way of determining now whether they were indeed authorized representatives of petitioner. Paragraph 3 of each Proposal is explicit on this point -3. x x x the seller’s responsibility ends with delivery of the merchandise to carrier in good condition, to buyer, or to buyer’s authorized "Receiver/Depository" named on the face of this proposal(underscoring supplied).As above specifically stated, deliveries must be made to the buyer or his duly authorized representative named in the contracts. In other words, unless the buyer specifically designated someone to receive the delivery of materials and his name is written on the Proposals opposite the words "Authorized Receiver/Depository," the seller is under obligation to deliver to the buyer only and to no other person; otherwise, the delivery would be invalid and the seller would not be discharged from liability. In the present case, petitioner did not name any person in the Proposals who would receive the deliveries in his behalf, which meant that HOOVEN was bound to deliver exclusively to petitioner.Sixthly, it is also obvious from the contested delivery receipts that some important details were not supplied or were left in blank, i.e., truck numbers, persons who delivered the materials, invoice and s. o. numbers. The persons who delivered the materials were potential witnesses who could shed light on the circumstances surrounding the alleged deliveries of the materials to petitioner. Moreover, it could have been easier for HOOVEN to pinpoint responsibility to any of its employees for the non-delivery of the materials.We are not unaware of the slipshod manner of preparing receipts, order slips and invoices, which unfortunately has become a common business practice of traders

and businessmen. In most cases, these commercial forms are not always fully accomplished to contain all the necessary information describing the whole business transaction. The sales clerks merely indicate a description and the price of each item sold without bothering to fill up all the available spaces in the particular receipt or invoice, and without proper regard for any legal repercussion for such neglect. Certainly, it would not hurt if businessmen and traders would strive to make the receipts and invoices they issue complete, as far as practicable, in material particulars. These documents are not mere scraps of paper bereft of probative value but vital pieces of evidence of commercial transactions. They are written memorials of the details of the consummation of contracts.Given this pathetic state of respondent's evidence, how could it be said that respondent had satisfactorily proved its case? Essentially, respondent has the burden of establishing its affirmative allegations of complete delivery and installation of the materials, and petitioner’s failure to pay therefor. In this regard, its evidence on its discharge of that duty is grossly anemic. We emphasize that litigations cannot be properly resolved by suppositions, deductions, or even presumptions, with no basis in evidence, for the truth must have to be determined by the hard rules of admissibility and proof.The Court of Appeals however faulted the trial court for supposedly relying solely on the results of the ocular inspection on the premises, which were not conclusive since the inspection was conducted several years after the disputed materials were allegedly installed therein.We disagree. The ocular inspection was made by the judge himself, at the request of both petitioner and respondent, for the exclusive purpose of determining whether the materials subject of this case were actually delivered and installed. There is therefore no basis to give little evidentiary value on the results of the ocular inspection, as the Court of Appeals would, and charge the trial court with error for relying thereon. It is now rather late for any of the parties to disclaim them, especially when they are not in his or its favor. Furthermore, a cursory reading of the decision of the court a quo will at once show that it was not premised solely on the results of the ocular inspection but was likewise predicated on other evidence presented by the parties and well-considered facts and circumstances discussed by the trial court in its ratio decidendi. We cannot ignore the factual findings of the trial court, which must carry great weight in the evaluation of evidentiary facts, and in the absence of any indication showing grave error committed by trial court, the appellate court is bound to respect such findings of fact.We hasten to add however that petitioner is not entirely free from any liability to respondent. Petitioner admitted the delivery of materials under Exhs. "A" and its submarkings, "B" and its submarkings, "D," "D-1" and "E." With respect to Exh. "C-2," petitioner acknowledged his obligation under the first heading, Items Nos. 3, 4 and 5, and the second heading, and denied the rest. Consequently, he should be made liable therefor in the total amount of P58,786.65. From this amount, petitioner’s down payment of P48,000.00 should be deducted.

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It is insisted by petitioner in his appeal brief filed before the Court of Appeals that the second item under the second heading of Exh. "C-2" should be excluded in the computation since he never admitted liability therefor.We are not persuaded. The transcript of stenographic notes shows that during the ocular inspection counsel for respondent manifested in effect that petitioner admitted the delivery and installation of the second item in his building, and petitioner did not interpose any objection to respondent's manifestation –ATTY. QUIÑONES: We would like to make of record that defendant (Lagon) admits that plaintiff (Hooven Comalco) delivered and installed Item No. 1 under the second column of Exhibit “C-2” which is the front door of the ground floor.ATTY. RICO: Defendant however adds that these were installed in 1981 and had already paid for the said item.ATTY. QUIÑONES: I would like to make of record also that defendant admits the delivery and installation of Item No. 2 under the second column of Exhibit “C-2” as having been delivered and installed by the plaintiff in 1981 with the qualification, however, that he had already paid the same.COURT: Are you stating that all these installed items on the ground floor were all paid by you?MR. LAGON: Yes, Your Honor.[11]

Petitioner cannot now be heard to complain against its inclusion in the computation of his liability since his silence virtually amounted to acquiescence. The silence of one of the contracting parties and his failure to protest against the claims of the other party, when he is chargeable with the duty to do so, strongly suggest an admission of the veracity and validity of the other party’s claims.In sum, petitioner’s total liability to respondent may be computed as follows:(1) Items under Exh. “A,” consisting of 17light diffusers at P40.00 each P 680.00(2) Items under Exh. “B,” consisting of 23light boxes at P40.00 each 3,220.00(3) Third, fourth and fifth items under the first heading of Exh. "C-2" which on the basis of their measurements constitute only 1/3 of the total costs of materials listed therein 14,176.65(4) Items under the second heading of Exh. “C-2” 21,740.00(5) Items under Exhs. “D” and “D-1” 4,860.00(6) Items under Exh. “E- 14,110.00 P58,786.65Less: Stipulated 7% discount 4,408.99 P54,377.66Less: Advance payment made by petitioner to Hooven Comalco 48,000.00Unpaid Balance of petitioner P6,377.66Notwithstanding the breach of contract by respondent in failing to deliver and install in the premises of petitioner all the stipulated materials, we nevertheless accede to the right of respondent to recover the unpaid balance from petitioner for the materials actually delivered.The next point of inquiry is the propriety of awarding damages, attorney’s fees and litigation expenses.We are not in accord with the trial court’s ruling that petitioner is entitled to actual damages to the extent of the undelivered materials and undone labor in the amount of P26,120.00. There is no proof that petitioner already paid for the value of the undelivered and uninstalled materials to respondent. Therefore, petitioner may not be deemed to have suffered any such damage. We have declared in no uncertain terms that actual or compensatory damages cannot be presumed but must be proved with reasonable degree of certainty.[12] A court cannot rely on speculations, conjectures or guesswork as to the fact of damage but must depend upon competent proof that they have indeed been suffered by the injured party

and on the basis of the best evidence obtainable as to the actual amount thereof.[13] It must point out specific facts that could provide the gauge for measuring whatever compensatory or actual damages were borne.But we agree with petitioner that he is entitled to moral damages. HOOVEN's bad faith lies not so much on its breach of contract - as there was no showing that its failure to comply with its part of the bargain was motivated by ill will or done with fraudulent intent - but rather on its appalling temerity to sue petitioner for payment of an alleged unpaid balance of the purchase price notwithstanding knowledge of its failure to make complete delivery and installation of all the materials under their contracts. It is immaterial that, after the trial, petitioner was found to be liable to respondent to the extent ofP6,377.66. Petitioner's right to withhold full payment of the purchase price prior to the delivery and installation of all the merchandise cannot be denied since under the contracts the balance of the purchase price became due and demandable only upon the completion of the project. Consequently, the resulting social humiliation and damage to petitioner's reputation as a respected businessman in the community, occasioned by the filing of this suit provide sufficient grounds for the award of P50,000.00 as moral damages.Moreover, considering the fact that petitioner was drawn into this litigation by respondent and was compelled to hire an attorney to protect and defend his interest, and taking into account the work done by said attorney throughout the proceedings, as reflected in the record, we deem it just and equitable to award attorney's fees for petitioner in the amount of P30,000.00.[14] In addition, we agree with the trial court that petitioner is entitled to recover P46,554.50 as actual damages including litigation expenses as this amount is sufficiently supported by the evidence.[15]

WHEREFORE, the assailed Decision of the Court of Appeals dated 28 April 1997 is MODIFIED. Petitioner Jose V. Lagon is ordered to pay respondent Hooven Comalco Industries, Inc., P6,377.66 representing the value of the unpaid materials admittedly delivered to him. On the other hand, respondent is ordered to pay petitioner P50,000.00 as moral damages, P30,000.00 as attorney's fees andP46,554.50 as actual damages and litigation expenses.SO ORDERED.

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FIRST DIVISION [G.R. No. 119255. April 9, 2003] TOMAS K. CHUA, petitioner, vs. COURT OF APPEALS and ENCARNACION VALDES-CHOY, respondents.D E C I S I O NCARPIO, J.:

The Case

This is a petition for review on certiorari seeking to reverse the decision[1] of the Court of Appeals in an action for specific performance[2] filed in the Regional Trial Court[3] by petitioner Tomas K. Chua (“Chua”) against respondent Encarnacion Valdes-Choy (“Valdes-Choy”). Chua sought to compel Valdes-Choy to consummate the sale of her paraphernal house and lot in Makati City. The Court of Appeals reversed the decision[4] rendered by the trial court in favor of Chua.

The Facts

Valdes-Choy advertised for sale her paraphernal house and lot (“Property”) with an area of 718 square meters located at No. 40 Tampingco Street corner Hidalgo Street, San Lorenzo Village, Makati City. The Property is covered by Transfer Certificate of Title No. 162955 (“TCT”) issued by the Register of Deeds of Makati City in the name of Valdes-Choy. Chua responded to the advertisement. After several meetings, Chua and Valdes-Choy agreed on a purchase price of P10,800,000.00 payable in cash.

On 30 June 1989, Valdes-Choy received from Chua a check for P100,000.00. The receipt (“Receipt”) evidencing the transaction, signed by Valdes-Choy as seller, and Chua as buyer, reads:

30 June 1989R E C E I P TRECEIVED from MR. TOMAS K. CHUA PBCom Check No. 206011 in the amount of ONE HUNDRED THOUSAND PESOS ONLY (P100,000.00) as EARNEST MONEY for the sale of the property located at 40 Tampingco cor. Hidalgo, San Lorenzo Village, Makati, Metro Manila (Area : 718 sq. meters).The balance of TEN MILLION SEVEN HUNDRED THOUSAND (P10,700,000.00) is payable on or before 15[5] July 1989. Capital Gains Tax for the account of the seller. Failure to pay balance on or before 15 July 1989 forfeits the earnest money. This provided that all papers are in proper order.[6]

CONFORME: ENCARNACION VALDES Seller TOMAS K. CHUA                      Buyer                                                                      x x x.[7]

In the morning of 13 July 1989, Chua secured from Philippine Bank of Commerce (“PBCom”) a manager’s check for P480,000.00. Strangely, after securing the manager’s check, Chua immediately gave PBCom a verbal stop payment order claiming that this manager’s check for P480,000.00 “was lost and/or misplaced.”[8] On the same day, after receipt of Chua’s verbal order, PBCom Assistant Vice–President Julie C. Pe notified in writing [9] the PBCom Operations Group of Chua’s stop payment order.

In the afternoon of 13 July 1989, Chua and Valdes-Choy met with their respective counsels to execute the necessary documents and arrange the payments.[10] Valdes-Choy as vendor and Chua as vendee signed two Deeds of Absolute Sale (“Deeds of Sale”). The first Deed of Sale covered the house and lot for the purchase price of P8,000,000.00.[11] The second Deed of Sale covered the furnishings, fixtures and movable properties contained in the house for the purchase price of P2,800,000.00.[12] The parties also computed the capital gains tax to amount to P485,000.00.

On 14 July 1989, the parties met again at the office of Valdes-Choy’s counsel. Chua handed to Valdes-Choy the PBCom manager’s check for P485,000.00 so Valdes-Choy could pay the capital gains tax as she did not have sufficient funds to pay the tax. Valdes-Choy issued a receipt showing that Chua had a remaining balance of P10,215,000.00 after deducting the advances made by Chua. This receipt reads:

July 14, 1989Received from MR. TOMAS K. CHUA PBCom. Check No. 325851 in the amount of FOUR HUNDRED EIGHTY FIVE THOUSAND PESOS ONLY (P485,000.00) as Partial Payment for the sale of the property located at 40 Tampingco Cor. Hidalgo St., San Lorenzo Village, Makati, Metro Manila (Area 718 sq. meters), covered by TCT No. 162955 of the Registry of Deeds of Makati, Metro Manila.The total purchase price of the above-mentioned property is TEN MILLION EIGHT HUNDRED THOUSAND PESOS only, broken down as follows:SELLING PRICE P10,800,000.00EARNEST MONEY P100,000.00PARTIAL PAYMENT 485,000.00 585,000.00BALANCE DUE TO ENCARNACION VALDEZ-CHOY P10,215,000.00PLUS P80,000.00 for documentary stamps paid in advance by seller 80,000.00 P10,295,000.00On the same day, 14 July 1989, Valdes-Choy, accompanied by Chua, deposited the P485,000.00 manager’s check to her account with Traders Royal Bank. She then purchased a Traders Royal Bank manager’s check for P480,000.00 payable to the Commissioner of Internal Revenue for the capital gains tax. Valdes-Choy and Chua returned to the office of Valdes-Choy’s counsel and handed the Traders Royal Bank check to the counsel who undertook to pay the capital gains tax. It was then also that Chua showed to Valdes-Choy a PBCom manager’s check for P10,215,000.00 representing the balance of the purchase price. Chua, however, did not give this PBCom manager’s check to Valdes-Choy because the TCT was still registered in the name of Valdes-Choy. Chua required that the Property be registered first in his name before he would turn over the check to Valdes-Choy. This angered Valdes-Choy who tore up the Deeds of Sale, claiming that what Chua required was not part of their agreement.[14]

On the same day, 14 July 1989, Chua confirmed his stop payment order by submitting to PBCom an affidavit of loss[15] of the PBCom Manager’s Check for P480,000.00. PBCom Assistant Vice-President Pe, however, testified that the manager’s check was nevertheless honored because Chua subsequently verbally advised the bank that he was lifting the stop-payment order due to his “special arrangement” with the bank.[16]

On 15 July 1989, the deadline for the payment of the balance of the purchase price, Valdes-Choy suggested to her counsel that to break the impasse Chua should deposit in escrow the P10,215,000.00 balance.[17] Upon such deposit, Valdes-Choy was willing to cause the issuance of a new TCT in the name of Chua even without receiving the balance of the purchase price. Valdes-Choy believed this was the only way she could protect herself if the certificate of title is transferred in the name of the buyer before she is fully paid. Valdes-Choy’s counsel promised to relay her suggestion to Chua and his counsel, but nothing came out of it.On 17 July 1989, Chua filed a complaint for specific performance against Valdes-Choy which the trial court dismissed on 22 November 1989. On 29 November 1989, Chua re-filed his complaint for specific performance with damages. After trial in due course, the trial court rendered judgment in favor of Chua, the dispositive portion of which reads:Applying the provisions of Article 1191 of the new Civil Code, since this is an action for specific performance where the plaintiff, as vendee, wants 

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to pursue the sale, and in order that the fears of the defendant may be allayed and still have the sale materialize, judgment is hereby rendered:I. 1. Ordering the defendant to deliver to the Court not later than five (5) days from finality of this decision:a. the owner’s duplicate copy of TCT No. 162955 registered in her name;b. the covering tax declaration and the latest tax receipt evidencing payment of real estate taxes;c. the two deeds of sale prepared by Atty. Mark Bocobo on July 13, 1989, duly executed by defendant in favor of the plaintiff, whether notarized or not; and2. Within five (5) days from compliance by the defendant of the above, ordering the plaintiff to deliver to the Branch Clerk of Court of this Court the sum of P10,295,000.00 representing the balance of the consideration (with the sum of P80,000.00 for stamps already included);3. Ordering the Branch Clerk of this Court or her duly authorized representative:a. to make representations with the BIR for the payment of capital gains tax for the sale of the house and lot (not to include the fixtures) and to pay the same from the funds deposited with her;b. to present the deed of sale executed in favor of the plaintiff, together with the owner‘s duplicate copy of TCT No. 162955, real estate tax receipt and proof of payment of capital gains tax, to the Makati Register of Deeds;c. to pay the required registration fees and stamps (if not yet advanced by the defendant) and if needed update the real estate taxes all to be taken from the funds deposited with her; andd. surrender to the plaintiff the new Torrens title over the property;4. Should the defendant fail or refuse to surrender the two deeds of sale over the property and the fixtures that were prepared by Atty. Mark Bocobo and executed by the parties, the Branch Clerk of Court of this Court is hereby authorized and empowered to prepare, sign and execute the said deeds of sale for and in behalf of the defendant;5. Ordering the defendant to pay to the plaintiff;a. the sum of P100,000.00 representing moral and compensatory damages for the plaintiff; andb. the sum of P50,000.00 as reimbursement for plaintiff’s attorney’s fees and cost of litigation.6. Authorizing the Branch Clerk of Court of this Court to release to the plaintiff, to be taken from the funds said plaintiff has deposited with the Court, the amounts covered at paragraph 5 above;7. Ordering the release of the P10,295,000.00 to the defendant after deducting therefrom the following amounts:a. the capital gains tax paid to the BIR;b. the expenses incurred in the registration of the sale, updating of real estate taxes, and transfer of title; andc. the amounts paid under this judgment to the plaintiff.8. Ordering the defendant to surrender to the plaintiff or his representatives the premises with the furnishings intact within seventy-two (72) hours from receipt of the proceeds of the sale;9. No interest is imposed on the payment to be made by the plaintiff because he had always been ready to pay the balance and the premises had been used or occupied by the defendant for the duration of this case.

II. In the event that specific performance cannot be done for reasons or causes not attributable to the plaintiff, judgment is hereby rendered ordering the defendant:1. To refund to the plaintiff the earnest money in the sum of P100,000.00, with interest at the legal rate from June 30, 1989 until fully paid;2. To refund to the plaintiff the sum of P485,000.00 with interest at the legal rate from July 14, 1989 until fully paid;3. To pay to the plaintiff the sum of P700,000.00 in the concept of moral damages and the additional sum of P300,000.00 in the concept of exemplary damages; and4. To pay to the plaintiff the sum of P100,000.00 as reimbursement of attorney’s fees and cost of litigation.SO ORDERED.[18]

Valdes-Choy appealed to the Court of Appeals which reversed the decision of the trial court. The Court of Appeals handed down a new judgment, disposing as follows:WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE, and another one is rendered:(1) Dismissing Civil Case No. 89-5772;(2) Declaring the amount of P100,000.00, representing earnest money as forfeited in favor of defendant-appellant;(3) Ordering defendant-appellant to return/refund the amount of P485,000.00 to plaintiff-appellee without interest;(4) Dismissing defendant-appellant’s compulsory counter-claim; and (5) Ordering the plaintiff-appellee to pay the costs.[19]

Hence, the instant petition.The Trial Court’s Ruling

The trial court found that the transaction reached an impasse when Valdes-Choy wanted to be first paid the full consideration before a new TCT covering the Property is issued in the name of Chua. On the other hand, Chua did not want to pay the consideration in full unless a new TCT is first issued in his name. The trial court faulted Valdes-Choy for this impasse.

The trial court held that the parties entered into a contract to sell on 30 June 1989, as evidenced by the Receipt for the P100,000.00 earnest money. The trial court pointed out that the contract to sell was subject to the following conditions: (1) the balance of P10,700,000.00 was payable not later than 15 July 1989; (2) Valdes-Choy may stay in the Property until 13 August 1989; and (3) all papers must be “in proper order” before full payment is made.

The trial court held that Chua complied with the terms of the contract to sell. Chua showed that he was prepared to pay Valdes-Choy the consideration in full on 13 July 1989, two days before the deadline of 15 July 1989. Chua even added P80,000.00 for the documentary stamp tax. He purchased from PBCom two manager’s checks both payable to Valdes-Choy. The first check for P485,000.00 was to pay the capital gains tax. The second check for P10,215,000.00 was to pay the balance of the purchase price. The trial court

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was convinced that Chua demonstrated his capacity and readiness to pay the balance on 13 July 1989 with the production of the PBCom manager’s check for P10,215,000.00.

On   the   other   hand,   the   trial   court   found   that   Valdes-Choy   did   not perform her correlative obligation under the contract to sell to put all the papers in order.  The trial court noted that as of 14 July 1989, the capital gains   tax  had not  been paid  because  Valdes-Choy’s  counsel  who was suppose   to   pay   the   tax  did   not   do   so.  The   trial   court   declared   that Valdes-Choy was in a position to deliver only the owner’s duplicate copy of the TCT, the signed Deeds of Sale, the tax declarations, and the latest realty tax receipt. The trial court concluded that these documents were all useless without the Bureau of Internal Revenue receipt evidencing full payment of the capital gains tax which is a pre-requisite to the issuance of a new certificate of title in Chua’s name.The   trial   court   held   that   Chua’s   non-payment   of   the   balance of P10,215,000.00 on the agreed date was due  to Valdes-Choy’s fault.

The Court of Appeals’ Ruling

In reversing the trial court, the Court of Appeals ruled that Chua’s stance to pay the full consideration only after the Property is registered in his name was not the agreement of the parties. The Court of Appeals noted that there is a whale of difference between the phrases “all papers are in proper order” as written on the Receipt, and “transfer of title” as demanded by Chua.

Contrary to the findings of the trial court, the Court of Appeals found that all the papers were in order and that Chua had no valid reason not to pay on the agreed date. Valdes-Choy was in a position to deliver the owner’s duplicate copy of the TCT, the signed Deeds of Sale, the tax declarations, and the latest realty tax receipt. The Property was also free from all liens and encumbrances.

The Court of Appeals declared that the trial court erred in considering Chua’s showing to Valdes-Choy of the PBCom manager’s check for P10,215,000.00 as compliance with Chua’s obligation to pay on or before 15 July 1989. The Court of Appeals pointed out that Chua did not want to give up the check unless “the property was already in his name.”[20] Although Chua demonstrated his capacity to pay, this could not be equated with actual payment which he refused to do.

The Court of Appeals did not consider the non-payment of the capital gains   tax   as   failure   by   Valdes-Choy   to   put   the   papers   “in   proper order.”  The Court of Appeals explained that the payment of the capital gains tax has no bearing on the validity of the Deeds of Sale.  It is only after the deeds are signed and notarized can  the final computation and payment  of the capital gains tax be made.

The IssuesIn his Memorandum, Chua raises the following issues:1. WHETHER THERE IS A PERFECTED CONTRACT OF SALE OF IMMOVABLE PROPERTY;2. WHETHER VALDES-CHOY MAY RESCIND THE CONTRACT IN CONTROVERSY WITHOUT OBSERVING THE PROVISIONS OF ARTICLE 1592 OF THE NEW CIVIL CODE;3. WHETHER THE WITHHOLDING OF PAYMENT OF THE BALANCE OF THE PURCHASE PRICE ON THE PART OF CHUA (AS VENDEE) WAS JUSTIFIED BY THE CIRCUMSTANCES OBTAINING AND MAY NOT BE RAISED AS GROUND FOR THE AUTOMATIC RESCISSION OF THE CONTRACT OF SALE;4. WHETHER THERE IS LEGAL AND FACTUAL BASIS FOR THE COURT OF APPEALS TO DECLARE THE “EARNEST MONEY” IN THE AMOUNT OF P100,000.00 AS FORFEITED IN FAVOR OF VALDES-CHOY;5. WHETHER THE TRIAL COURT’S JUDGMENT IS IN ACCORD WITH LAW, REASON AND EQUITY DESERVING OF BEING REINSTATED AND AFFIRMED.[21]

The issues for our resolution are: (a) whether the transaction between Chua and Valdes-Choy is a perfected contract of sale or a mere contract to sell, and (b) whether Chua can compel Valdes-Choy to cause the issuance of a new TCT in Chua’s name even before payment of the full purchase price.

The Court’s RulingThe petition is bereft of merit.There is no dispute that Valdes-Choy is the absolute owner of the Property which is registered in her name under TCT No.162955, free from all liens and encumbrances. She was ready, able and willing to deliver to Chua the owner’s duplicate copy of the TCT, the signed Deeds of Sale, the tax declarations, and the latest realty tax receipt. There is also no dispute that on 13 July 1989, Valdes-Choy received PBCom Check No. 206011 for P100,000.00 as earnest money from Chua. Likewise, there is no controversy that the Receipt for theP100,000.00 earnest money embodied the terms of the binding contract between Valdes-Choy and Chua.

Further, there is no controversy that as embodied in the Receipt, Valdes-Choy and Chua agreed on the following terms: (1) the balance of P10,215,000.00 is payable on or before 15 July 1989; (2) the capital gains tax is for the account of Valdes-Choy; and (3) if Chua fails to pay the balance of P10,215,000.00 on or before 15 July 1989, Valdes-Choy has the right to forfeit the earnest money, provided that “all papers are in proper order.” On 13 July 1989, Chua gave Valdes-Choy the PBCom manager’s check for P485,000.00 to pay the capital gains tax.

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Both the trial and appellate courts found that the balance of P10,215,000.00 was not actually paid to Valdes-Choy on the agreed date. On 13 July 1989, Chua did show to Valdes-Choy the PBCom manager’s check for P10,215,000.00, with Valdes-Choy as payee. However, Chua refused to give this check to Valdes-Choy until a new TCT covering the Property is registered in Chua’s name. Or, as the trial court put it, until there is proof of payment of the capital gains tax which is a pre-requisite to the issuance of a new certificate of title.First and Second Issues: Contract of Sale or Contract to Sell?Chua has consistently characterized his agreement with Valdez-Choy, as evidenced by the Receipt, as a contract to sell and not a contract of sale. This has been Chua’s persistent contention in his pleadings before the trial and appellate courts.

Chua now pleads for the first time that there is a perfected contract of sale rather than a contract to sell. He contends that there was no reservation in the contract of sale that Valdes-Choy shall retain title to the Property until after the sale. There was no agreement for an automatic rescission of the contract in case of Chua’s default. He argues for the first time that his payment of earnest money and its acceptance by Valdes-Choy precludes the latter from rejecting the binding effect of the contract of sale. Thus, Chua claims that Valdes-Choy may not validly rescind the contract of sale without following Article 1592 [22] of the Civil Code which requires demand, either judicially or by notarial act, before rescission may take place.

Chua’s new theory is not well taken in light of well-settled jurisprudence. An issue not raised in the court below cannot be raised for the first time on appeal, as this is offensive to the basic rules of fair play, justice and due process. [23] In addition, when a party deliberately adopts a certain theory, and the case is tried and decided on that theory in the court below, the party will not be permitted to change his theory on appeal. To permit him to change his theory will be unfair to the adverse party.[24]

Nevertheless, in order to put to rest all doubts on the matter, we hold that the agreement between Chua and Valdes-Choy, as evidenced by the Receipt, is a contract to sell and not a contract of sale. The distinction between a contract of sale and contract to sell is well-settled:

In a contract of sale, the title to the property passes to the vendee upon the delivery of the thing sold; in a contract to sell, ownership is, by agreement, reserved in the vendor and is not to pass to the vendee until full payment of the purchase price. Otherwise stated, in a contract of sale, the vendor loses ownership over the property and cannot recover it until and unless the contract is resolved or rescinded; whereas, in a contract to sell, title is retained by the vendor until full payment of the price. In the latter contract, payment of the price is a positive suspensive condition, failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from becoming effective.[25]

A perusal of the Receipt shows that the true agreement between the parties was a contract to sell. Ownership over the Property was retained by Valdes-Choy and was not to pass to Chua until full payment of the purchase price.

First, the Receipt provides that the earnest money shall be forfeited in case the buyer fails to pay the balance of the purchase price on or before 15 July 1989. In such event, Valdes-Choy can sell the Property to other interested parties. There is in effect a right reserved in favor of Valdes-Choy not to push through with the sale upon Chua’s failure to remit the balance of the purchase price before the deadline. This is in the nature of a stipulation reserving ownership in the seller until full payment of the purchase price. This is also similar to giving the seller the right to rescind unilaterally the contract the moment the buyer fails to pay within a fixed period.[26]

Second, the agreement between Chua and Valdes-Choy was embodied in a receipt rather than in a deed of sale, ownership not having passed between them. The signing of the Deeds of Sale came later when Valdes-Choy was under the impression that Chua was about to pay the balance of the purchase price. The absence of a formal deed of conveyance is a strong indication that the parties did not intend immediate transfer of ownership, but only a transfer after full payment of the purchase price.[27]

Third, Valdes-Choy retained possession of the certificate of title and all other documents relative to the sale. When Chua refused to pay Valdes-Choy the balance of the purchase price, Valdes-Choy also refused to turn-over to Chua these documents.[28] These are additional proof that the agreement did not transfer to Chua, either by actual or constructive delivery, ownership of the Property.[29]

It is true that Article 1482 of the Civil Code provides that “[W]henever earnest money is given in a contract of sale, it shall be considered as part of the price and proof of the perfection of the contract.” However, this article speaks of earnest money given in a contract of sale. In this case, the earnest money was given in a contract to sell. The Receipt evidencing the contract to sell stipulates that the earnest money is a forfeitable deposit, to be forfeited if the sale is not consummated should Chua fail to pay the balance of the purchase price. The earnest money forms part of the consideration only if the sale is consummated upon full payment of the purchase price. If there is a contract of sale, Valdes-Choy should have the right to compel Chua to pay the balance of the purchase price.  Chua, however, has the right to walk away from the transaction, with no obligation to pay the balance, although he will forfeit the earnest money. Clearly, there is no contract of sale. The earnest money was given in a contract to sell, and thus Article 1482, which speaks of a contract of sale, is not applicable.Since the agreement between Valdes-Choy and Chua is a mere contract to sell, the full payment of the purchase price partakes of a suspensive condition. The non-fulfillment of the condition prevents the obligation to sell from arising and ownership is retained by the seller without further remedies by the buyer.[30] Article 1592 of the Civil Code permits the buyer to pay, even after the

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expiration of the period, as long as no demand for rescission of the contract has been made upon him either judicially or by notarial act. However, Article 1592 does not apply to a contract to sell where the seller reserves the ownership until full payment of the price.[31]

Third and Fourth Issues: Withholding of Payment of the Balanceof the Purchase Price and Forfeiture of the Earnest MoneyChua insists that he was ready to pay the balance of the purchase price but withheld payment because Valdes-Choy did not fulfill her contractual obligation to put all the papers in “proper order.” Specifically, Chua claims that Valdes-Choy failed to show that the capital gains tax had been paid after he had advanced the money for its payment. For the same reason, he contends that Valdes-Choy may not forfeit the earnest money even if he did not pay on time.There is a variance of interpretation on the phrase “all papers are in proper order” as written in the Receipt. There is no dispute though, that as long as the papers are “in proper order,” Valdes-Choy has the right to forfeit the earnest money if Chua fails to pay the balance before the deadline.The trial court interpreted the phrase to include payment of the capital gains tax, with the Bureau of Internal Revenue receipt as proof of payment. The Court of Appeals held otherwise. We quote verbatim the ruling of the Court of Appeals on this matter:The trial court made much fuss in connection with the payment of the capital gains tax, of which Section 33 of the National Internal Revenue Code of 1977, is the governing provision insofar as its computation is concerned. The trial court failed to consider Section 34-(a) of the said Code, the last sentence of which provides, that “[t]he amount realized from the sale or other disposition of propertyshall be the sum of money received plus the fair market value of the property (other than money) received;” and that the computation of the capital gains tax can only be finally assessed by the Commission on Internal Revenue upon the presentation of the Deeds of Absolute Sale themselves, without which any premature computation of the capital gains tax becomes of no moment. At any rate, the computation and payment of the capital gains tax has no bearing insofar as the validity and effectiveness of the deeds of sale in question are concerned, because it is only after the contracts of sale are finally executed in due form and have been duly notarized that the final computation of the capital gains tax can follow as a matter of course. Indeed, exhibit D, the PBC Check No. 325851, dated July 13, 1989, in the amount of P485,000.00, which is considered as part of the consideration of the sale, was deposited in the name of appellant, from which she in turn, purchased the corresponding check in the amount representing the sum to be paid for capital gains tax and drawn in the name of the Commissioner of Internal Revenue, which then allayed any fear or doubt that that amount would not be paid to the Government after all.[32]

We see no reason to disturb the ruling of the Court of Appeals.In a contract to sell, the obligation of the seller to sell becomes demandable only upon the happening of the suspensive condition. In this case, the suspensive

condition is the full payment of the purchase price by Chua. Such full payment gives rise to Chua’s right to demand the execution of the contract of sale.It is only upon the existence of the contract of sale that the seller becomes obligated to transfer the ownership of the thing sold to the buyer. Article 1458 of the Civil Code defines a contract of sale as follows:Art. 1458. 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.x x x. (Emphasis supplied)Prior to the existence of the contract of sale, the seller is not obligated to transfer ownership to the buyer, even if there is a contract to sell between them. It is also upon the existence of the contract of sale that the buyer is obligated to pay the purchase price to the seller. Since the transfer of ownership is in exchange for the purchase price, these obligations must be simultaneously fulfilled at the time of the execution of the contract of sale, in the absence of a contrary stipulation.In a contract of sale, the obligations of the seller are specified in Article 1495 of the Civil Code, as follows:Art. 1495. The vendor is bound to transfer the ownership of and deliver, as well as warrant the thing which is the object of the sale. (Emphasis supplied)The obligation of the seller is to transfer to the buyer ownership of the thing sold. In the sale of real property, the seller is not obligated to transfer in the name of the buyer a new certificate of title, but rather to transfer ownership of the real property. There is a difference between transfer of the certificate of title in the name of the buyer, and transfer of ownership to the buyer. The buyer may become the owner of the real property even if the certificate of title is still registered in the name of the seller. As between the seller and buyer, ownership is transferred not by the issuance of a new certificate of title in the name of the buyer but by the execution of the instrument of sale in a public document.In a contract of sale, ownership is transferred upon delivery of the thing sold. As the noted civil law commentator Arturo M. Tolentino explains it, -Delivery is not only a necessary condition for the enjoyment of the thing, but is a mode of acquiring dominion and determines the transmission of ownership, the birth of the real right. The delivery, therefore, made in any of the forms provided in articles 1497 to 1505 signifies that the transmission of ownership from vendor to vendee has taken place. The delivery of the thing constitutes an indispensable requisite for the purpose of acquiring ownership. Our law does not admit the doctrine of transfer of property by mere consent; the ownership, the property right, is derived only from delivery of the thing. x x x.[33] (Emphasis supplied)In a contract of sale of real property, delivery is effected when the instrument of sale is executed in a public document. When the deed of absolute sale is signed by the parties and notarized, then delivery of the real property is deemed made by the seller to the buyer. Article 1498 of the Civil Code provides that –Art. 1498. 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

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contract, if from the deed the contrary does not appear or cannot clearly be inferred.x x x.Similarly, in a contract to sell real property, once the seller is ready, able and willing to sign the deed of absolute sale before a notary public, the seller is in a position to transfer ownership of the real property to the buyer. At this point, the seller complies with his undertaking to sell the real property in accordance with the contract to sell, and to assume all the obligations of a vendor under a contract of sale pursuant to the relevant articles of the Civil Code. In a contract to sell, the seller is not obligated to transfer ownership to the buyer. Neither is the seller obligated to cause the issuance of a new certificate of title in the name of the buyer. However, the seller must put all his papers in proper order to the point that he is in a position to transfer ownership of the real property to the buyer upon the signing of the contract of sale.

In the instant case, Valdes-Choy was in a position to comply with all her obligations as a seller under the contract to sell. First, she already signed the Deeds of Sale in the office of her counsel in the presence of the buyer. Second, she was prepared to turn-over the owner’s duplicate of the TCT to the buyer, along with the tax declarations and latest realty tax receipt. Clearly, at this point Valdes-Choy was ready, able and willing to transfer ownership of the Property to the buyer as required by the contract to sell, and by Articles 1458 and 1495 of the Civil Code to consummate the contract of sale.

Chua, however, refused to give to Valdes-Choy the PBCom manager’s check for the balance of the purchase price. Chua imposed the condition that a new TCT should first be issued in his name, a condition that is found neither in the law nor in the contract to sell as evidenced by the Receipt. Thus, at this point Chua was not ready, able and willing to pay the full purchase price which is his obligation under the contract to sell. Chua was also not in a position to assume the principal obligation of a vendee in a contract of sale, which is also to pay the full purchase price at the agreed time.  Article 1582 of the Civil Code provides that –Art. 1582. The vendee is bound to accept delivery and to pay the price of the thing sold at the time and place stipulated in the contract.x x x. (Emphasis supplied)In this case, the contract to sell stipulated that Chua should pay the balance of the purchase price “on or before 15 July 1989.” The signed Deeds of Sale also stipulated that the buyer shall pay the balance of the purchase price upon signing of the deeds. Thus, the Deeds of Sale, both signed by Chua, state as follows:Deed of Absolute Sale covering the lot:xxxFor and in consideration of the sum of EIGHT MILLION PESOS (P8,000,000.00), Philippine Currency, receipt of which in full is hereby acknowledged by the VENDOR from the VENDEE, the VENDOR sells, transfers and conveys unto the VENDEE, his heirs, successors and assigns, the said parcel of land, together with the improvements existing thereon, free from all liens and encumbrances.[34] (Emphasis supplied)Deed of Absolute Sale covering the furnishings:xxx

For and in consideration of the sum of TWO MILLION EIGHT HUNDRED THOUSAND PESOS (P2,800,000.00), Philippine Currency, receipt of which in full is hereby acknowledged by the VENDOR from the VENDEE, the VENDOR sells, transfers and conveys unto the VENDEE, his heirs, successors and assigns, the said furnitures, fixtures and other movable properties thereon, free from all liens and encumbrances.[35] (Emphasis supplied)However, on the agreed date, Chua refused to pay the balance of the purchase price as required by the contract to sell, the signed Deeds of Sale, and Article 1582 of the Civil Code. Chua was therefore in default and has only himself to blame for the rescission by Valdes-Choy of the contract to sell.Even if measured under existing usage or custom, Valdes-Choy had all her papers “in proper order.” Article 1376 of the Civil Code provides that:Art. 1376. The usage or custom of the place shall be borne in mind in the interpretation of the ambiguities of a contract, and shall fill the omission of stipulations which are ordinarily established.Customarily, in the absence of a contrary agreement, the submission by an individual seller to the buyer of the following papers would complete a sale of real estate: (1) owner’s duplicate copy of the Torrens title;[36] (2) signed deed of absolute sale; (3) tax declaration; and (3) latest realty tax receipt. The buyer can retain the amount for the capital gains tax and pay it upon authority of the seller, or the seller can pay the tax, depending on the agreement of the parties.The buyer has more interest in having the capital gains tax paid immediately since this is a pre-requisite to the issuance of a new Torrens title in his name. Nevertheless, as far as the government is concerned, the capital gains tax remains a liability of the seller since it is a tax on the seller’s gain from the sale of the real estate. Payment of the capital gains tax, however, is not a pre-requisite to the transfer of ownership to the buyer. The transfer of ownership takes effect upon the signing and notarization of the deed of absolute sale.The recording of the sale with the proper Registry of Deeds [37] and the transfer of the certificate of title in the name of the buyer are necessary only to bind third parties to the transfer of ownership.[38] As between the seller and the buyer, the transfer of ownership takes effect upon the execution of a public instrument conveying the real estate.[39] Registration of the sale with the Registry of Deeds, or the issuance of a new certificate of title, does not confer ownership on the buyer. Such registration or issuance of a new certificate of title is not one of the modes of acquiring ownership.[40]

In this case, Valdes-Choy was ready, able and willing to submit to Chua all the papers that customarily would complete the sale, and to pay as well the capital gains tax. On the other hand, Chua’s condition that a new TCT be first issued in his name before he pays the balance of P10,215,000.00, representing 94.58% of the purchase price, is not customary in a sale of real estate. Such a condition, not specified in the contract to sell as evidenced by the Receipt, cannot be considered part of the “omissions of stipulations which are ordinarily established” by usage or custom.[41] What is increasingly becoming customary is to deposit in escrow the balance of the purchase price pending the issuance of a new certificate of title in

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the name of the buyer. Valdes-Choy suggested this solution but unfortunately, it drew no response from Chua.Chua had no reason to fear being swindled. Valdes-Choy was prepared to turn-over to him the owner’s duplicate copy of the TCT, the signed Deeds of Sale, the tax declarations, and the latest realty tax receipt. There was no hindrance to paying the capital gains tax as Chua himself had advanced the money to pay the same and Valdes-Choy had procured a manager’s check payable to the Bureau of Internal Revenue covering the amount. It was only a matter of time before the capital gains tax would be paid. Chua acted precipitately in filing the action for specific performance a mere two days after the deadline of 15 July 1989 when there was an impasse. While this case was dismissed on 22 November 1989, he did not waste any time in re-filing the same on 29 November 1989.Accordingly, since Chua refused to pay the consideration in full on the agreed date, which is a suspensive condition, Chua cannot compel Valdes-Choy to consummate the sale of the Property. Article 1181 of the Civil Code provides that -ART. 1181. In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already acquired shall depend upon the happening of the event which constitutes the condition.Chua acquired no right to compel Valdes-Choy to transfer ownership of the Property to him because the suspensive condition - the full payment of the purchase price - did not happen. There is no correlative obligation on the part of Valdes-Choy to transfer ownership of the Property to Chua. There is also no obligation on the part of Valdes-Choy to cause the issuance of a new TCT in the name of Chua since unless expressly stipulated, this is not one of the obligations of a vendor.WHEREFORE, the Decision of the Court of Appeals in CA-G.R. CV No. 37652 dated 23 February 1995 is AFFIRMED in toto.SO ORDERED.

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THIRD DIVISION[G.R. No. 151212. September 10, 2003]TEN FORTY REALTY AND DEVELOPMENT CORP., Represented by its President, VERONICA G. LORENZANA, petitioner, vs. MARINA CRUZ,respondent.D E C I S I O NPANGANIBAN, J.:In an ejectment suit, the question of ownership may be provisionally ruled upon for the sole purpose of determining who is entitled to possession de facto. In the present case, both parties base their alleged right to possess on their right to own. Hence, the Court of Appeals did not err in passing upon the question of ownership to be able to decide who was entitled to physical possession of the disputed land.The CaseBefore us is a Petition for Review[1] under Rule 45 of the Rules of Court, seeking to nullify the August 31, 2001 Decision[2] and December 19, 2001 Resolution[3] of the Court of Appeals (CA) in CA- GR SP No. 64861. The dispositive portion of the assailed Decision is as follows:“WHEREFORE, premises considered, the petition is hereby DISMISSED and the Decision dated May 4, 2001 is hereby AFFIRMED.”[4]

The assailed Resolution denied petitioner's Motion for Reconsideration.The FactsThe facts of the case are narrated by the CA as follows:“A complaint for ejectment was filed by [Petitioner Ten Forty Realty and Development Corporation] against x x x [Respondent Marina Cruz] before the Municipal Trial Court in Cities (MTCC) of Olongapo City, docketed as Civil Case 4269, which alleged that: petitioner is the true and absolute owner of a parcel of lot and residential house situated in #71 18th Street, E.B.B. Olongapo City, particularly described as:‘A parcel of residential house and lot situated in the above-mentioned address containing an area of 324 square meters more or less bounded on the Northeast by 041 (Lot 255, Ts-308); on the Southeast by 044 (Lot 255, Ts-308); on the Southwest by 043 (Lot 226-A & 18th street) and on the Northwest by 045 (Lot 227, Ts-308) and declared for taxation purposes in the name of [petitioner] under T.D. No. 002-4595-R and 002-4596.’having acquired the same on December 5, 1996 from Barbara Galino by virtue of a Deed of Absolute Sale; the sale was acknowledged by said Barbara Galino through a 'Katunayan'; payment of the capital gains tax for the transfer of the property was evidenced by a Certification Authorizing Registration issued by the Bureau of Internal Revenue; petitioner came to know that Barbara Galino sold the same property on April 24, 1998 to Cruz, who immediately occupied the property and which occupation was merely tolerated by petitioner; on October 16, 1998, a complaint for ejectment was filed with the Barangay East Bajac-Bajac, Olongapo City but for failure to arrive at an amicable settlement, a Certificate to File Action was issued; on April 12, 1999 a demand letter was sent to [respondent] to vacate

and pay reasonable amount for the use and occupation of the same, but was ignored by the latter; and due to the refusal of [respondent] to vacate the premises, petitioner was constrained to secure the services of a counsel for an agreed fee of P5,000.00 as attorney’s fee and P500.00 as appearance fee and incurred an expense of P5,000.00 for litigation.“In respondent’s Answer with Counterclaim, it was alleged that: petitioner is not qualified to own the residential lot in dispute, being a public land; according to Barbara Galino, she did not sell her house and lot to petitioner but merely obtained a loan from Veronica Lorenzana; the payment of the capital gains tax does not necessarily show that the Deed of Absolute Sale was at that time already in existence; the court has no jurisdiction over the subject matter because the complaint was filed beyond the one (1) year period after the alleged unlawful deprivation of possession; there is no allegation that petitioner had been in prior possession of the premises and the same was lost thru force, stealth or violence; evidence will show that it was Barbara Galino who was in possession at the time of the sale and vacated the property in favor of respondent; never was there an occasion when petitioner occupied a portion of the premises, before respondent occupied the lot in April 1998, she caused the cancellation of the tax declaration in the name of Barbara Galino and a new one issued in respondent’s name; petitioner obtained its tax declaration over the same property on November 3, 1998, seven (7) months [after] the respondent [obtained hers]; at the time the house and lot [were] bought by respondent, the house was not habitable, the power and water connections were disconnected; being a public land, respondent filed a miscellaneous sales application with the Community Environment and Natural Resources Office in Olongapo City; and the action for ejectment cannot succeed where it appears that respondent had been in possession of the property prior to the petitioner.”[5]

In a Decision[6] dated October 30, 2000, the Municipal Trial Court in Cities (MTCC) ordered respondent to vacate the property and surrender to petitioner possession thereof. It also directed her to pay, as damages for its continued unlawful use, P500 a month from April 24, 1999 until the property was vacated, P5,000 as attorney’s fees, and the costs of the suit.

On appeal, the Regional Trial Court[7] (RTC) of Olongapo City (Branch 72) reversed the MTCC. The RTC ruled as follows: 1) respondent’s entry into the property was not by mere tolerance of petitioner, but by virtue of a Waiver and Transfer of Possessory Rights and Deed of Sale in her favor; 2) the execution of the Deed of Sale without actual transfer of the physical possession did not have the effect of making petitioner the owner of the property, because there was no delivery of the object of the sale as provided for in Article 1428 of the Civil Code; and 3) being a corporation, petitioner was disqualified from acquiring the property, which was public land.Ruling of the Court of AppealsSustaining the RTC, the CA held that petitioner had failed to make a case for unlawful detainer, because no contract -- express or implied -- had been entered

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into by the parties with regard to possession of the property. It ruled that the action should have been for forcible entry, in which prior physical possession was indispensable -- a circumstance petitioner had not shown either.The appellate court also held that petitioner had challenged the RTC’s ruling on the question of ownership for the purpose of compensating for the latter’s failure to counter such ruling. The RTC had held that, as a corporation, petitioner had no right to acquire the property which was alienable public land.Hence, this Petition.[8]

IssuesPetitioner submits the following issues for our consideration:“1. The Honorable Court of Appeals had clearly erred in not holding that [r]espondent’s occupation or possession of the property in question was merely through the tolerance or permission of the herein [p]etitioner;“[2.] The Honorable Court of Appeals had likewise erred in holding that the ejectment case should have been a forcible entry case where prior physical possession is indispensable; and“[3.] The Honorable Court of Appeals had also erred when it ruled that the herein [r]espondent’s possession or occupation of the said property is in the nature of an exercise of ownership which should put the herein [p]etitioner on guard.”[9]

The Court’s RulingThe Petition has no merit.First Issue:Alleged Occupation by TolerancePetitioner faults the CA for not holding that the former merely tolerated respondent’s occupation of the subject property. By raising this issue, petitioner is in effect asking this Court to reassess factual findings. As a general rule, this kind of reassessment cannot be done through a petition for review on certiorari under Rule 45 of the Rules of Court, because this Court is not a trier of facts; it reviews only questions of law.[10] Petitioner has not given us ample reasons to depart from the general rule.On the basis of the facts found by the CA and the RTC, we find that petitioner failed to substantiate its case for unlawful detainer. Admittedly, no express contract existed between the parties. Not shown either was the corporation’s alleged tolerance of respondent’s possession.

While possession by tolerance may initially be lawful, it ceases to be so upon the owner’s demand that the possessor by tolerance vacate the property.[11] To justify an action for unlawful detainer, the permission or tolerance must have been present at the beginning of the possession.[12] Otherwise, if the possession was unlawful from the start, an action for unlawful detainer would be an improper remedy. Sarona v. Villegas[13] elucidates thus:

“A close assessment of the law and the concept of the word ‘tolerance’ confirms our view heretofore expressed that such tolerance must be present right from the start of possession sought to be recovered, to categorize a cause of action as one of unlawful detainer not of forcible entry. Indeed, to hold otherwise would espouse a dangerous doctrine. And for two reasons. First. Forcible entry into the land is an open challenge to

the right of the possessor. Violation of that right authorizes the speedy redress – in the inferior court – provided for in the rules. If one year from the forcible entry is allowed to lapse before suit is filed, then the remedy ceases to be speedy; and the possessor is deemed to have waived his right to seek relief in the inferior court. Second, if a forcible entry action in the inferior court is allowed after the lapse of a number of years, then the result may well be that no action for forcible entry can really prescribe. No matter how long such defendant is in physical possession, plaintiff will merely make a demand, bring suit in the inferior court – upon a plea of tolerance to prevent prescription to set in – and summarily throw him out of the land. Such a conclusion is unreasonable. Especially if we bear in mind the postulates that proceedings of forcible entry and unlawful detainer are summary in nature, and that the one year time bar to suit is but in pursuance of the summary nature of the action.”[14]

In this case, the Complaint and the other pleadings do not recite any averment of fact that would substantiate the claim of petitioner that it permitted or tolerated the occupation of the property by Respondent Cruz. The Complaint contains only bare allegations that 1) respondent immediately occupied the subject property after its sale to her, an action merely tolerated by petitioner;[15] and 2) her allegedly illegal occupation of the premises was by mere tolerance.[16]

These allegations contradict, rather than support, petitioner’s theory that its cause of action is for unlawful detainer. First, these arguments advance the view that respondent’s occupation of the property was unlawful at its inception. Second, they counter the essential requirement in unlawful detainer cases that petitioner’s supposed act of sufferance or tolerance must be present right from the start of a possession that is later sought to be recovered.[17]

As the bare allegation of petitioner’s tolerance of respondent’s 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 -- an action that had already prescribed, however, when the Complaint was filed on May 12, 1999. The prescriptive period of one year for forcible entry cases is reckoned from the date of respondent’s actual entry into the land, which in this case was on April 24, 1998.

Second Issue:Nature of the Case

Much of the difficulty in the present controversy stems from the legal characterization of the ejectment Complaint filed by petitioner. Specifically, was it for unlawful detainer or for forcible entry?The answer is given in Section 1 of Rule 70 of the Rules of Court, which we reproduce as follows:“SECTION 1. Who may institute proceedings, and when. - Subject to the provisions of the next succeeding section, a person deprived of the possession of any land or building by force, intimidation, threat, strategy, or stealth, or a lessor, vendor, vendee, or other person against whom the possession of any land or building is unlawfully withheld after the expiration or termination of the right to hold

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possession, by virtue of any contract, express or implied, or the legal representatives or assigns of any such lessor, vendor, vendee, or other person, may, at any time within one (1) year after such unlawful deprivation or withholding of possession, bring an action in the proper Municipal Trial Court against the person or persons unlawfully withholding or depriving of possession, or any person or persons claiming under them, for the restitution of such possession, together with damages and costs.”While both causes of action deal only with the sole issue of physical or de facto possession,[18] the two cases are really separate and distinct, as explained below:“x x x. In forcible entry, one is deprived of physical possession of land or building by means of force, intimidation, threat, strategy, or stealth. In unlawful detainer, one unlawfully withholds possession thereof after the expiration or termination of his right to hold possession under any contract, express or implied. In forcible entry, the possession is illegal from the beginning and the basic inquiry centers on who has the prior possession de facto. In unlawful detainer, the possession was originally lawful but became unlawful by the expiration or termination of the right to possess, hence the issue of rightful possession is decisive for, in such action, the defendant is in actual possession and the plaintiff’s cause of action is the termination of the defendant’s right to continue in possession.“What determines the cause of action is the nature of defendant’s entry into the land. If the entry is illegal, then the action which may be filed against the intruder within one year therefrom is forcible entry. If, on the other hand, the entry is legal but the possession thereafter became illegal, the case is one of unlawful detainer which must be filed within one year from the date of the last demand.”[19]

It is axiomatic that what determines the nature of an action as well as which court has jurisdiction over it are the allegations in the complaint[20] and the character of the relief sought.[21]

In its Complaint, petitioner alleged that, having acquired the subject property from Barbara Galino on December 5, 1996,[22] it was the true and absolute owner[23] thereof; that Galino had sold the property to Respondent Cruz on April 24, 1998;[24] that after the sale, the latter immediately occupied the property, an action that was merely tolerated by petitioner;[25] and that, in a letter given to respondent on April 12, 1999,[26] petitioner had demanded that the former vacate the property, but that she refused to do so. [27] Petitioner thereupon prayed for judgment ordering her to vacate the property and to pay reasonable rentals for the use of the premises, attorney’s fees and the costs of the suit.[28]

The above allegations appeared to show the elements of unlawful detainer. They also conferred initiatory jurisdiction on the MTCC, because the case was filed a month after the last demand to vacate -- hence, within the one-year prescriptive period.However, what was actually proven by petitioner was that possession by respondent had been illegal from the beginning. While the Complaint was crafted to be an unlawful detainer suit, petitioner’s real cause of action was for forcible

entry, which had already prescribed. Consequently, the MTCC had no more jurisdiction over the action.The appellate court, therefore, did not err when it ruled that petitioner’s Complaint for unlawful detainer was a mere subterfuge or a disguised substitute action for forcible entry, which had already prescribed. To repeat, to maintain a viable action for forcible entry, plaintiff must have been in prior physical possession of the property; this is an essential element of the suit.[29]

Third Issue: Alleged Acts of Ownership Petitioner next questions the CA’s pronouncement that respondent’s occupation of the property was an exercise of a right flowing from a claim of ownership. It submits that the appellate court should not have passed upon the issue of ownership, because the only question for resolution in an ejectment suit is that of possession de facto.Clearly, each of the parties claimed the right to possess the disputed property because of alleged ownership of it. Hence, no error could have been imputed to the appellate court when it passed upon the issue of ownership only for the purpose of resolving the issue of possession de facto.[30] The CA’s holding is moreover in accord with jurisprudence and the law.

Execution of a Deed of Sale Not Sufficient as DeliveryIn a contract of sale, the buyer acquires the thing sold only upon its delivery “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.”[31] With respect to incorporeal property, Article 1498 lays down the general rule: the execution of a 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.However, ownership is transferred not by contract but by tradition or delivery.[32] Nowhere in the Civil Code is it provided that the execution of a Deed of Sale is a conclusivepresumption of delivery of possession of a piece of real estate.[33]

This Court has held that 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.[34] Pasagui v. Villablanca[35] had earlier ruled that 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.It is undisputed that petitioner did not occupy the property from the time it was allegedly sold to it on December 5, 1996 or at any time thereafter. Nonetheless, it maintains that Galino’s continued stay in the premises from the time of the sale up to the time respondent’s occupation of the same on April 24, 1998, was possession held on its behalf and had the effect of delivery under the law.[36]

Both the RTC and the CA disagreed. According to the RTC, petitioner did not gain control and possession of the property, because Galino had continued to exercise ownership rights over the realty. That is, she had remained in possession, continued to declare it as her property for tax purposes and sold it to respondent in 1998.

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For its part, the CA found it highly unbelievable that petitioner -- which claims to be the owner of the disputed property -- would tolerate possession of the property by respondent from April 24, 1998 up to October 16, 1998. How could it have been so tolerant despite its knowledge that the property had been sold to her, and that it was by virtue of that sale that she had undertaken major repairs and improvements on it?Petitioner should have likewise been put on guard by respondent’s declaration of the property for tax purposes on April 23, 1998,[37] as annotated in the tax certificate filed seven months later.[38] Verily, the tax declaration represented an adverse claim over the unregistered property and was inimical to the right of petitioner.Indeed, the above circumstances derogated its claim of control and possession of the property.

Order of Preference in Double Sale of Immovable PropertyThe ownership of immovable property sold to two different buyers at different times is governed by Article 1544 of the Civil Code, which reads as follows:“Article 1544. x x x“Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property.“Should there be no inscription, the ownership shall pertain to the person who in good faith was first in possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith.”Galino allegedly sold the property in question to petitioner on December 5, 1996 and, subsequently, to respondent on April 24, 1998. Petitioner thus argues that being the first buyer, it has a better right to own the realty. However, it has not been able to establish that its Deed of Sale was recorded in the Registry of Deeds of Olongapo City.[39] Its claim of an unattested and unverified notation on its Deed of Absolute Sale[40] is not equivalent to registration. It admits that, indeed, the sale has not been recorded in the Registry of Deeds.[41]

In the absence of the required inscription, the law gives preferential right to the buyer who in good faith is first in possession. In determining the question of who is first in possession, certain basic parameters have been established by jurisprudence.First, the possession mentioned in Article 1544 includes not only material but also symbolic possession.[42] Second, possessors in good faith are those who are not aware of any flaw in their title or mode of acquisition. [43] Third, buyers of real property that is in the possession of persons other than the seller must be wary -- they must investigate the rights of the possessors.[44] Fourth, good faith is always presumed; upon those who allege bad faith on the part of the possessors rests the burden of proof.[45]

Earlier, we ruled that 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.

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 former’s 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 petitioner’s right of ownership.Disqualification from Ownership of Alienable Public LandPrivate corporations are disqualified from acquiring lands of the public domain, as provided under Section 3 of Article XII of the Constitution, which we quote:“Sec. 3. Lands of the public domain are classified into agricultural, forest or timber, mineral lands, and national parks. Agricultural lands of the public domain may be further classified by law according to the uses to which they may be devoted. Alienable lands of the public domain shall be limited to agricultural lands. Private corporations or associations may not hold such alienable lands of the public domain except by lease, for a period not exceeding twenty-five years, and not to exceed one thousand hectares in area. Citizens of the Philippines may not lease not more than five hundred hectares, or acquire not more than twelve hectares thereof by purchase, homestead, or grant. x x x.” (Italics supplied)While corporations cannot acquire land of the public domain, they can however acquire private land.[46] Hence, the next issue that needs to be resolved is the determination of whether the disputed property is private land or of the public domain.According to the certification by the City Planning and Development Office of Olongapo City, the contested property in this case is alienable and disposable public land.[47] It was for this reason that respondent filed a miscellaneous sales application to acquire it.[48]

On the other hand, 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.[49]

In view of the foregoing, we affirm the appellate court’s ruling that respondent is entitled to possession de facto. This determination, however, is only provisional in nature.[50] Well-settled is the rule that an award of possession de facto over a piece of property does not constitute res judicata as to the issue of its ownership.[51]

WHEREFORE, this Petition is DENIED and the assailed Decision AFFIRMED. Costs against petitioner.SO ORDERED.Sandoval-Gutierrez, Corona, and Carpio-Morales, JJ., concur.Puno, (Chairman), on official leave.

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Digest TEN FORTY REALTY V. CRUZ| PanganibanG.R. No. 151212 | September 10, 2003FACTS:• 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 court’s 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 petitioner’s tolerance of respondent’s 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 former’s 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 petitioner’s 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.

SECOND DIVISION[G.R. No. 133895. October 2, 2001]ZENAIDA M. SANTOS, petitioner, vs. CALIXTO SANTOS, ALBERTO SANTOS, ROSA SANTOS-CARREON and ANTONIO santosD E C I S I O NQUISUMBING, J.:This petition for review[1] seeks to annul and set aside the decision dated March 10, 1998 of the Court of Appeals that affirmed the decision of the Regional Trial Court of Manila, Branch 48, dated March 17, 1993. Petitioner also seeks to annul the resolution that denied her motion for reconsideration.Petitioner Zenaida M. Santos is the widow of Salvador Santos, a brother of private respondents Calixto, Alberto, Antonio, all surnamed Santos and Rosa Santos-Carreon.The spouses Jesus and Rosalia Santos owned a parcel of land registered under TCT No. 27571 with an area of 154 square meters, located at Sta. Cruz Manila. On it was a four-door apartment administered by Rosalia who rented them out. The spouses had five children, Salvador, Calixto, Alberto, Antonio and Rosa.On January 19, 1959, Jesus and Rosalia executed a deed of sale of the properties in favor of their children Salvador and Rosa. TCT No. 27571 became TCT No. 60819. Rosa in turn sold her share to Salvador on November 20, 1973 which resulted in the issuance of a new TCT No. 113221. Despite the transfer of

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the property to Salvador, Rosalia continued to lease and receive rentals from the apartment units.On November 1, 1979, Jesus died. Six years after or on January 9, 1985, Salvador died, followed by Rosalia who died the following month. Shortly after, petitioner Zenaida, claiming to be Salvador’s heir, demanded the rent from Antonio Hombrebueno,[2] a tenant of Rosalia. When the latter refused to pay, Zenaida filed an ejectment suit against him with the Metropolitan Trial Court of Manila, Branch 24, which eventually decided in Zenaida’s favor.On January 5, 1989, private respondents instituted an action for reconveyance of property with preliminary injunction against petitioner in the Regional Trial Court of Manila, where they alleged that the two deeds of sale executed on January 19, 1959 and November 20, 1973 were simulated for lack of consideration. They were executed to accommodate Salvador in generating funds for his business ventures and providing him with greater business flexibility.In her Answer, Zenaida denied the material allegations in the complaint and as special and affirmative defenses, argued that Salvador was the registered owner of the property, which could only be subjected to encumbrances or liens annotated on the title; that the respondents’ right to reconveyance was already barred by prescription and laches; and that the complaint stated no cause of action.On March 17, 1993, the trial court decided in private respondents’ favor, thus:WHEREFORE, viewed from all the foregoing considerations, judgment is hereby made in favor of the plaintiffs and against the defendants:a) Declaring Exh. “B”, the deed of sale executed by Rosalia Santos and Jesus Santos on January 19, 1959, as entirely null and void for being fictitious or simulated and inexistent and without any legal force and effect;b) Declaring Exh. “D”, the deed of sale executed by Rosa Santos in favor of Salvador Santos on November 20, 1973, also as entirely null and void for being likewise fictitious or simulated and inexistent and without any legal force and effect;c) Directing the Register of Deeds of Manila to cancel Transfer Certificate of Title No. T-113221 registered in the name of Salvador Santos, as well as, Transfer Certificate of Title No. 60819 in the names of Salvador Santos, Rosa Santos, and consequently thereafter, reinstating with the same legal force and effect as if the same was not cancelled, and which shall in all respects be entitled to like faith and credit; Transfer Certificate of Title No. T-27571 registered in the name of Rosalia A. Santos, married to Jesus Santos, the same to be partitioned by the heirs of the said registered owners in accordance with law; andd) Making the injunction issued in this case permanent.Without pronouncement as to costs.SO ORDERED.[3]

The trial court reasoned that notwithstanding the deeds of sale transferring the property to Salvador, the spouses Rosalia and Jesus continued to possess the property and to exercise rights of ownership not only by receiving the monthly rentals, but also by paying the realty taxes. Also, Rosalia kept the owner’s duplicate copy of the title even after it was already in the name of

Salvador. Further, the spouses had no compelling reason in 1959 to sell the property and Salvador was not financially capable to purchase it. The deeds of sale were therefore fictitious. Hence, the action to assail the same does not prescribe.[4]

Upon appeal, the Court of Appeals affirmed the trial court’s decision dated March 10, 1998. It held that in order for the execution of a public instrument to effect tradition, as provided in Article 1498 of the Civil Code, [5] the vendor shall have had control over the thing sold, at the moment of sale. It was not enough to confer upon the purchaser the ownership and the right of possession. The thing sold must be placed in his control. The subject deeds of sale did not confer upon Salvador the ownership over the subject property, because even after the sale, the original vendors remained in dominion, control, and possession thereof. The appellate court further said that if the reason for Salvador’s failure to control and possess the property was due to his acquiescence to his mother, in deference to Filipino custom, petitioner, at least, should have shown evidence to prove that her husband declared the property for tax purposes in his name or paid the land taxes, acts which strongly indicate control and possession. The appellate court disposed:WHEREFORE, finding no reversible error in the decision appealed from, the same is hereby AFFIRMED. No pronouncement as to costs.SO ORDERED.[6]

Hence, this petition where petitioner avers that the Court of Appeals erred in:I....HOLDING THAT THE OWNERSHIP OVER THE LITIGATED PROPERTY BY THE LATE HUSBAND OF DEFENDANT-APPELLANT WAS AFFECTED BY HIS FAILURE TO EXERCISE CERTAIN ATTRIBUTES OF OWNERSHIP.II...HOLDING THAT DUE EXECUTION OF A PUBLIC INSTRUMENT IS NOT EQUIVALENT TO DELIVERY OF THE LAND IN DISPUTE.III...NOT FINDING THAT THE CAUSE OF ACTION OF ROSALIA SANTOS HAD PRESCRIBED AND/OR BARRED BY LACHES.IV...IGNORING PETITIONER’S ALLEGATION TO THE EFFECT THAT PLAINTIFF DR. ROSA [S.] CARREON IS NOT DISQUALIFIED TO TESTIFY AS TO THE QUESTIONED DEEDS OF SALE CONSIDERING THAT SALVADOR SANTOS HAS LONG BEEN DEAD.[7]

In this petition, we are asked to resolve the following:1. Are payments of realty taxes and retention of possession indications of continued ownership by the original owners?2. Is a sale through a public instrument tantamount to delivery of the thing sold?3. Did the cause of action of Rosalia Santos and her heirs prescribe?4. Can petitioner invoke the “Dead Man’s Statute?”[8]

On the first issue, petitioner contends that the Court of Appeals erred in holding that despite the deeds of sale in Salvador’s favor, Jesus and Rosalia still owned the property because the spouses continued to pay the realty taxes and possess the property. She argues that tax declarations are not conclusive evidence of

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ownership when not supported by evidence. She avers that Salvador allowed his mother to possess the property out of respect to her in accordance with Filipino values.It is true that neither tax receipts nor declarations of ownership for taxation purposes constitute sufficient proof of ownership. They must be supported by other effective proofs.[9] These requisite proofs we find present in this case. As admitted by petitioner, despite the sale, Jesus and Rosalia continued to possess and administer the property and enjoy its fruits by leasing it to third persons.[10] Both Rosa and Salvador did not exercise any right of ownership over it.[11] Before the second deed of sale to transfer her 1/2 share over the property was executed by Rosa, Salvador still sought the permission of his mother.[12] Further, after Salvador registered the property in his name, he surrendered the title to his mother.[13] These are clear indications that ownership still remained with the original owners. In Serrano vs. CA, 139 SCRA 179, 189 (1985), we held that the continued collection of rentals from the tenants by the seller of realty after execution of alleged deed of sale is contrary to the notion of ownership.Petitioner argues that Salvador, in allowing her mother to use the property even after the sale, did so out of respect for her and out of generosity, a factual matter beyond the province of this Court.[14]Significantly, in Alcos vs. IAC, 162 SCRA 823, 837 (1988), we noted that the buyer’s immediate possession and occupation of the property corroborated the truthfulness and authenticity of the deed of sale. Conversely, the vendor’s continued possession of the property makes dubious the contract of sale between the parties.On the second issue, is a sale through a public instrument tantamount to delivery of the thing sold? Petitioner in her memorandum invokes Article 1477[15] of the Civil Code which provides that ownership of the thing sold is transferred to the vendee upon its actual or constructive delivery. Article 1498, in turn, provides that when the sale is made through a public instrument, its execution is equivalent to the delivery of the thing subject of the contract. Petitioner avers that applying said provisions to the case, Salvador became the owner of the subject property by virtue of the two deeds of sale executed in his favor.Nowhere in the Civil Code, however, does it provide that execution of a deed of sale is a conclusive presumption of delivery of possession. The Code merely said that the execution shall be equivalent to delivery. The presumption can be rebutted by clear and convincing evidence.[16] Presumptive delivery can be negated by the failure of the vendee to take actual possession of the land sold.[17]

In Danguilan vs. IAC, 168 SCRA 22, 32 (1988), we held that for the execution of a public instrument to effect tradition, the purchaser must be placed in control of the thing sold. When there is no impediment to prevent the thing sold from converting to 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 nor make use of it himself or through another in his name, then delivery has not been effected.

As found by both the trial and appellate courts and amply supported by the evidence on record, Salvador was never placed in control of the property. The original sellers retained their control and possession. Therefore, there was no real transfer of ownership.Moreover, in Norkis Distributors, Inc. vs. CA, 193 SCRA 694, 698-699 (1991), citing the land case of Abuan vs. Garcia, 14 SCRA 759 (1965), we held that 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. In the instant case, although the spouses Jesus and Rosalia executed a deed of sale, they did not deliver the possession and ownership of the property to Salvador and Rosa. They agreed to execute a deed of sale merely to accommodate Salvador to enable him to generate funds for his business venture.On the third issue, petitioner argues that from the date of the sale from Rosa to Salvador on November 20, 1973, up to his death on January 9, 1985, more or less twelve years had lapsed, and from his death up to the filing of the case for reconveyance in the court a quo on January 5, 1989, four years had lapsed. In other words, it took respondents about sixteen years to file the case below. Petitioner argues that an action to annul a contract for lack of consideration prescribes in ten years and even assuming that the cause of action has not prescribed, respondents are guilty of laches for their inaction for a long period of time.Has respondents’ cause of action prescribed? In Lacsamana vs. CA, 288 SCRA 287, 292 (1998), we held that the right to file an action for reconveyance on the ground that the certificate of title was obtained by means of a fictitious deed of sale is virtually an action for the declaration of its nullity, which does not prescribe. This applies squarely to the present case. The complaint filed by respondents in the court a quo was for the reconveyance of the subject property to the estate of Rosalia since the deeds of sale were simulated and fictitious. The complaint amounts to a declaration of nullity of a void contract, which is imprescriptible. Hence, respondents’ cause of action has not prescribed.Neither is their action barred by laches. The elements of laches are: 1) conduct on the part of the defendant, or of one under whom he claims, giving rise to the situation of which the complaint seeks a remedy; 2) delay in asserting the complainant’s rights, the complainant having had knowledge or notice of the defendant’s conduct as having been afforded an opportunity to institute a suit; 3) lack of knowledge or notice on the part of the defendant that the complainant would assert the right in which he bases his suit; and 4) injury or prejudice to the defendant in the event relief is accorded to the complainant, or the suit is not held barred.[18] These elements must all be proved positively. The conduct which caused the complaint in the court a quo was petitioner’s assertion of right of ownership as heir of Salvador. This started in December 1985 when petitioner demanded payment of the lease rentals from Antonio Hombrebueno, the tenant of the apartment units. From December 1985 up to the filing of the complaint for reconveyance on January 5, 1989, only less than four years had lapsed which we

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do not think is unreasonable delay sufficient to bar respondents’ cause of action. We likewise find the fourth element lacking. Neither petitioner nor her husband made considerable investments on the property from the time it was allegedly transferred to the latter. They also did not enter into transactions involving the property since they did not claim ownership of it until December 1985. Petitioner stood to lose nothing. As we held in the same case of Lacsamana vs. CA, cited above, the concept of laches is not concerned with the lapse of time but only with the effect of unreasonable lapse. In this case, the alleged 16 years of respondents’ inaction has no adverse effect on the petitioner to make respondents guilty of laches.Lastly, petitioner in her memorandum seeks to expunge the testimony of Rosa Santos-Carreon before the trial court in view of Sec. 23, Rule 130 of the Revised Rules of Court, otherwise known as the “Dead Man’s Statute.”[19] It is too late for petitioner, however, to invoke said rule. The trial court in its order dated February 5, 1990, denied petitioner’s motion to disqualify respondent Rosa as a witness. Petitioner did not appeal therefrom. Trial ensued and Rosa testified as a witness for respondents and was cross-examined by petitioner’s counsel. By her failure to appeal from the order allowing Rosa to testify, she waived her right to invoke the dead man’s statute. Further, her counsel cross-examined Rosa on matters that occurred during Salvador’s lifetime. In Goñi vs. CA, 144 SCRA 222, 231 (1986), we held that protection under the dead man’s statute is effectively waived when a counsel for a petitioner cross-examines a private respondent on matters occurring during the deceased’s lifetime. The Court of Appeals cannot be faulted in ignoring petitioner on Rosa’s disqualification.WHEREFORE, the instant petition is DENIED. The assailed decision dated March 10, 1998 of the Court of Appeals, which sustained the judgment of the Regional Trial Court dated March 17, 1993, in favor of herein private respondents, is AFFIRMED. Costs against petitioner.SO ORDERED.

SECOND DIVISION G.R. No. 167195ASSET PRIVATIZATION TRUST, Petitioner, Present: CARPIO MORALES, J.,* - versus - Acting Chairperson, TINGA, VELASCO, JR., LEONARDO-DE CASTRO,** and BRION, JJ. T.J. ENTERPRISES, . Promulgated: May 8, 2009x----------------------------------------------------------------------------------x D E C I S I O N TINGA, J.:: This is a Rule 45 petition[1] which seeks the reversal of the Court of Appeals’ decision[2] and resolution[3] affirming the RTC’s decision[4] holding petitioner liable for actual damages for breach of contract.

Petitioner Asset Privatization Trust[5] (petitioner) was a government entity created for the purpose to conserve, to provisionally manage and to dispose assets of government institutions.[6] Petitioner had acquired from the Development Bank of the Philippines (DBP) assets consisting of machinery and refrigeration equipment which were then stored at Golden City compound, Pasay City. The compound was then leased to and in the physical possession of Creative Lines, Inc., (Creative Lines). These assets were being sold on an as-is-where-is basis.

On 7 November 1990, petitioner and respondent entered into an absolute deed of sale over certain machinery and refrigeration equipment identified as Lots Nos. 2, 3 and 5. Respondent paid the full amount of P84,000.00 as evidenced by petitioner’s Receipt No. 12844. After two (2) days, respondent demanded the delivery of the machinery it had purchased. Sometime in March 1991, petitioner issued Gate Pass No. 4955. Respondent was able to pull out from the compound the properties designated as Lots Nos. 3 and 5. However, during the hauling of Lot No. 2 consisting of sixteen (16) items, only nine (9) items were pulled out by respondent. The seven (7) items that were left behind consisted of the following: (1) one (1) Reefer Unit 1; (2) one (1) Reefer Unit 2; (3) one (1) Reefer Unit 3; (4) one (1) unit blast freezer with all accessories; (5) one (1) unit chest freezer; (6) one (1) unit room air-conditioner; and (7) one (1) unit air

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compressor. Creative Lines’ employees prevented respondent from hauling the remaining machinery and equipment.

Respondent filed a complaint for specific performance and damages against petitioner and Creative Lines.[7] During the pendency of the case, respondent was able to pull out the remaining machinery and equipment. However, upon inspection it was discovered that the machinery and equipment were damaged and had missing parts.

Petitioner argued that upon the execution of the deed of sale it had complied with its obligation to deliver the object of the sale since there was no stipulation to the contrary. It further argued that being a sale on an as-is-where-is basis, it was the duty of respondent to take possession of the property. Petitioner claimed that there was already a constructive delivery of the machinery and equipment.

The RTC ruled that the execution of the deed of absolute sale did not result in constructive delivery of the machinery and equipment. It found that at the time of the sale, petitioner did not have control over the machinery and equipment and, thus, could not have transferred ownership by constructive delivery. The RTC ruled that petitioner is liable for breach of contract and should pay for the actual damages suffered by respondent.

On petitioner’s appeal, the Court of Appeals affirmed in toto the decision of the RTC. Hence this petition. Before this Court, petitioner raises issues by attributing the following errors to the Court of Appeals, to wit:I. The Court of Appeals erred in not finding that petitioner had complied with its obligation to make delivery of the properties subject of the contract of sale. II. The Court of Appeals erred in not considering that the sale was on an “as-is-where-is” basis wherein the properties were sold in the condition and in the place where they were located. III. The Court of Appeals erred in not considering that respondent’s acceptance of petitioner’s disclaimer of warranty forecloses respondent’s legal basis to enforce any right arising from the contract.IV. The reason for the failure to make actual delivery of the properties was not attributable to the fault and was beyond the control of petitioner. The claim for damages against petitioner is therefore bereft of legal basis.[8]

The first issue hinges on the determination of whether there was a constructive delivery of the machinery and equipment upon the execution of the deed of absolute sale between petitioner and respondent. The ownership of a thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof.[9] The thing sold shall be understood as delivered when it is placed in the control and possession of the vendee.[10]

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.[11] In

order for the execution of a public instrument to effect tradition, the purchaser must be placed in control of the thing sold.[12]

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 effected because of a legal impediment.[13] 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.[14]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.[15] 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.

On the second issue, petitioner posits that the sale being in an as-is-where-is basis, respondent agreed to take possession of the things sold in the condition where they are found and from the place where they are located. The phrase as-is where-is basis pertains solely to the physical condition of the thing sold, not to its legal situation.[16] It is merely descriptive of the state of the thing sold. Thus, the as-is where-is basis merely describes the actual state and location of the machinery and equipment sold by petitioner to respondent. The depiction does not alter petitioner’s responsibility to deliver the property to respondent.

Anent the third issue, petitioner maintains that the presence of the disclaimer of warranty in the deed of absolute sale absolves it from all warranties, implied or otherwise. The position is untenable.

The vendor is bound to transfer the ownership of and deliver, as well as warrant the thing which is the object of the sale. [17] Ownership of the thing sold is acquired by the vendee from the moment it its 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.[18] A perusal of the deed of absolute sale shows that both the vendor and the vendee represented and warranted to each other that each had all the requisite power and authority to enter into the deed of absolute sale and that they shall perform each of their respective obligations under the deed of absolute in accordance with the terms thereof.[19] As previously shown, there was no actual or constructive delivery of the things sold. Thus, petitioner has not performed its obligation to transfer ownership and possession of the things sold to respondent.

As to the last issue, petitioner claims that its failure to make actual delivery was beyond its control. It posits that the refusal of Creative Lines to allow the hauling of the machinery and equipment was unforeseen and constituted a fortuitous event.

The matter of fortuitous events is governed by Art. 1174 of the Civil Code which provides that except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the nature of the obligation requires

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assumption of risk, no person shall be responsible for those events which could not be foreseen, or which though foreseen, were inevitable. The elements of a fortuitous event are: (a) the cause of the unforeseen and unexpected occurrence, must have been independent of human will; (b) the event that constituted the caso fortuito must have been impossible to foresee or, if foreseeable, impossible to avoid; (c) the occurrence must have been such as to render it impossible for the debtors to fulfill their obligation in a normal manner, and; (d) the obligor must have been free from any participation in the aggravation of the resulting injury to the creditor.[20]

A fortuitous event may either be an act of God, or natural occurrences such as floods or typhoons, or an act of man such as riots, strikes or wars.[21] However, when the loss is found to be partly the result of a person’s participation–whether by active intervention, neglect or failure to act—the whole occurrence is humanized and removed from the rules applicable to a fortuitous event.[22]

We quote with approval the following findings of the Court of Appeals, to wit:

We find that Creative Lines’ refusal to surrender the property to the vendee does not constitute force majeure which exculpates APT from the payment of damages. This event cannot be considered unavoidable or unforeseen. APT knew for a fact that the properties to be sold were housed in the premises leased by Creative Lines. It should have made arrangements with Creative Lines beforehand for the smooth and orderly removal of the equipment. The principle embodied in the act of God doctrine strictly requires that the act must be one occasioned exclusively by the violence of nature and all human agencies are to be excluded from creating or entering into the cause of the mischief. When the effect, the cause of which is to be considered, is found to be in part the result of the participation of man, whether it be from active intervention or neglect, or failure to act, the whole occurrence is thereby humanized, as it were, and removed from the rules applicable to the acts of God.[23]

Moreover, Art. 1504 of the Civil Code provides that where actual delivery has been delayed through the fault of either the buyer or seller the goods are at the risk of the party in fault. The risk of loss or deterioration of the goods sold does not pass to the buyer until there is actual or constructive delivery thereof. As previously discussed, there was no actual or constructive delivery of the machinery and equipment. Thus, the risk of loss or deterioration of property is borne by petitioner. Thus, it should be liable for the damages that may arise from the delay.

Assuming arguendo that Creative Lines’ refusal to allow the hauling of the machinery and equipment is a fortuitous event, petitioner will still be liable for damages. This Court agrees with the appellate court’s findings on the matter of damages, thus:

Article 1170 of the Civil Code states: “Those who in the performance of their obligations are guilty of fraud, negligence, or delay and those who in any manner

contravene the tenor thereof are liable for damages.” In contracts and quasi-contracts, the damages for which the obligor who acted in good faith is liable shall be those that are the natural and probable consequences of the breach of the obligation, and which the parties have foreseen or could have reasonably foreseen at the time the obligation was constituted.[24] The trial court correctly awarded actual damages as pleaded and proven during trial.[25]

WHEREFORE, the Court AFFIRMS in toto the Decision of the Court of Appeals dated 31 August 2004. Cost against petitioner.

SO ORDERED.

Republic of the Philippines Supreme Court Baguio City SECOND DIVISION

ESTELITA VILLAMAR, Petitioner, - versus - BALBINO MANGAOIL, Respondent.

G.R. No. 188661 Present: CARPIO, J., Chairperson,BRION,PEREZ,SERENO, and REYES, JJ. Promulgated:April 11, 2012

x--------------------------------------------------------------------------------------------x

DECISION REYES, J.:

The Case Before us is a petition for review on certiorari[1] under Rule 45 of the Rules of Court filed by Estelita Villamar (Villamar) to assail the Decision [2] rendered by the Court of Appeals (CA) on February 20, 2009 in CA-G.R. CV No. 86286, the dispositive portion of which reads:

WHEREFORE, the instant appeal is DISMISSED. The assailed decision is AFFIRMED in toto.

SO ORDERED.[3] The resolution[4] issued by the CA on July 8, 2009 denied the petitioner's

motion for reconsideration to the foregoing. The ruling[5] of Branch 23, Regional Trial Court (RTC) of Roxas, Isabela,

which was affirmed by the CA in the herein assailed decision and resolution, ordered the (1) rescission of the contract of sale of real property entered into by Villamar and Balbino Mangaoil (Mangaoil); and (2) return of the down payment made relative to the said contract.

Antecedents Facts The CA aptly summarized as follows the facts of the case prior to the filing

by Mangaoil of the complaint[6] for rescission of contract before the RTC: Villamar is the registered owner of a 3.6080 hectares parcel of land [hereinafter referred as the subject property] in San Francisco, Manuel, Isabela covered by Transfer Certificate of Title (TCT) No. T-92958-A. On March 30, 1998, she entered into an Agreement with Mangaoil for the purchase and sale of said parcel of land, under the following terms and conditions: “1. The price of the land is ONE HUNDRED AND EIGHTY THOUSAND (180,000.00) PESOS per hectare but only the 3.5000 hec. shall be paid and the

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rest shall be given free, so that the total purchase or selling price shall be [P]630,000.00 only; 2. ONE HUNDRED EIGHTY FIVE THOUSAND (185,000.00) PESOS of the total price was already received on March 27, 1998 for payment of the loan secured by the certificate of title covering the land in favor of the Rural Bank of Cauayan, San Manuel Branch, San Manuel, Isabela [Rural Bank of Cauayan], in order that the certificate of title thereof be withdrawn and released from the said bank, and the rest shall be for the payment of the mortgag[e]s in favor of Romeo Lacaden and Florante Parangan; 3. After the release of the certificate of title covering the land subject-matter of this agreement, the necessary deed of absolute sale in favor of the PARTY OF THE SECOND PART shall be executed and the transfer be immediately effected so that the latter can apply for a loan from any lending institution using the corresponding certificate of title as collateral therefor, and the proceeds of the loan, whatever be the amount, be given to the PARTY OF THE FIRST PART; 4. Whatever balance left from the agreed purchase price of the land subject matter hereof after deducting the proceed of the loan and the [P]185,000.00 already received as above-mentioned, the PARTY OF THE SECOND PART shall pay unto the PARTY OF THE FIRST PART not later than June 30, 1998 and thereafter the parties shall be released of any obligations for and against each other; xxx” On April 1, 1998, the parties executed a Deed of Absolute Sale whereby Villamar (then Estelita Bernabe) transferred the subject parcel of land to Mangaoil for and in consideration of [P]150,000.00. In a letter dated September 18, 1998, Mangaoil informed Villamar that he was backing out from the sale agreed upon giving as one of the reasons therefor: “3. That the area is not yet fully cleared by incumbrances as there are tenants who are not willing to vacate the land without giving them back the amount that they mortgaged the land.” Mangaoil demanded refund of his [P]185,000.00 down payment. Reiterating said demand in another letter dated April 29, 1999, the same, however, was unheeded.[7] x x x (Citations omitted)

On January 28, 2002, the respondent filed before the RTC a complaint[8] for rescission of contract against the petitioner. In the said complaint, the respondent sought the return of P185,000.00 which he paid to the petitioner, payment of interests thereon to be computed from March 27, 1998 until the suit's termination, and the award of damages, costs and P20,000.00 attorney's fees. The respondent's factual allegations were as follows:

5. That as could be gleaned the “Agreement” (Annex “A”), the plaintiff [Mangaoil] handed to the defendant [Villamar] the sum of [P]185,000.00 to be applied as follows; [P]80,000 was for the redemption of the land which was mortgaged to the Rural Bank of Cauayan, San Manuel Branch, San Manuel, Isabela, to enable the plaintiff to get hold of the title and register the sale x x

x and [P]105,000.00 was for the redemption of the said land from private mortgages to enable plaintiff to posses[s] and cultivate the same;

6. That although the defendant had already long redeemed the said land from the said bank and withdrawn TCT No. T-92958-A, she has failed and refused, despite repeated demands, to hand over the said title to the plaintiff and still refuses and fails to do so;

7. That, also, the plaintiff could not physically, actually and materially posses[s] and cultivate the said land because the private mortgage[e]s and/or present possessors refuse to vacate the same;

x x x x 11. That on September 18, 1998, the plaintiff sent a letter to the

defendant demanding a return of the amount so advanced by him, but the latter ignored the same, x x x;

12. That, again, on April 29, 1999, the plaintiff sent to the defendant another demand letter but the latter likewise ignored the same, x x x;

13. That, finally, the plaintiff notified the defendant by a notarial act of his desire and intention to rescind the said contract of sale, xxx; x x x.[9] (Citations omitted) In the respondent’s answer to the complaint, she averred that she had complied with her obligations to the respondent. Specifically, she claimed having caused the release of TCT No. T-92958-A by the Rural Bank of Cauayan and its delivery to a certain “Atty. Pedro C. Antonio” (Atty. Antonio). The petitioner alleged that Atty. Antonio was commissioned to facilitate the transfer of the said title in the respondent's name. The petitioner likewise insisted that it was the respondent who unceremoniously withdrew from their agreement for reasons only the latter knew.

The Ruling of the RTC On September 9, 2005, the RTC ordered the rescission of the agreement and the deed of absolute sale executed between the respondent and the petitioner. The petitioner was, thus directed to return to the respondent the sum of P185,000.00 which the latter tendered as initial payment for the purchase of the subject property. The RTC ratiocinated that: There is no dispute that the defendant sold the LAND to the plaintiff for [P]630,000.00 with down payment of [P]185,000.00. There is no evidence presented if there were any other partial payments made after the perfection of the contract of sale. Article 1458 of the Civil Code provides: “Art. 1458. 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 therefore a price certain in money or its equivalent.” As such, in a contract of sale, the obligation of the vendee to pay the price is correlative of the obligation of the vendor to deliver the thing sold. It created or established at the same time, out of the same course, and which result in mutual relations of creditor and debtor between the parties.

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The claim of the plaintiff that the LAND has not been delivered to him was not refuted by the defendant. Considering that defendant failed to deliver to him the certificate of title and of the possession over the LAND to the plaintiff, the contract must be rescinded pursuant to Article 1191 of the Civil Code which, in part, provides: “Art. 1191. The power of rescind obligations is implied in reciprocal ones in case one of the obligors should not comply with what is incumbent upon him.”[10] The petitioner filed before the CA an appeal to challenge the foregoing. She ascribed error on the part of the RTC when the latter ruled that the agreement and deed of sale executed by and between the parties can be rescinded as she failed to deliver to the respondent both the subject property and the certificate of title covering the same.

The Ruling of the CA On February 20, 2009, the CA rendered the now assailed decision dismissing the petitioner’s appeal based on the following grounds: Burden of proof is the duty of a party to prove the truth of his claim or defense, or any fact in issue necessary to establish his claim or defense by the amount of evidence required by law. In civil cases, the burden of proof is on the defendant if he alleges, in his answer, an affirmative defense, which is not a denial of an essential ingredient in the plaintiff's cause of action, but is one which, if established, will be a good defense – i.e., an “avoidance” of the claim, which prima facie, the plaintiff already has because of the defendant's own admissions in the pleadings. Defendant-appellant Villamar's defense in this case was an affirmative defense. She did not deny plaintiff-appellee’s allegation that she had an agreement with plaintiff-appellee for the sale of the subject parcel of land. Neither did she deny that she was obliged under the contract to deliver the certificate of title to plaintiff-appellee immediately after said title/property was redeemed from the bank. What she rather claims is that she already complied with her obligation to deliver the title to plaintiff-appellee when she delivered the same to Atty. Antonioas it was plaintiff-appellee himself who engaged the services of said lawyer to precisely work for the immediate transfer of said title in his name. Since, however, this affirmative defense as alleged in defendant-appellant's answer was not admitted by plaintiff-appellee, it then follows that it behooved the defendant-appellant to prove her averments by preponderance of evidence. Yet, a careful perusal of the record shows that the defendant-appellant failed to sufficiently prove said affirmative defense. She failed to prove that in the first place, “Atty. Antonio” existed to receive the title for and in behalf of plaintiff-appellee. Worse, the defendant-appellant failed to prove that Atty. Antonio received said title “as allegedly agreed upon.” We likewise sustain the RTC's finding that defendant-appellant V[i]llamar failed to deliver possession of the subject property to plaintiff-appellee Mangaoil. As correctly observed by the RTC - “[t]he claim of the

plaintiff that the land has not been delivered to him was not refuted by the defendant.” Not only that. On cross-examination, the defendant-appellant gave Us insight on why no such delivery could be made, viz.:“x x x x

Q: So, you were not able to deliver this property to Mr. Mangaoil just after you redeem the property because of the presence of these two (2) persons, is it not?x x xA: Yes, sir. Q: Forcing you to file the case against them and which according to you, you have won, is it not? A: Yes, sir. Q: And now at present[,] you are in actual possession of the land? A: Yes, sir. x x x” With the foregoing judicial admission, the RTC could not have erred in finding that defendant-[appellant] failed to deliver the possession of the property sold, to plaintiff-appellee. Neither can We agree with defendant-appellant in her argument that the execution of the Deed of Absolute Sale by the parties is already equivalent to a valid and constructive deliveryof the property to plaintiff-appellee. Not only is it doctrinally settled that in a contract of sale, the vendor is bound to transfer the ownership of, and to deliver the thing that is the object of the sale, the way Article 1547 of the Civil Code is worded, viz.: “Art. 1547. In a contract of sale, unless a contrary intention appears, there is: (1) An implied warranty on the part of the seller that he has a right to sell the thing at the time when the ownership is to pass, and that the buyer shall from that time have and enjoy the legal and peaceful possession of the thing; (2) An implied warranty that the thing shall be free from any hidden defaults or defects, or any change or encumbrance not declared or known to the buyer. x x x.” shows that actual, and not mere constructive delivery is warrantied by the seller to the buyer. “(P)eaceful possession of the thing” sold can hardly be enjoyed in a mere constructive delivery. The obligation of defendant-appellant Villamar to transfer ownership and deliver possession of the subject parcel of land was her correlative obligation to plaintiff-appellee in exchange for the latter's purchase price thereof. Thus, if she fails to comply with what is incumbent upon her, a correlative right to rescind such contract from plaintiff-appellee arises, pursuant to Article 1191 of the Civil Code.[11] x x x (Citations omitted)

The Issues Aggrieved, the petitioner filed before us the instant petition and submits the following issues for resolution:

I.WHETHER THE FAILURE OF PETITIONER-SELLER TO DELIVER THE CERTIFICATE OF TITLE OVER THE PROPERTY TO RESPONDENT-BUYER IS A BREACH OF OBLIGATION

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IN A CONTRACT OF SALE OF REAL PROPERTY THAT WOULD WARRANT RESCISSION OF THE CONTRACT;

II. WHETHER PETITIONER IS LIABLE FOR BREACH OF OBLIGATION IN A CONTRACT OF SALE FOR FAILURE OF RESPONDENT[-]BUYER TO IMMEDIATELY TAKE ACTUAL POSSESSION OF THE PROPERTY NOTWITHSTANDING THE ABSENCE OF ANY STIPULATION IN THE CONTRACT PROVIDING FOR THE SAME;

III. WHETHER THE EXECUTION OF A DEED OF SALE OF REAL PROPERTY IN THE PRESENT CASE IS ALREADY EQUIVALENT TO A VALID AND CONSTRUCTIVE DELIVERY OF THE PROPERTY TO THE BUYER;

IV. WHETHER OR NOT THE CONTRACT OF SALE SUBJECT MATTER OF THIS CASE SHOULD BE RESCINDED ON SLIGHT OR CASUAL BREACH;

V. WHETHER OR NOT THE COURT OF APPEALS ERRED IN AFFIRMING THE DECISION OF THE RTC ORDERING THE RESCISSION OF THE CONTRACT OF SALE[.][12]

The Petitioner's Arguments The petitioner avers that the CA, in ordering the rescission of the agreement and deed of sale, which she entered into with the respondent, on the basis of her alleged failure to deliver the certificate of title, effectively imposed upon her an extra duty which was neither stipulated in the contract nor required by law. She argues that under Articles 1495 [13] and 1496[14] of the New Civil Code (NCC), the obligation to deliver the thing sold is complied with by a seller who executes in favor of a buyer an instrument of sale in a public document. Citing Chua v. Court of Appeals,[15] she claims that there is a distinction between transferring a certificate of title in the buyer's name, on one hand, and transferring ownership over the property sold, on the other. The latter can be accomplished by the seller's execution of an instrument of sale in a public document. The recording of the sale with the Registry of Deeds and the transfer of the certificate of title in the buyer's name are necessary only to bind third parties to the transfer of ownership.[16] The petitioner contends that in her case, she had already complied with her obligations under the agreement and the law when she had caused the release of TCT No. T-92958-A from the Rural Bank of Cauayan, paid individual mortgagees Romeo Lacaden (Lacaden) and Florante Parangan (Paranga), and executed an absolute deed of sale in the respondent's favor. She adds that before T-92958-A can be cancelled and a new one be issued in the respondent's favor, the latter decided to withdraw from their agreement. She also points out that in the letters seeking for an outright rescission of their agreement sent to her by the respondent, not once did he demand for the delivery of TCT. The petitioner insists that the respondent's change of heart was due to (1) the latter's realization of the difficulty in determining the subject property's perimeter boundary; (2) his doubt that the property he purchased

would yield harvests in the amount he expected; and (3) the presence of mortgagees who were not willing to give up possession without first being paid the amounts due to them. The petitioner contends that the actual reasons for the respondent's intent to rescind their agreement did not at all constitute a substantial breach of her obligations. The petitioner stresses that under Article 1498 of the NCC, when a sale is made through a public instrument, its execution is equivalent to the delivery of the thing which is the contract's object, unless in the deed, the contrary appears or can be inferred. Further, in Power Commercial and Industrial Corporation v. CA,[17] it was ruled that the failure of a seller to eject lessees from the property he sold and to deliver actual and physical possession, cannot be considered a substantial breach, when such failure was not stipulated as a resolutory or suspensive condition in the contract and when the effects and consequences of the said failure were not specified as well. The execution of a deed of sale operates as a formal or symbolic delivery of the property sold and it already authorizes the buyer to use the instrument as proof of ownership.[18] The petitioner argues that in the case at bar, the agreement and the absolute deed of sale contains no stipulation that she was obliged to actually and physically deliver the subject property to the respondent. The respondent fully knew Lacaden's and Parangan's possession of the subject property. When they agreed on the sale of the property, the respondent consciously assumed the risk of not being able to take immediate physical possession on account of Lacaden's and Parangan's presence therein. The petitioner likewise laments that the CA allegedly misappreciated the evidence offered before it when it declared that she failed to prove the existence of Atty. Antonio. For the record, she emphasizes that the said lawyer prepared and notarized the agreement and deed of absolute sale which were executed between the parties. He was also the petitioner’s counsel in the proceedings before the RTC. Atty. Antonio was also the one asked by the respondent to cease the transfer of the title over the subject property in the latter's name and to return the money he paid in advance.

The Respondent's Contentions In the respondent's comment,[19] he seeks the dismissal of the instant petition. He invokes Articles 1191 and 1458 to argue that when a seller fails to transfer the ownership and possession of a property sold, the buyer is entitled to rescind the contract of sale. Further, he contends that the execution of a deed of absolute sale does not necessarily amount to a valid and constructive delivery. In Masallo v. Cesar,[20] it was ruled that a person who does not have actual possession of real property cannot transfer constructive possession by the execution and delivery of a public document

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by which the title to the land is transferred. In Addison v. Felix and Tioco,[21] the Court was emphatic that symbolic delivery by the execution of a public instrument is equivalent to actual delivery only when the thing sold is subject to the control of the vendor.

Our Ruling The instant petition is bereft of merit. There is only a single issue for resolution in the instant petition, to wit, whether or not the failure of the petitioner to deliver to the respondent both the physical possession of the subject property and the certificate of title covering the same amount to a substantial breach of the former's obligations to the latter constituting a valid cause to rescind the agreement and deed of sale entered into by the parties. We rule in the affirmative. The RTC and the CA both found that the petitioner failed to comply with her obligations to deliver to the respondent both the possession of the subject property and the certificate of title covering the same. Although Articles 1458, 1495 and 1498 of the NCC and case law do not generally require the seller to deliver to the buyer the physical possession of the property subject of a contract of sale and the certificate of title covering the same, the agreement entered into by the petitioner and the respondent provides otherwise. However, the terms of the agreement cannot be considered as violative of law, morals, good customs, public order, or public policy, hence, valid. Article 1458 of the NCC obliges the seller to transfer the ownership of and to deliver a determinate thing to the buyer, who shall in turn pay therefor a price certain in money or its equivalent. In addition thereto, Article 1495 of the NCC binds the seller to warrant the thing which is the object of the sale. On the other hand, Article 1498 of the same code provides that 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. In the case of Chua v. Court of Appeals,[22] which was cited by the petitioner, it was ruled that “when the deed of absolute sale is signed by the parties and notarized, then delivery of the real property is deemed made by the seller to the buyer.”[23] The transfer of the certificate of title in the name of the buyer is not necessary to confer ownership upon him. In the case now under our consideration, item nos. 2 and 3 of the agreement entered into by the petitioner and the respondent explicitly provide: 2. ONE HUNDRED EIGHTY FIVE THOUSAND (P185,000.00) PESOS of the total price was already received on March 27, 1998 for payment of the loan secured by the certificate of title covering the land in favor of the Rural Bank of Cauayan, San Manuel Branch, San Manuel,

Isabela, in order that the certificate of title thereof be withdrawn and released from the said bank, and the rest shall be for the payment of the mortgages in favor of Romeo Lacaden and Florante Parangan; 3. After the release of the certificate of title covering the land subject-matter of this agreement, the necessary deed of absolute sale in favor of the PARTY OF THE SECOND PART shall be executed and the transfer be immediately effected so that the latter can apply for a loan from any lending institution using the corresponding certificate of title as collateral therefor, and the proceeds of the loan, whatever be the amount, be given to the PARTY OF THE FIRST PART;[24] (underlining supplied) As can be gleaned from the agreement of the contending parties, the respondent initially paid the petitioner P185,000.00 for the latter to pay the loan obtained from the Rural Bank of Cauayan and to cause the release from the said bank of the certificate of title covering the subject property. The rest of the amount shall be used to pay the mortgages over the subject property which was executed in favor of Lacaden and Parangan. After the release of the TCT, a deed of sale shall be executed and transfer shall be immediately effected so that the title covering the subject property can be used as a collateral for a loan the respondent will apply for, the proceeds of which shall be given to the petitioner. Under Article 1306 of the NCC, the contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order or public policy. While Articles 1458 and 1495 of the NCC and the doctrine enunciated in the case of Chua do not impose upon the petitioner the obligation to physically deliver to the respondent the certificate of title covering the subject property or cause the transfer in the latter's name of the said title, a stipulation requiring otherwise is not prohibited by law and cannot be regarded as violative of morals, good customs, public order or public policy. Item no. 3 of the agreement executed by the parties expressly states that “transfer [shall] be immediately effected so that the latter can apply for a loan from any lending institution using the corresponding certificate of title as collateral therefore.” Item no. 3 is literal enough to mean that there should be physical delivery of the TCT for how else can the respondent use it as a collateral to obtain a loan if the title remains in the petitioner’s possession. We agree with the RTC and the CA that the petitioner failed to prove that she delivered the TCT covering the subject property to the respondent. What the petitioner attempted to establish was that she gave the TCT to Atty. Antonio whom she alleged was commissioned to effect the transfer of the title in the respondent's name. Although Atty. Antonio's existence is certain as he was the petitioner’s counsel in the proceedings

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before the RTC, there was no proof that the former indeed received the TCT or that he was commissioned to process the transfer of the title in the respondent's name. It is likewise the petitioner’s contention that pursuant to Article 1498 of the NCC, she had already complied with her obligation to deliver the subject property upon her execution of an absolute deed of sale in the respondent’s favor. The petitioner avers that she did not undertake to eject the mortgagors Parangan and Lacaden, whose presence in the premises of the subject property was known to the respondent. We are not persuaded. In the case of Power Commercial and Industrial Corporation[25] cited by the petitioner, the Court ruled that the failure of the seller to eject the squatters from the property sold cannot be made a ground for rescission if the said ejectment was not stipulated as a condition in the contract of sale, and when in the negotiation stage, the buyer's counsel himself undertook to eject the illegal settlers. The circumstances surrounding the case now under our consideration are different. In item no. 2 of the agreement, it is stated that part of the P185,000.00 initially paid to the petitioner shall be used to pay the mortgagors, Parangan and Lacaden. While the provision does not expressly impose upon the petitioner the obligation to eject the said mortgagors, the undertaking is necessarily implied. Cessation of occupancy of the subject property is logically expected from the mortgagors upon payment by the petitioner of the amounts due to them. We note that in the demand letter[26] dated September 18, 1998, which was sent by the respondent to the petitioner, the former lamented that “the area is not yet fully cleared of incumbrances as there are tenants who are not willing to vacate the land without giving them back the amount that they mortgaged the land.” Further, in the proceedings before the RTC conducted after the complaint for rescission was filed, the petitioner herself testified that she won the ejectment suit against the mortgagors “only last year”.[27] The complaint was filed on September 8, 2002 or more than four years from the execution of the parties' agreement. This means that after the lapse of a considerable period of time from the agreement's execution, the mortgagors remained in possession of the subject property.

Notwithstanding the absence of stipulations in the agreement and absolute deed of sale entered into by Villamar and Mangaoil expressly indicating the consequences of the former's failure to deliver the physical possession of the subject property and the certificate of title covering the same, the latter is entitled to demand for the rescission of their contract pursuant to Article 1191 of the NCC. We note that the agreement entered into by the petitioner and the respondent only contains three items specifying the parties'

undertakings. In item no. 5, the parties consented “to abide with all the terms and conditions set forth in this agreement and never violate the same.”[28] Article 1191 of the NCC is clear that “the power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.” The respondent cannot be deprived of his right to demand for rescission in view of the petitioner’s failure to abide with item nos. 2 and 3 of the agreement. This remains true notwithstanding the absence of express stipulations in the agreement indicating the consequences of breaches which the parties may commit. To hold otherwise would render Article 1191 of the NCC as useless. 

Article 1498 of the NCC generally considers the execution of a public instrument as constructive delivery by the seller to the buyer of the property subject of a contract of sale. The case at bar, however, falls among the exceptions to the foregoing rule since a mere presumptive and not conclusive delivery is created as the respondent failed to take material possession of the subject property. Further, even if we were to assume for argument's sake that the agreement entered into by the contending parties does not require the delivery of the physical possession of the subject property from the mortgagors to the respondent, still, the petitioner's claim that her execution of an absolute deed of sale was already sufficient as it already amounted to a constructive delivery of the thing sold which Article 1498 of the NCC allows, cannot stand. In Philippine Suburban Development Corporation v. The Auditor General,[29] we held: When the sale of real property is made in a public instrument, the execution thereof is equivalent to the delivery of the thing object of the contract, if from the deed the contrary does not appear or cannot clearly be inferred. In other words, there is symbolic delivery of the property subject of the sale by the execution of the public instrument, unless from the express terms of the instrument, or by clear inference therefrom, this was not the intention of the parties. Such would be the case, for instance, x x x where the vendor has no control over the thing sold at the moment of the sale, and, therefore, its material delivery could not have been made.[30] (Underlining supplied and citations omitted) Stated differently, as a general rule, the execution of a public instrument amounts to a constructive delivery of the thing subject of a contract of sale. However, exceptions exist, among which is when mere presumptive and not conclusive delivery is created in cases where the

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buyer fails to take material possession of the subject of sale. 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 the case at bar, the RTC and the CA found that the petitioner failed to deliver to the respondent the possession of the subject property due to the continued presence and occupation of Parangan and Lacaden. We find no ample reason to reverse the said findings. Considered in the light of either the agreement entered into by the parties or the pertinent provisions of law, the petitioner failed in her undertaking to deliver the subject property to the respondent. IN VIEW OF THE FOREGOING, the instant petition is DENIED. The February 20, 2009 Decision and July 8, 2009 Resolution of the Court of Appeals, directing the rescission of the agreement and absolute deed of sale entered into by Estelita Villamar and Balbino Mangaoil and the return of the down payment made for the purchase of the subject property, are AFFIRMED. However, pursuant to our ruling in Eastern Shipping Lines, Inc. v. CA,[31] an interest of 12% per annum is imposed on the sum ofP185,000.00 to be returned to Mangaoil to be computed from the date of finality of this Decision until full satisfaction thereof.

SO ORDERED.

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SECOND DIVISION RUDOLF LIETZ, INC., G.R. No. 122463 Petitioner, Present: - versus- PUNO, J., Chairman, AUSTRIA-MARTINEZ, CALLEJO, SR.,THE COURT OF APPEALS, TINGA, andAGAPITO BURIOL, TIZIANA CHICO-NAZARIO, JJ. TURATELLO & PAOLA SANI, Respondents. Promulgated: December 19, 2005 x --------------------------------------------------------------------x D E C I S I O N TINGA, J.: This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court, praying for the annulment of the Decision[1] dated April 17, 1995 and the Resolution[2] dated October 25, 1995 of the Court of Appeals in CA-G.R. CV No. 38854. The Court of Appeals affirmed theDecision[3] in Civil Case No. 2164 of the Regional Trial Court (RTC), Branch 48, of Palawan and Puerto Princesa City with the modification that herein respondents Tiziana Turatello and Paola Sani are entitled to damages, attorney’s fees, and litigation expenses.

The dispositive portion of the RTC Decision reads: WHEREFORE, in view of the foregoing and as prayed for by the

defendants, the instant complaint is hereby DISMISSED. Defendant’s counterclaim is likewise DISMISSED. Plaintiff, however, is ordered to pay defendant Turatello and Sani’s counsel the sum of P3,010.38 from August 9, 1990 until fully paid representing the expenses incurred by said counsel when the trial was cancelled due to the non-appearance of plaintiff’s witnesses. With costs against the plaintiff.SO ORDERED.[4] As culled from the records, the following antecedents appear: Respondent Agapito Buriol previously owned a parcel of unregistered land situated at Capsalay Island, Port Barton, 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 respondent Buriol’s 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.[5] 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. TheDeed of Absolute Sale embodying the agreement described the land as follows: A parcel of land, consisting of FIVE (5) hectares, more or less, a portion of that parcel of land declared in the name of Agapito Buriol, under Tax Declaration No. 0021, revised in the year 1985, together with all improvements thereon, situated at the Island of Capsalay, Barangay

Port Barton, municipality of San Vicente, province of Palawan which segregated from the whole parcel described in said tax declaration, has the following superficial boundaries: NORTH, Sec. 01-017; and remaining property of the vendor; EAST, by Seashore; SOUTH, 01-020; and WEST, by 01-018 (now Elizabeth Lietz).[6] 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 on April 3, 1989 a complaint for Annulment of Lease with Recovery of Possession with Injunction and Damages against respondents and Flavia Turatello before the RTC. 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 Flavia Turatello and respondents Tiziana Turatello and Paola Sani. The complaint sought the issuance of a restraining order and a writ of preliminary injunction to prevent Flavia Turatello and respondents Turatello and Sani from introducing improvements on the property, the annulment of the lease agreement between respondents, and the restoration of the amount paid by petitioner in excess of the value of the property sold to him. Except for Flavia Turatello, 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 attorney’s fees.[7] After trial on the merits, the trial court rendered judgment on May 27, 1992, dismissing both petitioner’s complaint and respondents’ counterclaim for damages. Petitioner and respondents Turatello and Sani separately appealed the RTC Decision to the Court of Appeals, which affirmed the dismissal of petitioner’s complaint and awarded respondents Turatello and Sani damages and attorney’s fees. The dispositive portion of the Court of Appeals Decision reads: WHEREFORE, the decision appealed from is hereby AFFIRMED, with the following modification:

Plaintiff-appellant Rudolf Lietz, Inc. is hereby (1) ordered to pay defendants-appellants Turatello and Sani, the sum of P100,000.00 as moral damages; (2) P100,000.00 as exemplary damages; (3) P135,728.73 as attorney’s fees; and (4) P10,000.00 as litigation expenses. SO ORDERED.[8] Petitioner brought to this Court the instant petition after the denial of its motion for reconsideration of the Court of Appeal Decision. The instant petition imputes the following errors to the Court of Appeals.

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I. IN DEFENDING AGAPITO BURIOL’S GOOD FAITH AND IN STATING THAT ASSUMING THAT HE (BURIOL) WAS IN BAD FAITH PETITIONER WAS SOLELY RESPONSIBLE FOR ITS INEXCUSABLE CREDULOUSNESS. II. IN ASSERTING THAT ARTICLES 1542 AND 1539 OF THE NEW CIVIL CODE ARE, RESPECTIVELY, APPLICABLE AND INAPPLICABLE IN THE CASE AT BAR. III. IN NOT GRANTING PETITIONER’S CLAIM FOR ACTUAL AND EXEMPLARY DAMAGES. IV. IN GRANTING RESPONDENTS TIZIANA TURATELLO AND PAOLA SANI EXHORBITANT [sic] AMOUNTS AS DAMAGES WHICH ARE EVEN BEREFT OF EVIDENTIARY BASIS.[9] Essentially, only two main issues confront this Court, namely: (i) whether or not petitioner is entitled to the delivery of the entire five hectares or its equivalent, and (ii) whether or not damages may be awarded to either party.

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. As in its appeal to the Court of Appeals, petitioner anchors its argument on the second paragraph of Article 1539 of the Civil Code, which provides:

Art. 1539. The obligation to deliver the thing sold includes that of placing in the control of the vendee all that is mentioned in the contract, in conformity with the following rules:

If the sale of real estate should be made with a statement of its area, at the rate of a certain price for a unit of measure or number, the vendor shall be obliged to deliver to the vendee, if the latter should demand it, all that may have been stated in the contract; but, should this be not possible, the vendee may choose between a proportional reduction of the price and the rescission of the contract, provided that, in the latter case, the lack in the area be not less than one-tenth of that stated. . . .

The Court of Appeals Decision, however, declared as inapplicable the abovequoted provision and instead ruled that petitioner is no longer entitled to a reduction in price based on the provisions of Article 1542 of the Civil Code, which read:

Art. 1542. In the sale of real estate, made for a lump sum and not at the rate of a certain sum for a unit of measure or number, there shall be no increase or decrease of the price, although there be a greater or lesser area or number than that stated in the contract.

The same rule shall be applied when two or more immovables are sold for a single price; but if, besides mentioning the boundaries, which is indispensable in every conveyance of real estate, its area or number should be designated in the contract, the vendor shall be bound to deliver all that is

included within said boundaries, even when it exceeds the area or number specified in the contract; and, should he not be able to do so, he shall suffer a reduction in the price, in proportion to what is lacking in the area or number, unless the contract is rescinded because the vendee does not accede to the failure to deliver what has been stipulated.

Article 1539 governs a sale of immovable by the unit, that is, at a stated rate per unit area. In a unit price contract, the statement of area of immovable is not conclusive and the price may be reduced or increased depending on the area actually delivered. If the vendor delivers less than the area agreed upon, the vendee may oblige the vendor to deliver all that may be stated in the contract or demand for the proportionate reduction of the purchase price if delivery is not possible. If the vendor delivers more than the area stated in the contract, the vendee has the option to accept only the amount agreed upon or to accept the whole area, provided he pays for the additional area at the contract rate.[10]

In some instances, a sale of an immovable may be made for a lump sum and not at a rate per unit. The parties agree on a stated purchase price for an immovable the area of which may be declared based on an estimate or where both the area and boundaries are stated.

In the case where the area of the immovable is stated in the contract based on an estimate, the actual area delivered may not measure up exactly with the area stated in the contract. According to Article 1542[11] of the Civil Code, in the sale of real estate, made for a lump sum and not at the rate of a certain sum for a unit of measure or number, there shall be no increase or decrease of the price although there be a greater or lesser area or number than that stated 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 “more or less” or similar words in designating quantity covers only a reasonable excess or deficiency.[12]

Where both the area and the boundaries of the immovable are declared, the area covered within the boundaries of the immovable prevails over the stated area. In cases of conflict between areas and boundaries, it is the latter which should prevail. What really defines a piece of ground is not the area, calculated with more or less certainty, mentioned in its description, but the boundaries therein laid down, as enclosing the land and indicating its limits. In a contract of sale of land in a mass, it is well established that the specific boundaries stated in the contract must control over any statement with respect to the area contained within its boundaries. It is not of vital consequence that a deed or contract of sale of land should disclose the area with mathematical accuracy. It is sufficient if its extent is objectively indicated with sufficient precision to enable one to identify it. An error as to the superficial area is immaterial.[13] Thus, the

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obligation of the vendor is to deliver everything within the boundaries, inasmuch as it is the entirety thereof that distinguishes the determinate object.[14]

As correctly noted by the trial court and the Court of Appeals, the sale between petitioner and respondent Buriol involving the latter’s 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 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.

The Court rejects petitioner’s contention that the property’s boundaries as stated in the Deed of Absolute Sale are superficial and unintelligible and, therefore, cannot prevail over the area stated in the contract. First, as pointed out by the Court of Appeals, at an ocular inspection prior to the perfection of the contract of sale, respondent Buriol pointed to petitioner the boundaries of the property. Hence, petitioner gained a fair estimate of the area of the property sold to him. Second, petitioner cannot now assail the contents of the Deed of Absolute Sale, particularly the description of the boundaries of the property, because petitioner’s subscription to the Deed of Absolute Sale indicates his assent to the correct description of the boundaries of the property.

Petitioner also asserts that respondent Buriol is guilty of misleading petitioner into believing that the latter was buying five hectares when he knew prior to the sale that he owned only four hectares. The review of the circumstances of the alleged misrepresentation is factual and, therefore, beyond the province of the Court. Besides, this issue had already been raised before and passed upon by the trial court and the Court of Appeals. The factual finding of the courts below that no sufficient evidence supports petitioner’s allegation of misrepresentation is binding on the Court.

The Court of Appeals reversed the trial court’s dismissal of respondents Turatello and Sani’s counterclaim for moral and exemplary damages, attorney’s fees and litigation expenses. In awarding moral damages in the amount of P100,000 in favor of Turatello and Sani, the Court of Appeals justified the award to alleviate the suffering caused by petitioner’s unfounded civil action. The filing alone of a civil action should not be a ground for an award of moral damages in the same way that a clearly unfounded civil action is not among the grounds for moral damages.[15]

Exemplary or corrective damages are imposed, by way of example

or correction for the public good, in addition to the moral, temperate, liquidated or compensatory damages.[16] With the deletion of the award for moral damages, there is no basis for the award of exemplary damages.

WHEREFORE, the instant petition for review on certiorari is

GRANTED in PART. The Court of Appeals Decision in CA-G.R. CV No. 38854 is AFFIRMED with the MODIFICATION that the award of moral and exemplary damages is DELETED.

SO ORDERED.

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FIRST DIVISION G.R. No. 173215 CEBU WINLAND DEVELOPMENT CORPORATION, Petitioner, Present: PUNO, C.J., Chairperson, - versus - CARPIO, CORONA, LEONARDO-DE CASTRO, and BERSAMIN, JJ. ONG SIAO HUA, Promulgated: Respondent. May 21, 2009 x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x D E C I S I O N PUNO, C.J.: Before us is a Petition for Review[1] filed under Rule 45 of the Rules of Court assailing the Decision[2] dated February 14, 2006 of the Court of Appeals and its Resolution[3] dated June 2, 2006 denying petitioner’s motion for reconsideration of the said decision. The facts are undisputed. Petitioner, Cebu Winland Development Corporation, is the owner and developer of a condominium project called the Cebu Winland Tower Condominium located in Juana Osmeña Extension, Cebu City. Respondent, Ong Siao Hua, is a buyer of two condominium units and four parking slots from petitioner. Sometime before January 6, 1995 while the Cebu Winland Tower Condominium was under construction, petitioner offered to sell to respondent condominium units at promotional prices. As an added incentive, petitioner offered a 3% discount provided 30% of the purchase price is paid as down payment and the balance paid in 24 equal monthly installments. On January 6, 1995, respondent accepted the offer of petitioner and bought two condominium units designated as Unit Nos. 2405 and 2406, as well as four parking slots designated as slots 91, 99, 101 and 103 (subject properties). The area per condominium unit as indicated in petitioner’s price list is 155 square meters and the price per square meter is P22,378.95. The price for the parking slot isP240,000 each. Respondent, therefore, paid P2,298,655.08 as down payment and issued 24 postdated checks in the amount of P223,430.70 per check for the balance of the purchase price in the total amount of P5,362,385.19 computed as follows:[4]

155 sq.m./unit x 2 units x P22,378.95/sq.m. P6,937,474.50

4 parking slots at P240,000/slot 960,000.00 Sub-total P 7,897,474.50Less: 3% discount ( 236,924.23) Net purchase price P 7,660,550.2730% down payment ( 2,298,165.08)Balance at P223,430.70 per month for 24 months P 5,362,385.19

The parties did not execute any written document setting forth the said transaction. On October 10, 1996, possession of the subject properties was turned over to respondent.[5] After the purchase price was fully paid with the last check dated January 31, 1997, respondent requested petitioner for the condominium certificates of title evidencing ownership of the units. Petitioner then sent to respondent, for the

latter’s signature, documents denominated as Deeds of Absolute Sale for the two condominium units. Upon examination of the deed of absolute sale of Unit No. 2405 and the identical document for Unit No. 2406, respondent was distressed to find that the stated floor area is only 127 square meters contrary to the area indicated in the price list which was 155 square meters. Respondent caused a verification survey of the said condominium units and discovered that the actual area is only 110 square meters per unit. Respondent demanded from petitioner to refund the amount of P2,014,105.50 representing excess payments for the difference in the area, computed as follows:[6] 155 sq.m.-110 = 45 x 2 units = 90 sq.m. x P22,378.95 = P2,014,105.50 Petitioner refused to refund the said amount to respondent. Consequently, respondent filed a Complaint[7] on August 7, 1998 in the Regional Office of the Housing and Land Use Regulatory Board (HLURB) in Cebu City, praying for the refund of P2,014,105.50 plus interest, moral damages and attorney’s fees, including the suspension of petitioner’s license to sell. The case was docketed as HLURB Case No. REM-0220-080798. On December 6, 1999, the Housing and Land Use Arbiter (the Arbiter) rendered a Decision[8] dismissing the complaint. The Arbiter found petitioner not guilty of misrepresentation. Considering further that the subject properties have been delivered on October 10, 1996 and respondent filed his complaint only on August 7, 1998, the Arbiter further ruled that respondent’s action had already prescribed pursuant to Article 1543,[9] in relation to Articles 1539 and 1542,[10] of the Civil Code. The dispositive portion of the said decision reads: WHEREFORE, Premises Considered, judgment is hereby rendered DISMISSING this Complaint, and ordering the parties to do the following, to wit:

1. For the Complainant to SIGN the two (2) Deed[s] of Absolute Sale which this Board finds to be in order within 30 days from finality of this decision; and

2. For the Respondent to DELIVER the corresponding condominium certificate of title for the two units namely units 2405 and 2406 free from all liens and encumbrances.

Consequently, the counterclaim is likewise dismissed for it finds no evidence that Complainant acted in bad faith in filing this complaint.

Cost against the parties. SO ORDERED.[11] Aggrieved, respondent filed a Petition for Review of said decision with the Board of Commissioners of the HLURB (the Board). In the course of its proceedings, the Board ordered that an ocular inspection of Unit Nos. 2405 and 2406 be conducted by an independent engineer. The Board further ordered that there should be two measurements of the areas in controversy, one based on the master deed and another based on the internal surface of the perimeter wall. After the ocular inspection, the independent geodetic engineer found the following measurements: Unit 2405- Based on internal face of perimeter wall = 109 sq. m.

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Based on master deed = 115 sq. m. Unit 2406- Based on internal face of perimeter wall = 110 sq. m. Based on master deed = 116 sq. m.[12]

Thereafter, the Board rendered its Decision[13] dated June 8, 2004 affirming the Arbiter’s finding that respondent’s action had already prescribed. However, the Board found that there was a mistake regarding the object of the sale constituting a ground for rescission based on Articles 1330 and 1331[14] of the Civil Code. Hence, the Board modified the decision of the Arbiter as follows: Wherefore[,] the decision of the [O]ffice below is hereby modified with the following additional directive: In the alternative, and at the option of the complainant, the contract is rescinded and the respondent is directed to refund to (sic) P7,660,550[.]27 while complainant is directed to turn over possession of the units 2405, 2406 and the four parking lots to the respondent. So ordered.[15]

Not satisfied with the decision of the Board, petitioner filed an appeal to the Office of the President arguing that the Board erred in granting relief to respondent considering that the latter’s action had already prescribed. On March 11, 2005, the Office of the President rendered a Decision[16] finding that respondent’s action had already prescribed pursuant to Article 1543 of the Civil Code. The dispositive portion of said decision reads as follows: WHEREFORE, premises considered, the Decision dated June 8, 2004 of the HLURB is hereby MODIFIED and the Decision dated December 6, 1999 of the Housing and Land Use Arbiter is hereby REINSTATED. SO ORDERED.[17]

Respondent filed a Motion for Reconsideration but the same was denied by the Office of the President in a Resolution [18] dated June 20, 2005. Hence, respondent filed a Petition for Review before the Court of Appeals.

On February 14, 2006, the Court of Appeals rendered the assailed Decision finding that respondent’s action has not prescribed. The dispositive portion of the Decision reads: WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by us GRANTING the petition filed in this case, REVERSING and SETTING ASIDE the assailed Decision and Resolution of the Office of the President dated March 11, 2005 and June 20, 2005, respectively, and reinstating the Decision promulgated by the Board of Commissioners of the HLURB on June 8, 2004. SO ORDERED.[19]

Petitioner’s Motion for Reconsideration[20] of the assailed decision having been denied in the Resolution dated June 2, 2006, petitioner is now before us, in this petition for review raising the following grounds:

I. The Court of Appeals Erred in Holding That in A Contract of Sale Ownership Is Not Transferred by Delivery[.]

II.

The Court of Appeals Erred in Holding That Respondent’s Action Has Not Prescribed.

III. The Court of Appeals Erred And Exceeded Its Jurisdiction When It Found Petitioner Guilty Of Misrepresentation As The Decision Of The HLURB Board of Commissioners On The Same Matter Is Final With Respect To Respondent Who Did Not Appeal Said Decision That Petitioner Did Not Commit Misrepresentation.[21] The issue before us is whether respondent’s action has prescribed pursuant to Article 1543, in relation to Articles 1539 and 1542 of the Civil Code, to wit: ARTICLE 1539. The obligation to deliver the thing sold includes that of placing in the control of the vendee all that is mentioned in the contract, in conformity with the following rules:

If the sale of real estate should be made with a statement of its area, at the rate of a certain price for a unit of measure or number , the vendor shall be obliged to deliver to the vendee, if the latter should demand it, all that may have been stated in the contract; but, should this be not possible, the vendee may choose between a proportional reduction of the price and the rescission of the contract, provided that, in the latter case, the lack in the area be not less than one-tenth of that stated.

The same shall be done, even when the area is the same, if any part of the immovable is not of the quality specified in the contract.

The rescission, in this case, shall only take place at the will of the vendee, when the inferior value of the thing sold exceeds one-tenth of the price agreed upon. Nevertheless, if the vendee would not have bought the immovable had he known of its smaller area or inferior quality, he may rescind the sale. (1469a) [Emphasis supplied]

ARTICLE 1542. In the sale of real estate, made for a lump sum and not at the rate of a certain sum for a unit of measure or number, there shall be no increase or decrease of the price, although there be a greater or lesser area or number than that stated in the contract.

The same rule shall be applied when two or more immovables are sold for a single price; but if, besides mentioning the boundaries, which is indispensable in every conveyance of real estate, its area or number should be designated in the contract, the vendor shall be bound to deliver all that is included within said boundaries, even when it exceeds the area or number specified in the contract; and, should he not be able to do so, he shall suffer a reduction in the price, in proportion to what is lacking in the area or number, unless the contract is rescinded because the vendee does not accede to the failure to deliver what has been stipulated. (1471) [Emphasis supplied]

ARTICLE 1543. The actions arising from Articles 1539 and 1542 shall prescribe in six months, counted from the day of delivery. (1472a) [Emphasis supplied]

Petitioner argues that it delivered possession of the subject properties to respondent on October 10, 1996, hence, respondent’s action filed on August 7, 1998 has already prescribed.

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Respondent, on the one hand, contends that his action has not prescribed because the prescriptive period has not begun to run as the same must be reckoned from the execution of the deeds of sale which has not yet been done. The resolution of the issue at bar necessitates a scrutiny of the concept of “delivery” in the context of the Law on Sales or as used in Article 1543 of the Civil Code. Under the Civil Code, the vendor is bound to transfer the ownership of and deliver the thing which is the object of the sale. The pertinent provisions of the Civil Code on the obligation of the vendor to deliver the object of the sale provide:

ARTICLE 1495. The vendor is bound to transfer the ownership of and deliver, as well as warrant the thing which is the object of the sale. (1461a)

ARTICLE 1496. 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. (n)

ARTICLE 1497. The thing sold shall be understood as delivered, when it is placed in the control and possession of the vendee. (1462a) ARTICLE 1498. 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. xxx

Under the Civil Code, ownership does not pass by mere stipulation but only by delivery.[22] Manresa explains, “the delivery of the thing . . . signifies that title has passed from the seller to the buyer."[23] According to Tolentino, the purpose of delivery is not only for the enjoyment of the thing but also a mode of acquiring dominion and determines the transmission of ownership, the birth of the real right. The delivery under any of the forms provided by Articles 1497 to 1505 of the Civil Code signifies that the transmission of ownership from vendor to vendee has taken place.[24] Article 1497 above contemplates what is known as real or actual delivery, when the thing sold is placed in the control and possession of the vendee. Article 1498, on the one hand, refers to symbolic delivery by the execution of a public instrument. It should be noted, however, that Article 1498 does not say that the execution of the deed provides a conclusive presumption of the delivery of possession. It confines itself to providing that the execution thereof is equivalent to delivery, which means that the presumption therein can be rebutted by means of clear and convincing evidence. Thus, the presumptive delivery by the execution of a public instrument can be negated by the failure of the vendee to take actual possession of the land sold.[25] In Equatorial Realty Development, Inc. v. Mayfair Theater, Inc.,[26] the concept of “delivery” was explained as follows: Delivery has been described as a composite act, a thing in which both parties must join and the minds of both parties concur. It is an act by which one party parts with the title to and the possession of the property, and the other acquires the right to and the possession of the same. In its natural sense, delivery means something in addition to the delivery of property or title; it means

transfer of possession. In the Law on Sales, delivery may be either actual or constructive, but both forms of delivery contemplate "the absolute giving up of the control and custody of the property on the part of the vendor, and the assumption of the same by the vendee." (Emphasis supplied) In light of the foregoing, “delivery” as used in the Law on Sales refers to the concurrent transfer of two things: (1) possession and (2) ownership. This is the rationale behind the jurisprudential doctrine that presumptive delivery via execution of a public instrument is negated by the reality that the vendee actually failed to obtain material possession of the land subject of the sale.[27] In the same vein, if the vendee is placed in actual possession of the property, but by agreement of the parties ownership of the same is retained by the vendor until the vendee has fully paid the price, the mere transfer of the possession of the property subject of the sale is not the “delivery” contemplated in the Law on Sales or as used in Article 1543 of the Civil Code.

In the case at bar, it appears that respondent was already placed in possession of the subject properties. However, it is crystal clear that the deeds of absolute sale were still to be executed by the parties upon payment of the last installment. This fact shows that ownership of the said properties was withheld by petitioner. Following case law, it is evident that the parties did not intend to immediately transfer ownership of the subject properties until full payment and the execution of the deeds of absolute sale.[28] Consequently, there is no “delivery” to speak of in this case since what was transferred was possession only and not ownership of the subject properties.

We, therefore, hold that the transfer of possession of the subject properties on October 10, 1996 to respondent cannot be considered as “delivery” within the purview of Article 1543 of the Civil Code. It follows that since there has been no transfer of ownership of the subject properties since the deeds of absolute sale have not yet been executed by the parties, the action filed by respondent has not prescribed.

The next issue is whether the sale in the case at bar is one made with a statement of its area or at the rate of a certain price for a unit of measure and not for a lump sum. Article 1539 provides that “If the sale of real estate should be made with a statement of its area, at the rate of a certain price for a unit of measure or number, the vendor shall be obliged to deliver to the vendee…all that may have been stated in the contract; but, should this be not possible, the vendee may choose between a proportional reduction of the price and the rescission of the contract….” Article 1542, on the one hand, provides that “In the sale of real estate, made for a lump sum and not at the rate of a certain sum for a unit of measure or number, there shall be no increase or decrease of the price,

34

although there be a greater or lesser area or number than that stated in the contract."

The distinction between Article 1539 and Article 1542 was explained by Manresa[29] as follows:

. . . If the sale was made for a price per unit of measure or number, the consideration of the contract with respect to the vendee, is the number of such units, or, if you wish, the thing purchased as determined by the stipulated number of units. But if, on the other hand, the sale was made for a lump sum, the consideration of the contract is the object sold, independently of its number or measure, the thing as determined by the stipulated boundaries, which has been called in law a determinate object.

This difference in consideration between the two cases implies a distinct regulation of the obligation to deliver the object, because, for an acquittance delivery must be made in accordance with the agreement of the parties, and the performance of the agreement must show the confirmation, in fact, of the consideration which induces each of the parties to enter into the contract. In Rudolf Lietz, Inc. v. Court of Appeals,[30] we held:

Article 1539 governs a sale of immovable by the unit, that is, at a stated rate per unit area. In a unit price contract, the statement of area of immovable is not conclusive and the price may be reduced or increased depending on the area actually delivered. If the vendor delivers less than the area agreed upon, the vendee may oblige the vendor to deliver all that may be stated in the contract or demand for the proportionate reduction of the purchase price if delivery is not possible. If the vendor delivers more than the area stated in the contract, the vendee has the option to accept only the amount agreed upon or to accept the whole area, provided he pays for the additional area at the contract rate.

In some instances, a sale of an immovable may be made for a lump sum and not at a rate per unit. The parties agree on a stated purchase price for an immovable the area of which may be declared based on an estimate or where both the area and boundaries are stated.

In the case where the area of the immovable is stated in the contract based on an estimate, the actual area delivered may not measure up exactly with the area stated in the contract. According to Article 1542 of the Civil Code, in the sale of real estate, made for a lump sum and not at the rate of a certain sum for a unit of measure or number, there shall be no increase or decrease of the price although there be a greater or lesser area or number than that stated 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 "more or less" or similar words in designating quantity covers only a reasonable excess or deficiency.

Where both the area and the boundaries of the immovable are declared, the area covered within the boundaries of the immovable prevails over the stated area. In cases of conflict between areas and boundaries, it is the latter which should prevail. What really defines a piece of ground is not the area, calculated with more or less certainty, mentioned in its description, but the boundaries therein laid down, as enclosing the land and indicating its limits. In a contract of sale of land in a mass, it is well established that the specific boundaries stated in the contract must control over any statement with respect to the area contained within its boundaries. It is not of vital consequence that a deed or contract of sale of land should disclose the area with mathematical accuracy. It is sufficient if its extent is objectively indicated with sufficient precision to enable one to identify it. An error as to the superficial area is immaterial. Thus, the obligation of the vendor is to deliver everything within the boundaries, inasmuch as it is the entirety thereof that distinguishes the determinate object.

In the case at bar, it is undisputed by the parties that the purchase price of the subject properties was computed based on the price list prepared by petitioner, or P22,378.95 per square meter. Clearly, the parties agreed on a sale at a rate of a certain price per unit of measure and not one for a lump sum. Hence, it is Article 1539 and not Article 1542 which is the applicable law. Accordingly, respondent is entitled to the relief afforded to him under Article 1539, that is, either a proportional reduction of the price or the rescission of the contract, at his option. Respondent chose the former remedy since he prayed in his Complaint for the refund of the amount of P2,014,105.50 representing the proportional reduction of the price paid to petitioner.

In its decision, the Court of Appeals held that the action filed by respondent has not prescribed and reinstated the decision of the Board. It is an error to reinstate the decision of the Board. The Board, in its decision, held that there was a mistake regarding the object of the sale constituting a ground for rescission based on Articles 1330 and 1331 of the Civil Code. It then granted the relief of rescission at the option of respondent. Articles 1330 and 1331 of the Civil Code provide:

ARTICLE 1330. A contract where consent is given through mistake, violence, intimidation, undue influence, or fraud is voidable. (1265a)

ARTICLE 1331. In order that mistake may invalidate consent, it should refer to the substance of the thing which is the object of the

35

contract, or to those conditions which have principally moved one or both parties to enter into the contract. We find that these articles are inapplicable to the case at bar. In order that mistake may invalidate consent and constitute a ground for annulment of contract based on Article 1331, the mistake must be material as to go to the essence of the contract; that without such mistake, the agreement would not have been made.[31] The effect of error must be determined largely by its influence upon the party. If the party would have entered into the contract even if he had knowledge of the true fact, then the error does not vitiate consent.[32]

In the case at bar, the relief sought by respondent was for a refund and he continued to occupy the subject properties after he found out that the same were smaller in area. All these show that respondent did not consider the error in size significant enough to vitiate the contract. Hence, the Court of Appeals erred in affirming the Board’s decision to grant rescission based on Articles 1330 and 1331 of the Civil Code.

IN VIEW WHEREOF, the petition is DENIED. The decision of the

Court of Appeals is AFFIRMED but with the MODIFICATION that the decision of the HLURB is not reinstated. Petitioner is ordered to refund the amount of Two Million Fourteen Thousand One Hundred Five Pesos and Fifty Centavos (P2,014,105.50) to respondent with legal interest of six percent (6%) per annum from August 7, 1998, the date of judicial demand. A twelve percent (12%) interest per annum, in lieu of six percent (6%), shall be imposed on such amount from the date of promulgation of this decision until the payment thereof. Costs against petitioner.

SO ORDERED.

36

Republic of the PhilippinesSUPREME COURTManilaSECOND DIVISION G.R. No. 169890 March 12, 2007FELICIANO ESGUERRA, CANUTO ESGUERRA, JUSTA ESGUERRA, ANGEL ESGUERRA, FIDELA ESGUERRA, CLARA ESGUERRA, and PEDRO ESGUERRA, Petitioners, vs.VIRGINIA TRINIDAD, PRIMITIVA TRINIDAD, and THE REGISTER OF DEEDS OF MEYCAUAYAN, BULACAN,Respondents.

D E C I S I O NCARPIO MORALES, J.:Involved in the present controversy are two parcels of land located in Camalig, Meycauayan, Bulacan.Felipe Esguerra and Praxedes de Vera (Esguerra spouses) were the owners of several parcels of land in Camalig, Meycauayan, Bulacan – among them a 35,284-square meter parcel of land covered by Tax Declaration No. 10374, half of which (17,642 square meters) they sold to their grandchildren, herein petitioners Feliciano, Canuto, Justa, Angel, Fidela, Clara and Pedro, all surnamed Esguerra; and a 23,989-square meterparcel of land covered by Tax Declaration No. 12080, 23,489 square meters of which they also sold to petitioners, and the remaining 500 square meters they sold to their other grandchildren, the brothers Eulalio and Julian Trinidad (Trinidad brothers).Also sold to the Trinidad brothers were a 7,048-square meter parcel of land covered by Tax Declaration No. 9059, a 4,618-square meter parcel of land covered by Tax Declaration No. 12081, and a 768-square meter parcel of land covered by Tax Declaration No. 13989.The Esguerra spouses executed the necessary Deed of Sale in favor of petitioners on August 11, 1937,1 and that in favor of the Trinidad brothers on August 17, 1937.2 Both documents were executed before notary public Maximo Abaño.Eulalio Trinidad later sold his share of the land to his daughters-respondents herein, via a notarized Kasulatan ng Bilihang Tuluyan ng Lupa3 dated October 13, 1965. A portion of the land consisting of 1,693 square meters was later assigned Lot No. 3593 during a cadastral survey conducted in the late 1960s.On respondents’ application for registration of title, the then Court of First Instance (CFI) of Bulacan, by Decision4of February 20, 1967, awarded Lot No. 3593 in their favor in Land Registration Case No. N-323-V. Pursuant to the Decision, the Land Registration Commission (LRC, now the Land Registration Authority [LRA]) issued Decree No. N-114039 by virtue of which the Register of Deeds of Bulacan issued OCT No. 0-36315 in the name of respondents.Meanwhile, under a notarized Bilihan ng Lupa6 dated November 10, 1958, petitioners sold to respondents’ parents Eulalio Trinidad and Damiana Rodeadilla (Trinidad spouses) a portion of about 5,000 square meters of the 23,489-square meter of land which they previously acquired from the Esguerra spouses.7

During the same cadastral survey conducted in the late 1960s, it was discovered that the about 5,000-square meter portion of petitioners’ parcel of land sold to the Trinidad spouses which was assigned Lot No. 3591 actually measured 6,268 square meters.In a subsequent application for registration of title over Lot No. 3591, docketed as Land Registration Case No. N-335-V, the CFI, by Decision8 of August 21, 1972, awarded Lot No. 3591 in favor of Eulalio Trinidad. Pursuant to the Decision, the LRC

issued Decree No. N-149491 by virtue of which the Register of Deeds of Bulacan issued OCT No. 0-64989 in the name of Trinidad.Upon the death of the Trinidad spouses, Lot No. 3591 covered by OCT No. 0-6498 was transmitted to respondents by succession.Petitioners, alleging that upon verification with the LRA they discovered the issuance of the above-stated two OCTs, filed on August 29, 1994 before the Regional Trial Court (RTC) of Malolos, Bulacan two separate complaints for their nullification on the ground that they were procured through fraud or misrepresentation.In the first complaint, docketed as Civil Case No. 737-M-94, petitioners sought the cancellation of OCT No. 0-3631.In the other complaint, docketed as Civil Case No. 738-M-94, petitioners sought the cancellation of OCT No. 0-6498.Both cases were consolidated and tried before Branch 79 of the RTC which, after trial, dismissed the cases by Joint Decision10 of May 15, 1997.Their appeal with the Court of Appeals having been dismissed by Decision of February 28, 2005, a reconsideration of which was, by Resolution of October 3, 2005,11 denied, petitioners filed the instant petition.Petitioners fault the appellate court1. . . . in misappreciating the fact that the act of the respondent Eulalio Trinidad in acquiring the property from Felipe Esguerra constituted fraud.2. . . . in the [i]nterpretation and application of the provisions of Article 1542 of the New Civil Code.3. . . . in ruling that there is prescription, res judicata, and violation of the non-[forum] shopping.12

In their Comment, respondents assailed the petition as lacking verification and certification against forum shopping and failing to attach to it an affidavit of service and material portions of the record in support thereof. Petitioners counter that the procedural deficiencies have been mooted by the filing of a Compliance.A check of the rollo shows that attached to the petition are an Affidavit of Service dated November 21, 2005 and the appellate court’s Decision of February 28, 2005 and Resolution of October 3, 2005; and that on January 16, 2006 or almost three months following the last day to file the petition, petitioners submitted, not at their own instance,13 a Verification and Sworn Certification on Non-Forum Shopping signed by petitioner Pedro Esguerra who cited honest and excusable mistake behind the omission to submit the same.This Court has strictly enforced the requirement of verification and certification, obedience to which and to other procedural rules is needed if fair results are to be expected therefrom.14 While exceptional cases have been considered to correct patent injustice concomitant to a liberal application of the rules of procedure, there should be an effort on the part of the party invoking liberality to advance a reasonable or meritorious explanation for his failure to comply with the rules.15 In petitioners’ case, no such explanation has been advanced.With regard to petitioners’ failure to attach material portions of the record in support of the petition, this requirement is not a mere technicality but an essential requisite for the determination of prima facie basis for giving due course to the petition.16 As a rule, a petition which lacks copies of essential pleadings and portions of the case record

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may be dismissed. Much discretion is left to the reviewing court, however, to determine the necessity for such copies as the exact nature of the pleadings and portions of the case record which must accompany a petition is not specified.17

At all events, technicality aside, the petition must be denied.It is settled that fraud is a question of fact and the circumstances constituting the same must be alleged and proved in the court below.18

In the present cases, as did the trial court, the appellate court found no fraud in respondents’ acquisition and registration of the land, viz:. . . Appellant Pedro Esguerra even testified that he does not know how appellees were able to secure a title over the lot in question and that they never sold Lot No. 3593 to Virginia Trinidad since it is part of the whole lot of 23,489 square meters. The said testimony is a mere conclusion on the part of appellants. On the other hand, the evidence shows that appellees acquired title over the subject property by virtue of a deed of sale executed by their father Eulalio Trinidad in their favor.x x x x[T]hey failed to establish that appellees’ acquisition of the certificate of title is fraudulent. In fact, in their two complaints, appellants acknowledged that appellees observed and took the initial procedural steps in the registration of the land, thus ruling out fraud in the acquisition of the certificate of title. . . .19

Factual findings of the trial court, when affirmed by the Court of Appeals, are final, conclusive and binding on this Court,20 which is not a trier of facts,21 hence, bereft of function under Rule 45 to examine and weigh the probative value of the evidence presented,22 its jurisdiction being limited only to the review and revision of errors of law.23 Albeit there are exceptions24 to this rule, the cases at bar do not fall thereunder, there being no showing that the trial and appellate courts overlooked matters which, if considered, would alter their outcome.Under the Torrens System, an OCT enjoys a presumption of validity, which correlatively carries a strong presumption that the provisions of the law governing the registration of land which led to its issuance have been duly followed.25 Fraud being a serious charge, it must be supported by clear and convincing proof.26 Petitioners failed to discharge the burden of proof, however.On the questioned interpretation and application by the appellate court of Article 1542 of the Civil Code reading In the sale of real estate, made for a lump sum and not at the rate of a certain sum for a unit of measure or number, there shall be no increase or decrease of the price, although there be a greater or less areas or number than that stated in the contract.The same rule shall be applied when two or more immovables are sold for a single price; but if, besides mentioning the boundaries, which is indispensable in every conveyance of real estate, its area or number should be designated in the contract, the vendor shall be bound to deliver all that is included within said boundaries, even when it exceeds the area or number specified in the contract; and, should he not be able to do so, he shall suffer a reduction in the price, in proportion to what is lacking in the area or number, unless the contract is rescinded because the vendee does not accede to the failure to deliver what has been stipulated. (Emphasis and underscoring supplied),while petitioners admittedly sold Lot No. 3591 to the Trinidad spouses, they contend that what they sold were only 5,000 square meters and not 6,268 square meters, and thus claim the excess of 1,268 square meters.

In sales involving real estate, the parties may choose between two types of pricing agreement: a unit price contract wherein the purchase price is determined by way of reference to a stated rate per unit area (e.g.,P1,000 per square meter), or a lump sum contract which states a full purchase price for an immovable the area of which may be declared based on an estimate or where both the area and boundaries are stated (e.g., P1 million for 1,000 square meters, etc.). In Rudolf Lietz, Inc. v. Court of Appeals,27 the Court discussed the distinction:. . . In a unit price contract, the statement of area of immovable is not conclusive and the price may be reduced or increased depending on the area actually delivered. If the vendor delivers less than the area agreed upon, the vendee may oblige the vendor to deliver all that may be stated in the contract or demand for the proportionate reduction of the purchase price if delivery is not possible. If the vendor delivers more than the area stated in the contract, the vendee has the option to accept only the amount agreed upon or to accept the whole area, provided he pays for the additional area at the contract rate. x x x xIn the case where the area of the immovable is stated in the contract based on an estimate, the actual area delivered may not measure up exactly with the area stated in the contract. According to Article 1542 of the Civil Code, in the sale of real estate, made for a lump sum and not at the rate of a certain sum for a unit of measure or number, there shall be no increase or decrease of the price, although there be a greater or less areas or number than that stated in the contract. . . .x x x xWhere both the area and the boundaries of the immovable are declared, the area covered within the boundaries of the immovable prevails over the stated area. In cases of conflict between areas and boundaries, it is the latter which should prevail. What really defines a piece of ground is not the area, calculated with more or less certainty, mentioned in its description, but the boundaries therein laid down, as enclosing the land and indicating its limits. In a contract of sale of land in a mass, it is well established that the specific boundaries stated in the contract must control over any statement with respect to the area contained within its boundaries. It is not of vital consequence that a deed or contract of sale of land should disclose the area with mathematical accuracy. It is sufficient if its extent is objectively indicated with sufficient precision to enable one to identify it. An error as to the superficial area is immaterial. Thus, the obligation of the vendor is to deliver everything within the boundaries, inasmuch as it is the entirety thereof that distinguishes the determinate object.28 (Emphasis and underscoring supplied)The courts below correctly characterized the sale of Lot No. 3591 as one involving a lump sum contract. TheBilihan ng Lupa shows that the parties agreed on the purchase price of P1,000.00 on a predetermined, albeit unsurveyed, area of 5,000 square meters and not on a particular rate per unit area. As noted by the Court of Appeals, the identity of the realty was sufficiently described as riceland:It is clear from the afore-quoted Bilihan ng Lupa that what appellants sold to Eulalio was the "bahaging palayan." Though measured as 5,000 square meters, more or less, such measurement is only an approximation, and not an exact measurement. Moreover, we take note of the fact that the said deed of sale mentioned the boundaries covering the whole area of 33,489 square meters, including the "bahaging palayan." Had appellants intended to sell only a portion of the "bahaging palayan," they could have stated the specific area in the deed of sale and not the entire "bahaging palayan" . . . .29

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In fine, under Article 1542, what is controlling is the entire land included within the boundaries, regardless of whether the real area should be greater or smaller than that recited in the deed. This is particularly true since the area of the land in OCT No. 0-6498 was described in the deed as "humigit kumulang," that is, more or less.30

A caveat is in order, however. The use of "more or less" or similar words in designating quantity covers only a reasonable excess or deficiency. A vendee of land 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.31

Numerical data are not of course the sole gauge of unreasonableness of the excess or deficiency in area. Courts must consider a host of other factors. In one case,32 the Court found substantial discrepancy in area due to contemporaneous circumstances. Citing change in the physical nature of the property, it was therein established that the excess area at the southern portion was a product of reclamation, which explained why the land’s technical description in the deed of sale indicated the seashore as its southern boundary, hence, the inclusion of the reclaimed area was declared unreasonable.In OCT No. 0-6498, the increase by a fourth of a fraction of the area indicated in the deed of sale cannot be considered as an unreasonable excess. Most importantly, the circumstances attendant to the inclusion of the excess area bare nothing atypical or significant to hint at unreasonableness. It must be noted that the land was not yet technically surveyed at the time of the sale. As vendors who themselves executed the Bilihan ng Lupa, petitioners may rightly be presumed to have acquired a good estimate of the value and area of the bahaging palayan.As for the last assigned error, the appellate court, in finding that the complaints were time-barred, noted that when the complaints were filed in 1994, more than 27 years had elapsed from the issuance of OCT No. 0-3631 and more than 20 years from the issuance of OCT No. 0-6498. The prescriptive period of one (1) year had thus set in.1awphi1.nétPetitioners’ reliance on Agne v. Director of Lands33 is misplaced since the cancellation of title was predicated not on the ground of fraud but on want of jurisdiction. Even assuming that petitioners’ actions are in the nature of a suit for quieting of title, which is imprescriptible, the actions still necessarily fail since petitioners failed to establish the existence of fraud.A word on Republic Act No. 716034 which was raised by petitioners in their petition. It expressly requires the parties to undergo a conciliation process under the Katarungang Pambarangay, as a precondition to filing a complaint in court,35 non-compliance with this condition precedent does not prevent a court of competent jurisdiction from exercising its power of adjudication over a case unless the defendants object thereto. The objection should be seasonably made before the court first taking cognizance of the complaint, and must be raised in the Answer or in such other pleading allowed under the Rules of Court.36

While petitioners admittedly failed to comply with the requirement of barangay conciliation, they assert that respondents waived such objection when they failed to raise it in their Answer. Contrary to petitioners’ claim, however, the records reveal that respondents raised their objection in their Amended Answers37 filed in both cases.IN FINE, it is a fundamental principle in land registration that a certificate of title serves as evidence of an indefeasible and incontrovertible title to the property in favor of the person whose name appears therein. Such indefeasibility commences after the

lapse or expiration of one year from the date of entry of the decree of registration when all persons are considered to have a constructive notice of the title to the property. After the lapse of one year, therefore, title to the property can no longer be contested. This system was so effected in order to quiet title to land.38

WHEREFORE, the petition is DENIED. The assailed Decision and Resolution of the Court of Appeals are AFFIRMED.Costs against petitioners.SO ORDERED. Esguerra vs. Trinidad (518 SCRA 186) Unit Price Contract vs. LumpSum.In a unit price contract,  the statement of area of immovable is not conclusive and the price may be reduced or increased depending on the area actually delivered. If the vendor delivers less than the area agreed upon, the vendee may oblige the vendor to deliver all that may be stated in the contract or demand for the proportionate reduction of the purchase price if delivery is not   possible.   If   the   vendor   delivers  more   than   the   area   stated   in   the contract, the vendee has the option to accept only the amount agreed upon or to accept the whole area, provided he pays for the additional area at the contract   rate.In the sale of real estate, made for a  lump sum and not at the rate of a certain sum for a unit of measure or number, there shall be no increase or decrease of the price, although there be a greater or less areas or number than   that   stated   in   the   contract.

In a contract of sale of land in a mass, it is well established that the specific boundaries  stated   in   the  contract  must  control  over  any  statement  with respect   to   the   area   contained   within   its   boundaries.   It   is   not   of   vital consequence that a deed or contract of sale of land should disclose the area with   mathematical   accuracy.   It   is   sufficient   if   its   extent   is   objectively indicated with sufficient precision to enable one to identify it. An error as to the superficial area is immaterial.  Thus, the obligation of the vendor is to deliver   everything  within   the   boundaries,   inasmuch   as   it   is   the   entirety thereof that distinguishes the determinate object. 

Republic of the PhilippinesSUPREME COURTManilaTHIRD DIVISIONG.R. No. 148225 March 3, 2010CARMEN DEL PRADO, Petitioner, vs.SPOUSES ANTONIO L. CABALLERO and LEONARDA CABALLERO, Respondents.D E C I S I O NNACHURA, J.:This is a petition for review on certiorari of the decision1 of the Court of Appeals (CA) dated September 26, 2000 and its resolution denying the motion for reconsideration thereof.The facts are as follows:In a judgment rendered on February 1, 1985 in Cadastral Case No. N-6 (LRC Rec. No. N-611), Judge Juan Y. Reyes of the Regional Trial Court (RTC) of Cebu City, Branch 14, adjudicated in favor of Spouses Antonio L. Caballero and Leonarda B. Caballero several parcels of land situated in Guba, Cebu City, one of which was

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Cadastral Lot No. 11909, the subject of this controversy.2 On May 21, 1987, Antonio Caballero moved for the issuance of the final decree of registration for their lots.3 Consequently, on May 25, 1987, the same court, through then Presiding Judge Renato C. Dacudao, ordered the National Land Titles and Deeds Registration Administration to issue the decree of registration and the corresponding titles of the lots in favor of the Caballeros.4

On June 11, 1990, respondents sold to petitioner, Carmen del Prado, Lot No. 11909 on the basis of the tax declaration covering the property. The pertinent portion of the deed of sale reads as follows:That we, Spouses ANTONIO L. CABALLERO and LEONARDA B. CABALLERO, Filipinos, both of legal age and residents of Talamban, Cebu City, Philippines, for and in consideration of the sum of FORTY THOUSAND PESOS (P40,000.00), Philippine Currency, paid by CARMEN DEL PRADO, Filipino, of legal age, single and a resident of Sikatuna St., Cebu City, Philippines, the receipt of which is full is hereby acknowledged, do by these presents SELL, CEDE, TRANSFER, ASSIGN & CONVEY unto the said CARMEN DEL PRADO, her heirs, assigns and/or successors-in-interest, one (1) unregistered parcel of land, situated at Guba, Cebu City, Philippines, and more particularly described and bounded, as follows:"A parcel of land known as Cad. Lot No. 11909, bounded as follows:North : Lot 11903East : Lot 11908West : Lot 11910South : Lot 11858 & 11912containing an area of 4,000 square meters, more or less, covered by Tax Dec. No. 00787 of the Cebu City Assessor’s Office, Cebu City." of which parcel of land we are the absolute and lawful owners.Original Certificate of Title (OCT) No. 1305, covering Lot No. 11909, was issued only on November 15, 1990, and entered in the "Registration Book" of the City of Cebu on December 19, 1990.5 Therein, the technical description of Lot No. 11909 states that said lot measures about 14,457 square meters, more or less.6

On March 20, 1991, petitioner filed in the same cadastral proceedings a "Petition for Registration of Document Under Presidential Decree (P.D.) 1529"7 in order that a certificate of title be issued in her name, covering the whole Lot No. 11909. In the petition, petitioner alleged that the tenor of the instrument of sale indicated that the sale was for a lump sum or cuerpo cierto, in which case, the vendor was bound to deliver all that was included within said boundaries even when it exceeded the area specified in the contract. Respondents opposed, on the main ground that only 4,000 sq m of Lot No. 11909 was sold to petitioner. They claimed that the sale was not for a cuerpo cierto. They moved for the outright dismissal of the petition on grounds of prescription and lack of jurisdiction.After trial on the merits, the court found that petitioner had established a clear and positive right to Lot No. 11909. The intended sale between the parties was for a lump sum, since there was no evidence presented that the property was sold for a price per unit. It was apparent that the subject matter of the sale was the parcel of land, known as Cadastral Lot No. 11909, and not only a portion thereof.8

Thus, on August 2, 1993, the court a quo rendered its decision with the following dispositive portion:WHEREFORE, premises considered, the petition is hereby granted and judgment is hereby rendered in favor of herein petitioner. The Register of Deeds of the City of Cebu is hereby ordered and directed to effect the registration in his office of the Deed of Absolute Sale between Spouses Antonio Caballero and Leonarda Caballero and Petitioner, Carmen del Prado dated June 11, 1990 covering Lot No. 11909 after payment of all fees prescribed by law. Additionally, the Register of Deeds of the City of Cebu is hereby ordered to cancel Original Certificate No. 1305 in the name of Antonio Caballero and

Leonarda Caballero and the Transfer Certificate of Title be issued in the name of Petitioner Carmen del Prado covering the entire parcel of land known as Cadastral Lot No. 11909.9

An appeal was duly filed. On September 26, 2000, the CA promulgated the assailed decision, reversing and setting aside the decision of the RTC.The CA no longer touched on the character of the sale, because it found that petitioner availed herself of an improper remedy. The "petition for registration of document" is not one of the remedies provided under P.D. No. 1529, after the original registration has been effected. Thus, the CA ruled that the lower court committed an error when it assumed jurisdiction over the petition, which prayed for a remedy not sanctioned under the Property Registration Decree. Accordingly, the CA disposed, as follows:IN VIEW OF ALL THE FOREGOING, the appealed decision is REVERSED and SET ASIDE and a new one entered dismissing the petition for lack of jurisdiction. No pronouncement as to costs.10

Aggrieved, petitioner filed the instant petition, raising the following issues:I. WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE ERROR IN MAKING FINDINGS OF FACT CONTRARY TO THAT OF THE TRIAL COURT[;]II. WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE ERROR IN FAILING TO RULE THAT THE SALE OF THE LOT IS FOR A LUMP SUM OR CUERPO CIERTO[;]III. WHETHER OR NOT THE COURT A QUO HAS JURISDICTION OVER THE PETITION FOR REGISTRATION OF THE DEED OF ABSOLUTE SALE DATED 11 JUNE 1990 EXECUTED BETWEEN HEREIN PETITIONER AND RESPONDENTS[.]11

The core issue in this case is whether or not the sale of the land was for a lump sum or not.Petitioner asserts that the plain language of the Deed of Sale shows that it is a sale of a real estate for a lump sum, governed under Article 1542 of the Civil Code.12 In the contract, it was stated that the land contains an area of 4,000 sq m more or less, bounded on the North by Lot No. 11903, on the East by Lot No. 11908, on the South by Lot Nos. 11858 & 11912, and on the West by Lot No. 11910. When the OCT was issued, the area of Lot No. 11909 was declared to be 14,475 sq m, with an excess of 10,475 sq m. In accordance with Article 1542, respondents are, therefore, duty-bound to deliver the whole area within the boundaries stated, without any corresponding increase in the price. Thus, petitioner concludes that she is entitled to have the certificate of title, covering the whole Lot No. 11909, which was originally issued in the names of respondents, transferred to her name. We do not agree.In Esguerra v. Trinidad,13 the Court had occasion to discuss the matter of sales involving real estates. The Court’s pronouncement is quite instructive:In sales involving real estate, the parties may choose between two types of pricing agreement: a unit price contract wherein the purchase price is determined by way of reference to a stated rate per unit area (e.g., P1,000 per square meter), or a lump sum contract which states a full purchase price for an immovable the area of which may be declared based on the estimate or where both the area and boundaries are stated (e.g., P1 million for 1,000 square meters, etc.). In Rudolf Lietz, Inc. v. Court of Appeals (478 SCRA 451), the Court discussed the distinction:"…In a unit price contract, the statement of area of immovable is not conclusive and the price may be reduced or increased depending on the area actually delivered. If the vendor delivers less than the area agreed upon, the vendee may oblige the vendor to deliver all that may be stated in the contract or demand for the proportionate reduction of the purchase price if delivery is not possible. If the vendor delivers more than the area stated

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in the contract, the vendee has the option to accept only the amount agreed upon or to accept the whole area, provided he pays for the additional area at the contract rate.x x x xIn the case where the area of an immovable is stated in the contract based on an estimate, the actual area delivered may not measure up exactly with the area stated in the contract. According to Article 1542 of the Civil Code, in the sale of real estate, made for a lump sum and not at the rate of a certain sum for a unit of measure or number, there shall be no increase or decrease of the price, although there be a greater or less areas or number than that stated in the contract. . . .x x x xWhere both the area and the boundaries of the immovable are declared, the area covered within the boundaries of the immovable prevails over the stated area. In cases of conflict between areas and boundaries, it is the latter which should prevail. What really defines a piece of ground is not the area, calculated with more or less certainty, mentioned in its description, but the boundaries therein laid down, as enclosing the land and indicating its limits. In a contract of sale of land in a mass, it is well established that the specific boundaries stated in the contract must control over any statement with respect to the area contained within its boundaries. It is not of vital consequence that a deed or contract of sale of land should disclose the area with mathematical accuracy. It is sufficient if its extent is objectively indicated with sufficient precision to enable one to identify it. An error as to the superficial area is immaterial. Thus, the obligation of the vendor is to deliver everything within the boundaries, inasmuch as it is the entirety thereof that distinguishes the determinate object.14

The Court, however, clarified that the rule laid down in Article 1542 is not hard and fast and admits of an exception. It held:A caveat is in order, however. The use of "more or less" or similar words in designating quantity covers only a reasonable excess or deficiency. A vendee of land 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..Numerical data are not of course the sole gauge of unreasonableness of the excess or deficiency in area. Courts must consider a host of other factors. In one case (see Roble v. Arbasa, 414 Phil. 343 [2001]), the Court found substantial discrepancy in area due to contemporaneous circumstances. Citing change in the physical nature of the property, it was therein established that the excess area at the southern portion was a product of reclamation, which explained why the land’s technical description in the deed of sale indicated the seashore as its southern boundary, hence, the inclusion of the reclaimed area was declared unreasonable.15

In the instant case, the deed of sale is not one of a unit price contract. The parties agreed on the purchase price of P40,000.00 for a predetermined area of 4,000 sq m, more or less, bounded on the North by Lot No. 11903, on the East by Lot No. 11908, on the South by Lot Nos. 11858 & 11912, and on the West by Lot No. 11910. In a contract of sale of land in a mass, the specific boundaries stated in the contract must control over any other statement, with respect to the area contained within its boundaries.16

Black’s Law Dictionary17 defines the phrase "more or less" to mean:About; substantially; or approximately; implying that both parties assume the risk of any ordinary discrepancy. The words are intended to cover slight or unimportant inaccuracies in quantity, Carter v. Finch, 186 Ark. 954, 57 S.W.2d 408; and are ordinarily to be interpreted as taking care of unsubstantial differences or differences of small importance compared to the whole number of items transferred.Clearly, the discrepancy of 10,475 sq m cannot be considered a slight difference in quantity. The difference in the area is obviously sizeable and too substantial to be

overlooked. It is not a reasonable excess or deficiency that should be deemed included in the deed of sale.We take exception to the avowed rule that this Court is not a trier of facts. After an assiduous scrutiny of the records, we lend credence to respondents’ claim that they intended to sell only 4,000 sq m of the whole Lot No. 11909, contrary to the findings of the lower court. The records reveal that when the parties made an ocular inspection, petitioner specifically pointed to that portion of the lot, which she preferred to purchase, since there were mango trees planted and a deep well thereon. After the sale, respondents delivered and segregated the area of 4,000 sq m in favor of petitioner by fencing off the area of 10,475 sq m belonging to them.18

Contracts are the law between the contracting parties. Sale, by its very nature, is a consensual contract, because it is perfected by mere consent. The essential elements of a contract of sale are the following: (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. All these elements are present in the instant case.19

More importantly, we find no reversible error in the decision of the CA. Petitioner’s recourse, by filing the petition for registration in the same cadastral case, was improper. It is a fundamental principle in land registration that a certificate of title serves as evidence of an indefeasible and incontrovertible title to the property in favor of the person whose name appears therein. Such indefeasibility commences after one year from the date of entry of the decree of registration.20 Inasmuch as the petition for registration of document did not interrupt the running of the period to file the appropriate petition for review and considering that the prescribed one-year period had long since expired, the decree of registration, as well as the certificate of title issued in favor of respondents, had become incontrovertible.21

WHEREFORE, the petition is DENIED.SO ORDERED.

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Republic of the PhilippinesSUPREME COURTManilaTHIRD DIVISIONG.R. No. 170405 February 2, 2010RAYMUNDO S. DE LEON, Petitioner, vs.BENITA T. ONG.1 Respondent.D E C I S I O NCORONA, J.:On March 10, 1993, petitioner Raymundo S. de Leon sold three parcels of land 2 with improvements situated in Antipolo, Rizal to respondent Benita T. Ong. As these properties were mortgaged to Real Savings and Loan Association, Incorporated (RSLAI), petitioner and respondent executed a notarized deed of absolute sale with assumption of mortgage3 stating:x x x x x x x x xThat for and in consideration of the sum of ONE MILLION ONE HUNDRED THOUSAND PESOS (P1.1 million), Philippine currency, the receipt whereof is hereby acknowledged from [RESPONDENT] to the entire satisfaction of [PETITIONER], said [PETITIONER] does hereby sell, transfer and convey in a manner absolute and irrevocable, unto said [RESPONDENT], his heirs and assigns that certain real estate together with the buildings and other improvements existing thereon, situated in [Barrio] Mayamot, Antipolo, Rizal under the following terms and conditions:1. That upon full payment of [respondent] of the amount of FOUR HUNDRED FIFTEEN THOUSAND FIVE HUNDRED (P415,000), [petitioner] shall execute and sign a deed of assumption of mortgage in favor of [respondent] without any further cost whatsoever;2. That [respondent] shall assume payment of the outstanding loan of SIX HUNDRED EIGHTY FOUR THOUSAND FIVE HUNDRED PESOS (P684,500) with REAL SAVINGS AND LOAN,4 Cainta, Rizal… (emphasis supplied)x x x x x x x x xPursuant to this deed, respondent gave petitioner P415,500 as partial payment. Petitioner, on the other hand, handed the keys to the properties and wrote a letter informing RSLAI of the sale and authorizing it to accept payment from respondent and release the certificates of title.Thereafter, respondent undertook repairs and made improvements on the properties.5 Respondent likewise informed RSLAI of her agreement with petitioner for her to assume petitioner’s outstanding loan. RSLAI required her to undergo credit investigation.Subsequently, respondent learned that petitioner again sold the same properties to one Leona Viloria after March 10, 1993 and changed the locks, rendering the keys he gave her useless. Respondent thus proceeded to RSLAI to inquire about the credit investigation. However, she was informed that petitioner had already paid the amount due and had taken back the certificates of title.Respondent persistently contacted petitioner but her efforts proved futile.On June 18, 1993, respondent filed a complaint for specific performance, declaration of nullity of the second sale and damages6 against petitioner and Viloria in the Regional Trial Court (RTC) of Antipolo, Rizal, Branch 74. She claimed that since petitioner had previously sold the properties to her on March 10, 1993, he no longer had the right to sell the same to Viloria. Thus, petitioner fraudulently deprived her of the properties.Petitioner, on the other hand, insisted that respondent did not have a cause of action against him and consequently prayed for the dismissal of the complaint. He claimed that since the transaction was subject to a condition ( i.e., that RSLAI approve the assumption of mortgage), they only entered into a contract to sell. Inasmuch as respondent did apply for a loan from RSLAI, the condition did not arise. Consequently, the sale was not perfected and he could freely dispose of the properties. Furthermore, he made a counter-

claim for damages as respondent filed the complaint allegedly with gross and evident bad faith.Because respondent was a licensed real estate broker, the RTC concluded that she knew that the validity of the sale was subject to a condition. The perfection of a contract of sale depended on RSLAI’s approval of the assumption of mortgage. Since RSLAI did not allow respondent to assume petitioner’s obligation, the RTC held that the sale was never perfected.In a decision dated August 27, 1999,7 the RTC dismissed the complaint for lack of cause of action and ordered respondent to pay petitioner P100,000 moral damages, P20,000 attorney’s fees and the cost of suit.Aggrieved, respondent appealed to the Court of Appeals (CA),8 asserting that the court a quo erred in dismissing the complaint.The CA found that the March 10, 2003 contract executed by the parties did not impose any condition on the sale and held that the parties entered into a contract of sale. Consequently, because petitioner no longer owned the properties when he sold them to Viloria, it declared the second sale void. Moreover, it found petitioner liable for moral and exemplary damages for fraudulently depriving respondent of the properties.In a decision dated July 22, 2005,9 the CA upheld the sale to respondent and nullified the sale to Viloria. It likewise ordered respondent to reimburse petitioner P715,250 (or the amount he paid to RSLAI). Petitioner, on the other hand, was ordered to deliver the certificates of titles to respondent and pay her P50,000 moral damages and P15,000 exemplary damages.Petitioner moved for reconsideration but it was denied in a resolution dated November 11, 2005.10 Hence, this petition,11 with the sole issue being whether the parties entered into a contract of sale or a contract to sell.Petitioner insists that he entered into a contract to sell since the validity of the transaction was subject to a suspensive condition, that is, the approval by RSLAI of respondent’s assumption of mortgage. Because RSLAI did not allow respondent to assume his (petitioner’s) obligation, the condition never materialized. Consequently, there was no sale.Respondent, on the other hand, asserts that they entered into a contract of sale as petitioner already conveyed full ownership of the subject properties upon the execution of the deed.We modify the decision of the CA.Contract of Sale or Contract to Sell?The RTC and the CA had conflicting interpretations of the March 10, 1993 deed. The RTC ruled that it was a contract to sell while the CA held that it was 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. Should the buyer default in the payment of the purchase price, the seller may either sue for the collection thereof or have the contract judicially resolved and set aside. The non-payment of the price is therefore a negative resolutory condition.12

On the other hand, a 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. For this reason, if the buyer defaults in the payment thereof, the seller can only sue for damages.13

The deed executed by the parties (as previously quoted) stated that petitioner sold the properties to respondent "in a manner absolute and irrevocable" for a sum of P1.1 million.14 With regard to the manner of payment, it required respondent to pay P415,500 in cash to petitioner upon the execution of the deed, with the balance15payable directly to RSLAI (on behalf of petitioner) within a reasonable time.16 Nothing in said instrument

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implied that petitioner reserved ownership of the properties until the full payment of the purchase price.17 On the contrary, the terms and conditions of the deed only affected the manner of payment, not the immediate transfer of ownership (upon the execution of the notarized contract) from petitioner as seller to respondent as buyer. Otherwise stated, the said terms and conditions pertained to the performance of the contract, not the perfection thereof nor the transfer of ownership.Settled is the rule that the seller is obliged to transfer title over the properties and deliver the same to the buyer.18In this regard, Article 1498 of the Civil Code19 provides that, as a rule, the execution of a notarized deed of sale is equivalent to the delivery of a thing sold.In this instance, petitioner executed a notarized deed of absolute sale in favor of respondent. Moreover, not only did petitioner turn over the keys to the properties to respondent, he also authorized RSLAI to receive payment from respondent and release his certificates of title to her. The totality of petitioner’s acts clearly indicates that he had unqualifiedly delivered and transferred ownership of the properties to respondent. Clearly, it was a contract of sale the parties entered into.Furthermore, even assuming arguendo that the agreement of the parties was subject to the condition that RSLAI had to approve the assumption of mortgage, the said condition was considered fulfilled as petitioner prevented its fulfillment by paying his outstanding obligation and taking back the certificates of title without even notifying respondent. In this connection, Article 1186 of the Civil Code provides:Article 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment.Void Sale Or Double Sale?Petitioner sold the same properties to two buyers, first to respondent and then to Viloria on two separate occasions.20 However, the second sale was not void for the sole reason that petitioner had previously sold the same properties to respondent. On this account, the CA erred.This case involves a double sale as the disputed properties were sold validly on two separate occasions by the same seller to the two different buyers in good faith.Article 1544 of the Civil Code provides:Article 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property.Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property.Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith. (emphasis supplied)This provision clearly states that the rules on double or multiple sales apply only to purchasers in good faith. Needless to say, it disqualifies any purchaser in bad faith.A purchaser in good faith is one who buys the property of another without notice that some other person has a right to, or an interest in, such property and pays a full and fair price for the same at the time of such purchase, or before he has notice of some other person’s claim or interest in the property.21 The law requires, on the part of the buyer, lack of notice of a defect in the title of the seller and payment in full of the fair price at the time of the sale or prior to having notice of any defect in the seller’s title.Was respondent a purchaser in good faith? Yes.Respondent purchased the properties, knowing they were encumbered only by the mortgage to RSLAI. According to her agreement with petitioner, respondent had the obligation to assume the balance of petitioner’s outstanding obligation to RSLAI. Consequently, respondent informed RSLAI of the sale and of her assumption of

petitioner’s obligation. However, because petitioner surreptitiously paid his outstanding obligation and took back her certificates of title, petitioner himself rendered respondent’s obligation to assume petitioner’s indebtedness to RSLAI impossible to perform.Article 1266 of the Civil Code provides:Article 1266. The debtor in obligations to do shall be released when the prestation become legally or physically impossible without the fault of the obligor.Since respondent’s obligation to assume petitioner’s outstanding balance with RSLAI became impossible without her fault, she was released from the said obligation. Moreover, because petitioner himself willfully prevented the condition vis-à-vis the payment of the remainder of the purchase price, the said condition is considered fulfilled pursuant to Article 1186 of the Civil Code. For purposes, therefore, of determining whether respondent was a purchaser in good faith, she is deemed to have fully complied with the condition of the payment of the remainder of the purchase price.Respondent was not aware of any interest in or a claim on the properties other than the mortgage to RSLAI which she undertook to assume. Moreover, Viloria bought the properties from petitioner after the latter sold them to respondent. Respondent was therefore a purchaser in good faith. Hence, the rules on double sale are applicable.Article 1544 of the Civil Code provides that when neither buyer registered the sale of the properties with the registrar of deeds, the one who took prior possession of the properties shall be the lawful owner thereof.In this instance, petitioner delivered the properties to respondent when he executed the notarized deed22 and handed over to respondent the keys to the properties. For this reason, respondent took actual possession and exercised control thereof by making repairs and improvements thereon. Clearly, the sale was perfected and consummated on March 10, 1993. Thus, respondent became the lawful owner of the properties.Nonetheless, while the condition as to the payment of the balance of the purchase price was deemed fulfilled, respondent’s obligation to pay it subsisted. Otherwise, she would be unjustly enriched at the expense of petitioner.Therefore, respondent must pay petitioner P684,500, the amount stated in the deed. This is because the provisions, terms and conditions of the contract constitute the law between the parties. Moreover, the deed itself provided that the assumption of mortgage "was without any further cost whatsoever." Petitioner, on the other hand, must deliver the certificates of title to respondent. We likewise affirm the award of damages.WHEREFORE, the July 22, 2005 decision and November 11, 2005 resolution of the Court of Appeals in CA-G.R. CV No. 59748 are hereby AFFIRMED with MODIFICATION insofar as respondent Benita T. Ong is ordered to pay petitioner Raymundo de Leon P684,500 representing the balance of the purchase price as provided in their March 10, 1993 agreement.Costs against petitioner.SO ORDERED.

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Republic of the PhilippinesSUPREME COURTManilaSECOND DIVISIONG.R. No. 132281 September 15, 2006ROLENDO T. DELFIN, petitioner, vs.JOSEFINA L. VALDEZ and JOSE V. LAGON, respondents.D E C I S I O NGARCIA, J.:

In this petition for review under Rule 45 of the Rules of Court, petitioner Rolendo T. Delfin seeks the annulment and setting aside of the Decision1 dated December 16, 1997 of the Court of Appeals (CA), as reiterated in its Resolution of January 26, 1998,2 in CA G.R. CV No. 48751, affirming en toto an earlier decision of the Regional Trial Court (RTC) of Sultan Kudarat, Branch 19, in an action to quiet title thereat commenced by the petitioner against the herein respondents, Josefina L. Valdez and Jose V. Lagon.

The material facts are undisputed:

The spouses Carlos Valdez, Sr. and Josefina de Leon-Valdez (Josefina, hereafter), were the owners of a parcel of land with an area of 24,725 square meters located in the commercial district of Isulan, Sultan Kudarat. The property was designated as Lot No. 3 of Pls-208-D-13 and covered by Transfer Certificate of Title (TCT) No. T-19529 (T-1902) issued on August 18, 1967. Carlos Valdez, Sr. died intestate on March 26, 1966, survived by his widow, Josefina, and their children, among whom is Carlos Valdez, Jr., a practicing lawyer.On December 28, 1978, Josefina caused the subdivision of Lot No. 3 into eight (8) lots, namely, Lots Nos. 3-A to 3-H, all fronting the national road. To enhance the value of the property, she decided to sell a 4,094-square meter portion thereof, more particularly Lot No. 3-C and a portion of Lot No. 3-D to her co-respondent herein, Jose V. Lagon (Lagon, for short), a successful businessman in Sultan Kudarat who owned a construction firm and other business enterprises: the Lagon Enterprises and the Rural Bank of Isulan. He was also one of the clients of Josefina's son, Carlos Valdez, Jr.Hence, on May 9, 1979, Josefina, through her attorney-in-fact, Carlos Valdez, Jr., and Lagon entered into a contract of sale involving the aforementioned 4,094-square meter portion of what used to be Lot No. 3. No transfer certificate of title could as yet be issued to Lagon because at the time of the sale, the intestate estate of the late Carlos Valdez, Sr. had still to be settled and partitioned.On October 9, 1981, TCT No. T-19529, formerly covering Lot No. 3 was cancelled and superseded by eight (8) titles corresponding to the eight (8) resulting subdivision lots and bearing the following particulars:

TCT No. Lot No. Area

16436 3-A 2,586 sq. meters

16437 3-B 2,802 sq. meters

16438 3-C 2,534 sq. meters

16439 3-D 3,198 sq. meters

16440 3-E 3,359 sq. meters

16441 3-F 2,952 sq. meters

16442 3-G 3,650 sq. meters

16443 3-H 3,644 sq. metersAll   the   foregoing   subdivision  titles  were  under   the  name  of   "Josefina  L. Valdez, married to Carlos Valdez, Sr."Later, Josefina further caused the subdivision of Lot No. 3-D covered by TCT No. 16439, resulting in the existence of Lot No. 3-D-1, containing an area of 1,551 square meters. Lot No. 3-D-1 is the property involved in this case.On June 4, 1987, Josefina sold Lot No. 3-D-1 to the herein petitioner, Rolendo T. Delfin (Delfin, for brevity). Delfin registered the sale on June 16, 1987 and obtained TCT No. 20380 therefor in his name.It turned out that the area comprising the entirety of Lot No. 3-D-1 (1,551 square meters) which used to be a portion of Lot No. 3-D was already included in the earlier sale of May 9, 1979 between Josefina and Lagon over the 4,094-square meter portion of the mother lot, Lot No. 3.On September 24, 1990, upon learning that a portion of the property already sold to him was subsequently sold by Josefina to Delfin, Lagon filed in the RTC of Sultan Kudarat a complaint for specific performance with damages against Josefina and her attorney-in-fact, Atty. Carlos Valdez, Jr. Lagon's complaint was docketed as Civil Case No. 778, which eventually reached this Court in G.R. No. 140715, entitled Josefina L. Valdez and Carlos L. Valdez, Jr. v. Court of Appeals and Jose Lagon,3 a petition for review interposed by Josefina and Carlos Valdez, Jr. against an amended decision of the CA in the aforesaid civil case.For his part, upon knowing of Civil Case No. 778, Delfin instituted in the same court an action to quiet title against Josefina and Lagon, docketed as Civil Case No. 779, now the subject of the present petition.On January 20, 1995, the RTC of Sultan Kudarat, Branch 90, upon its finding that Delfin, albeit a prior registrant, was a purchaser in bad faith because he allegedly knew the prior sale between Josefin and Lagon, came out with its decision in Civil Case No. 779, dismissing Delfin's complaint for quieting of title and rendering judgment for Lagon, to wit:WHEREFORE, upon all the foregoing considerations, judgment is hereby rendered, dismissing [Delfin's] complaint.In [Lagon's] counterclaim, judgment is hereby rendered:(a) declaring [Delfin] a purchaser in bad faith, all consequently, a possessor in bad faith of Lot No. 3-D-1 xxx;(b) declaring [Lagon] to have a superior right to the land in question, identified as Lot No. 3-D-1 xxx, the same being a portion of or is included in the parcel of land priorly purchased by said [Lagon];(c) declaring the Deed of Absolute Sale xxx dated June 4, 1987, executed by xxx Josefina xxx in favor of xxx Delfin, covering Lot No. 3-D-1 xxx together with its corresponding Transfer Certificate of Title No. T-20380 issued in the name [Delfin], null and void; (d) directing the Register of Deeds of Sultan Kudarat to cancel Transfer Certificate of Title No. T-20380 in favor of [Delfin], covering the disputed lot xxx, and

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to issue a new TRANSFER CERTIFICATE OF TITLE in favor of [Lagon] covering said Lot No. 3-D-1 xxx;(e) ordering [Delfin], and those acting for and in his behalf to vacate Lot No. 3-D-1 xxx and surrender possession thereof to [Lagon]: [Delfin] may remove his aforementioned improvement from the said lot within TWO (2) MONTHS from the finality of this JUDGMENT, unless [Lagon] elects to acquire the same and pay [Delfin] the amount of TEN (10) THOUSAND PESOS within TWO (2) MONTHS from finality of this JUDGMENT. Should [Lagon] fail to pay the said amount within the said period of TWO (2) MONTHS from the finality of this Judgment, the period of Two (2) Months within which [Delfin] may remove his aforesaid useful improvement, consisting of a building housing the IVY PHARMACY and the Medical Specialist Center shall commence from the expiration of the TWO (2) MONTHS given [Lagon] to pay for the said useful improvement;(f) ordering [Delfin] to pay [Lagon] the sums of:1. P50,000.00 by way of moral and exemplary damages;2. P50,000.00 by way of attorney's fees;3. P30,000.00 by way of litigation expenses;4. P43,191.50 representing the actual airplane transportation expenses incurred by [Lagon's] lawyer's attendance during the trial of the xxx case; and further ordering [Delfin] to pay the costs of suit.IT IS SO ORDERED.4 (Words in brackets added.)From the above decision of the RTC, Delfin immediately went on appeal to the CA whereat his appellate recourse was docketed as CA-G.R. CV No. 48751.As stated at the outset hereof, the CA, in its challenged Decision5 dated December 16, 1987, affirmed en toto that of the trial court. With his motion for reconsideration having been denied by the CA in its affirmatory Resolution of January 26, 1998, Delfin is now with this Court via the present petition, claiming that the appellate court erred -1. when it ruled that petitioner was a buyer in bad faith proceeding from evidence which are unsubstantiated, hearsay or mere conjectures;2. when it failed to rule the issue involving [respondent] Josefina L. Valdez, which was timely raised by petitioner in his appeal brief but effectively brushed aside by affirmance in toto of the lower court's decision;3. when it did not leave the parties where they are under the doctrine of pari delicto, which was timely raised as a question of law in his appeal brief;4. in awarding by way of reconveyance to respondent Lagon the subject property not originally pleaded in his counterclaim; and5. in affirming the award of damages not supported by substantial evidence.We GRANT the petition, but upon a different ground.

From the very opening statement of the appellate court in the decision under review, it is obvious that said court, along with the court below it, resolved the controversy on the premise that there exists a case of double sale. On that premise, the CA and the trial court applied to this case the provisions of Article 1544 of the Civil Code, which reads:

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.To the two (2) courts below, the two (2) sales of the lot in question – Lot No. 3-D-1 – are: (1) the sale entered into on May 9, 1979 between Josefina, through her attorney-in-fact, Atty. Carlos Valdez, Jr., in favor of Lagon over the 4,094-square meter portion of the former Lot No. 3 which portion covered the entire area of Lot No. 3-D-1, referred to herein as the first sale; and (2) the sale of Lot No. 3-D-1 entered into between Josefina and Delfin on June 4, 1987, hereinafter referred to as the second sale.While on the surface, there is apparently a situation of double sale, in truth and in law, there is only one: the sale of Lot No. 3-D-1 by Josefina to the petitioner on June 4, 1987. Hence, Article 1544 of the Civil Code finds no application in this case.The application of Article 1544 of the Civil Code presupposes the existence of two (2) valid and binding contracts of sale, which, under legal contemplation, is made possible by the operation of the Torrens System whereunder registration is the operative act which transfers title or ownership of a titled property, such that before the first buyer registers his sale to consolidate ownership and title in his favor, the seller who retains the title and ownership in the meantime can validly transfer such title and ownership by way of a second sale to another buyer, who, in case he succeeds in registering said second sale before he acquired notice of the first sale, can defeat the rights of the first buyer under Article 1544 of the Civil Code.With our decision6 in Josefina L. Valdez and Carlos L. Valdez, Jr. v. Court of Appeals and Jose Lagon,7decided on September 24, 2004 and involving, among others, Lot No. 3-D-1, the factual landscape of this case has completely changed.We quote the Court's pertinent ruling in the aforesaid case of Valdez:The respondent [Lagon] admitted in his complaint that he undertook to construct the said building and transfer the Rural Bank of Isulan to the property he had purchased from xxx Josefina. The respondent [Lagon] affirmed the authenticity and due execution of his affidavit and his obligations therein, and testified, thus:ATTY. VALDEZ:Q Mr. Lagon, you testified that according to you the construction of the same, the PCIB Isulan was a compliance of your obligation under your contract with the Valdezes, do you recall having testified on that?A Yes, Sir.Q With in (sic) how many years, by the say (sic), were you supposed to comply with that condition by putting up a bank or a commercial building in that area?A Supposed to be five years, Sir.Q From when?A According to the affidavit, from the time I purchased the property up to or from May 9, 1979 to 1984, Sir.xxx xxx xxx

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In his letter to xxx Carlos, Jr., [Lagon], through counsel, admitted the binding effect of his affidavit as follows:It is hereby submitted therefore that there is in effect substantial compliance on the part of Mr. Lagon with regards to the additional condition laid down in his affidavit herein-referred to. If you deem it that Mr. Lagon has not satisfactorily complied with all the obligations you imposed upon him to do thereunder, it is made to reasons not of his own making but due to factors brought about by circumstances then prevailing, and elaboration on the same can only be properly stated on the proper time to come.Far from being a mere affidavit, the document embodies the unequivocal undertaking of [Lagon] to construct a fully operational commercial building and to transfer the Rural Bank of Isulan to the subject property as part of the consideration of the sale within five (5) years from the execution of the deed of sale, or until May 9, 1984.The intractable refusal of [Lagon] to pay the balance of the purchase price of the property despite the petitioners' (i.e., Josefina and Carlos Valdez, Jr.) demands had no legal basis. As such, xxx Josefina's refusal to deliver the torrens title over the subject property under xxx [Lagon's] name was justified, precisely because of xxx [Lagon's] refusal to comply with his obligation to pay the balance of the purchase price. Had xxx [Lagon] paid the purchase price of the property, such failure on the part of xxx Josefina to deliver the torrens title to and under the name of [Lagon] would have warranted the suspension of the five-year period agreed upon for the construction of a fully operational commercial building, as well as the transfer of the aforesaid bank to the property. This is so because absent such torrens title under the name of xxx [Lagon], no building permit for the construction of the buildings could be secured.Considering all the foregoing, the failure of xxx [Lagon] to cause the construction of the commercial building and the transfer of the bank to the property sold under the deed of sale executed between him and xxx Josefina was due to xxx [Lagon's] own fault.There was no need for xxx Josefina to make a notarized demand to xxx [Lagon] or file an action to rescind the deed of absolute sale to enable her to recover the ownership of the property. This is so because xxx Josefina and xxx [Lagon] had agreed that upon [his] failure to construct a new and fully operational commercial building and to cause the transfer of the Rural Bank of Isulan to the property on or before May 9, 1984, the deed of absolute sale would be deemed null and void without need of any demand from xxx [Josefina and Atty. Calos Valdes, Jr. Such agreement is evidenced by the affidavit executed by xxx [Lagon] himself on April 27, 1981.We do not agree with xxx [Lagon's] contentions that xxx Josefina through her son and attorney-in-fact xxx Carlos, Jr., had agreed to the sale of a portion of the property, the construction of the PCIB branch office thereon, and the crediting of the amount paid by the PCIB to xxx [Lagon's] account, and deducted from the balance of the purchase price. In the first place, xxx [Lagon] failed to adduce a morsel of evidence that xxx Josefina had knowledge of the said agreement and had agreed thereto. Furthermore, xxx [Lagon] failed to adduce documentary evidence that xxx Josefina authorized her son and attorney-in-fact to enter into such an agreement.It bears stressing that xxx [Josefina] specifically and unequivocally required in the special power of attorney, as part of the consideration of the sale of the property to xxx [Lagon], the latter's obligation to construct a new and fully operational commercial

building and transfer the Rural Bank of Isulan to the property. Had she agreed to modify the Special Power of Attorney she executed in favor of her son, xxx Carlos, Jr., for sure, she would have executed a document to that effect. She did not do so. xxx Carlos, Jr. could not lawfully bind xxx Josefina thereon because he was not so authorized to enter into such an agreement with xxx [Lagon]; neither can such authority be implied from the Special Power of Attorney xxx Josefina executed in favor of her son, xxx Carlos, Jr.In sum, then, xxx [Lagon] had no cause for specific performance against xxx [Josefina and Carlos Valdez, Jr.] However, xxx [Josefina and Carlos Valdez, Jr.] are obliged to refund to xxx [Lagon] the latter's partial payments for the subject property. (Words in brackets and parenthesis added; Emphasis supplied)Clear it is from the above that on account of Lagon's failure to comply with the terms and conditions of the so-called first sale, this Court deemed that sale "null and void" without need of any demand from Josefina and her son Carlos Valdez, Jr. for Lagon to comply with the agreed terms and conditions attendant to that so-called first sale.With the reality that this Court in Valdez deemed the so-called first sale as null and void by reason of Lagon's breach of the express terms and conditions relative thereto before the second sale was entered into by and between Josefina and Delfin, the provisions of Article 1544 of the Civil Code on double sales do not apply. Josefina had full and complete ownership over the subject lot (Lot No. 3-D-1) at the time of the second sale, the obligation to return to Lagon the sum of money originally received by her from the latter notwithstanding. This title and ownership of Lot No. 3-D-1 was effectively transferred from Josefina to Delfin with the issuance of a clean new transfer certificate of title in the name of Delfin upon the registration of the second sale.Finding the inapplicability of Article 1544 of the Civil Code to the present case, we see no need to address the legal issues raised in this petition for having become moot and academic.WHEREFORE, the instant petition is GRANTED and the assailed CA Decision and Resolution are herebyANNULLED and SET ASIDE and a new one entered quieting the title of petitioner Rolendo T. Delfin over Lot No. 3-D-1, now covered by TCT No. 20380 in his name, and DISMISSING all counterclaims in Civil Case No. 779.Costs against respondent Jose V. Lagon.SO ORDERED.

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SECOND DIVISION

KINGS PROPERTIESCORPORATION, Petitioner, - versus - CANUTO A. GALIDO, Respondent.

G.R. No. 170023 Present: CARPIO, J., Chairperson,LEONARDO-DE CASTRO,*

BRION, DEL CASTILLO, andABAD, JJ. Promulgated:November 27, 2009

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x D E C I S I O N CARPIO, J.:

The Case

Kings Properties Corporation (petitioner) filed this Petition for Review on Certiorari[1] assailing the Court of Appeals’ Decision[2] dated 20 December 2004 in CA-G.R. CV No. 68828 as well as the Resolution[3] dated 10 October 2005 denying the Motion for Reconsideration. In the assailed decision, the Court of Appeals reversed the Regional Trial Court’s Decision[4] dated 4 July 2000. This case involves an action for cancellation of certificates of title, registration of deed of sale and issuance of certificates of title filed by Canuto A. Galido (respondent) before Branch 71 of the Regional Trial Court of Antipolo City (trial court).

The Facts On 18 April 1966, the heirs of Domingo Eniceo, namely Rufina Eniceo and Maria Eniceo, were awarded with Homestead Patent No. 112947 consisting of four parcels of land located in San Isidro, Antipolo, Rizal (Antipolo property) and particularly described as follows: 1. Lot No. 1 containing an area of 96,297 square meters; Lot No. 3 containing an area of 25,170 square meters; Lot No. 4 containing an area of 26,812 square meters; and Lot No. 5 containing an area of 603 square meters.

The Antipolo property with a total area of 14.8882 hectares was registered under Original Certificate of Title (OCT) No. 535.[5] The issuance of the homestead patent was subject to the following conditions: To have and to hold the said tract of land, with the appurtenances thereunto of right belonging unto the said Heirs of Domingo Eniceo and to his heir or heirs and assigns forever, subject to the provisions of sections 118, 121, 122 and 124 of Commonwealth Act No. 141, as amended, which provide that except in favor of the Government or any of its branches, units or institutions, the land hereby acquired shall be inalienable and shall not be subject to incumbrance for a period of five (5) years next following the date of this patent, and shall not be liable for the satisfaction of any debt contracted prior to the expiration of that period; that it shall not be alienated, transferred or conveyed after five (5) years and before twenty-five (25) years next following the issuance of title, without the approval of the Secretary of Agriculture and Natural

Resources; that it shall not be incumbered, alienated, or transferred to any person, corporation, association, or partnership not qualified to acquire public lands under the said Act and its amendments; x x x [6] On 10 September 1973, a deed of sale covering the Antipolo property was executed between Rufina Eniceo and Maria Eniceo as vendors and respondent as vendee. Rufina Eniceo and Maria Eniceo sold the Antipolo property to respondent for P250,000.[7] A certain Carmen Aldana delivered the owner’s duplicate copy of OCT No. 535 to respondent.[8] Petitioner alleges that when Maria Eniceo died in June 1975, Rufina Eniceo and the heirs of Maria Eniceo (Eniceo heirs),[9] who continued to occupy the Antipolo property as owners, thought that the owner’s duplicate copy of OCT No. 535 was lost.[10] On 5 April 1988, the Eniceo heirs registered with the Registry of Deeds of Marikina City (Registry of Deeds) a Notice of Loss dated 2 April 1988 of the owner’s copy of OCT No. 535. The Eniceo heirs also filed a petition for the issuance of a new owner’s duplicate copy of OCT No. 535 with Branch 72 of the Regional Trial Court (RTC) of Antipolo, Rizal. The case was docketed as LRC Case No. 584-A.[11] On 31 January 1989, the RTC rendered a decision finding that the certified true copy of OCT No. 535 contained no annotation in favor of any person, corporation or entity. The RTC ordered the Registry of Deeds to issue a second owner’s copy of OCT No. 535 in favor of the Eniceo heirs and declared the original owner’s copy of OCT NO. 535 cancelled and considered of no further value.[12] On 6 April 1989, the Registry of Deeds issued a second owner’s copy of OCT No. 535 in favor of the Eniceo heirs.[13] Petitioner states that as early as 1991, respondent knew of the RTC decision in LRC Case No. 584-A because respondent filed a criminal case against Rufina Eniceo and Leonila Bolinas (Bolinas) for giving false testimony upon a material fact during the trial of LRC Case No. 584-A.[14] Petitioner alleges that sometime in February 1995, Bolinas came to the office of Alberto Tronio Jr. (Tronio), petitioner’s general manager, and offered to sell the Antipolo property. During an on-site inspection, Tronio saw a house and ascertained that the occupants were Bolinas’ relatives. Tronio also went to the Registry of Deeds to verify the records on file. Tronio ascertained that OCT No. 535 was clean and had no lien and encumbrances. After the necessary verification, petitioner decided to buy the Antipolo property.[15] On 14 March 1995, respondent caused the annotation of his adverse claim in OCT No. 535.[16] On 20 March 1995, the Eniceo heirs executed a deed of absolute sale in favor of petitioner covering lots 3 and 4 of the Antipolo property for P500,000.[17] On the same date, Transfer Certificate of Title (TCT) Nos. 277747 and 277120 were issued. TCT No. 277747 covering lots 1 and 5 of the Antipolo property was registered in the names of Rufina Eniceo, Ambrosio Eniceo, Rodolfo Calove, Fernando Calove and Leonila Calove Bolinas.[18] TCT No. 277120 covering lots 3 and 4 of the Antipolo property was registered in the name of petitioner.[19] On 5 April 1995, the Eniceo heirs executed another deed of sale in favor of petitioner covering lots 1 and 5 of the Antipolo property for P1,000,000. TCT No. 278588 was issued in the name of petitioner and TCT No. 277120 was cancelled.[20]

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On 17 August 1995, the Secretary of the Department of Environment and Natural Resources (DENR Secretary) approved the deed of sale between the Eniceo heirs and respondent.[21] On 16 January 1996, respondent filed a civil complaint with the trial court against the Eniceo heirs and petitioner. Respondent prayed for the cancellation of the certificates of title issued in favor of petitioner, and the registration of the deed of sale and issuance of a new transfer certificate of title in favor of respondent.[22] On 4 July 2000, the trial court rendered its decision dismissing the case for lack of legal and factual basis.[23] Respondent appealed to the Court of Appeals (CA). On 20 December 2004, the CA rendered a decision reversing the trial court’s decision.[24] Respondent filed a motion for reconsideration, which the CA denied in its Resolution dated 10 October 2005. Aggrieved by the CA’s decision and resolution, petitioner elevated the case before this Court.

The Ruling of the Trial Court The trial court stated that although respondent claims that the Eniceo heirs sold to him the Antipolo property, respondent did not testify in court as to the existence, validity and genuineness of the purported deed of sale and his possession of the duplicate owner’s copy of OCT No. 535. The trial court stated that as owner of a property consisting of hectares of land, respondent should have come to court to substantiate his claim and show that the allegations of the Eniceo heirs and petitioner are mere fabrications.[25] The trial court noticed that respondent did not register the deed of sale with the Register of Deeds immediately after its alleged execution on 10 September 1973. Further, respondent waited for 22 long years before he had the sale approved by the DENR Secretary. The trial court declared that respondent slept on his rights. The trial court concluded that respondent’s failure to register the sale and secure the cancellation of OCT No. 535 militates against his claim of ownership. The trial court believed that respondent has not established the preponderance of evidence necessary to justify the relief prayed for in his complaint.[26] The trial court stated that Bolinas was able to prove that the Eniceo heirs have remained in actual possession of the land. The filing of a petition for the issuance of a new owner’s duplicate copy requires the posting of the petition in three different places which serves as a notice to the whole world. Respondent’s failure to oppose this petition can be deemed as a waiver of his right, which is fatal to his cause.[27] The trial court noted that petitioner is a buyer in good faith and for value because petitioner has exercised due diligence in inspecting the property and verifying the title with the Register of Deeds.[28] The trial court held that even if the court were to believe that the deed of sale in favor of respondent were genuine, still it could not be considered a legitimate disposition of property, but merely an equitable mortgage. The trial court stated that respondent never obtained possession of the Antipolo property at any given time and a buyer who does not take possession of a property sold to him is presumed to be a mortgagee only and not a vendee.[29] The Ruling of the Court of Appeals

The CA ruled that the deed of sale in favor of respondent, being a notarized document, has in its favor the presumption of regularity and carries the evidentiary weight conferred upon it with respect to its due execution. The CA added that whoever asserts forgery has the burden of proving it by clear, positive and convincing evidence because forgery can never be presumed. The CA found that petitioner and the Eniceo heirs have not substantiated the allegation of forgery.[30] The CA pointed out that laches has not set in. One of the requisites of laches, which is injury or prejudice to the defendant in the event relief is accorded to the complainant or the suit is not held to be barred, is wanting in the instant case. The CA added that unrecorded sales of land brought under the Torrens system are valid between parties because registration of the instrument is merely intended to bind third persons.[31] The CA declared that petitioner’s contention regarding the validity of the questioned deed on the ground that it was executed without the approval of the DENR Secretary is untenable. The DENR Secretary approved the deed of sale on 17 August 1995. However, even supposing that the sale was not approved, the requirement for the DENR Secretary’s approval is merely directory and its absence does not invalidate any alienation, transfer or conveyance of the homestead after 5 years and before 25 years from the issuance of the title which can be complied with at any time in the future.[32] The CA ruled that petitioner is a buyer in bad faith because it purchased the disputed properties from the Eniceo heirs after respondent had caused the inscription on OCT No. 535 of an adverse claim. Registration of the adverse claim serves as a constructive notice to the whole world. Petitioner cannot feign ignorance of facts which should have put it on guard and then claim that it acted under the honest belief that there was no defect in the title of the vendors. Knowing that an adverse claim was annotated in the certificates of title of the Eniceo heirs, petitioner was forewarned that someone is claiming an interest in the disputed properties.[33] The CA found no merit in petitioner’s contention that the questioned deed of sale is an equitable mortgage. The CA stated that for the presumption of an equitable mortgage to arise, one must first satisfy the requirement that the parties entered into a contract denominated as a contract of sale and that their intention was to secure an existing debt by way of mortgage.[34] The CA stated that the execution of the notarized deed of sale, even without actual delivery of the disputed properties, transferred ownership from the Eniceo heirs to respondent. The CA held that respondent’s possession of the owner’s duplicate copy of OCT No. 535 bolsters the contention that the Eniceo heirs sold the disputed properties to him by virtue of the questioned deed.[35] The CA reversed the trial court’s decision. The dispositive portion of the CA decision reads: WHEREFORE, the appealed decision of the Regional Trial Court of Rizal (Antipolo, Branch 71) is REVERSED and SET ASIDE and another rendered as follows: 1. DECLARING NULL AND VOID TRANSFER CERTIFICATES OF TITLES NOS. 277747, 277120 AND 278588 OF THE REGISTRY OF DEEDS OF MARIKINA CITY (THE LAST TWO IN THE NAME OF DEFENDANT-APPELLEE KINGS PROPERTIES CORPORATION), THE DERIVATIVE TITLES THEREOF AND THE

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INSTRUMENTS WHICH WERE THE BASES OF THE ISSUANCE OF SAID CERTIFICATES OF TITLE; AND 2. DECLARING PLAINTIFF-APPELLANT CANUTO A. GALIDO THE OWNER OF FEE SIMPLE OF LOT NOS. 1, 3, 4, 5 FORMERLY REGISTERED UNDER ORIGINAL CERTIFICATE OF TITLE NO. 535 IN THE NAME OF THE HEIRS OF DOMINGO ENICEO, REPRESENTED BY RUFINA ENICEO, AND ORDERING THE REGISTER OF DEEDS OF MARIKINA CITY TO ISSUE NEW TRANSFER CERTIFICATES OF TITLE FOR SAID PARCELS OF LAND IN THE NAME OF PLAINTIFF-APPELLANT CANUTO A. GALIDO, UPON PAYMENT OF THE PROPER FEES AND PRESENTATION OF THE DEED OF SALE DATED SEPTEMBER 10, 1973 EXECUTED BY RUFINA ENICEO AND MARIA ENICEO, AS SOLE HEIRS OF THE LATE DOMINGO ENICEO, IN FAVOR OF THE LATTER.[36]

The Issues           Petitioner raises two issues in this petition: 1.       Whether the adverse claim of respondent over the Antipolo property should be barred by laches;[37] and2.       Whether the deed of sale delivered to respondent should be presumed an equitable mortgage pursuant to Article 1602(2) and 1604 of the Civil Code.[38]  The Ruling of the Court

Validity of the deed of sale to respondent

The contract between the Eniceo heirs and respondent executed on 10 September 1973 was a perfected contract of sale. A contract is perfected once there is consent of the contracting parties on the object certain and on the cause of the obligation.[39] In the present case, the object of the sale is the Antipolo property and the price certain isP250,000.

The contract of sale has also been consummated because the vendors and vendee have performed their respective obligations under the contract. In a contract of sale, the seller obligates himself to transfer the ownership of the determinate thing sold, and to deliver the same to the buyer, who obligates himself to pay a price certain to the seller.[40] The execution of the notarized deed of sale and the delivery of the owner’s duplicate copy of OCT No. 535 to respondent is tantamount to a constructive delivery of the object of the sale. In Navera v. Court of Appeals, the Court ruled that since the sale was made in a public instrument, it was clearly tantamount to a delivery of the land resulting in the symbolic possession thereof being transferred to the buyer.[41]

Petitioner alleges that the deed of sale is a forgery. The Eniceo heirs also claimed in their answer that the deed of sale is fake and spurious.[42] However, as correctly held by the CA, forgery can never be presumed. The party alleging forgery is mandated to prove it with clear and convincing evidence.[43] Whoever alleges forgery has the burden of proving it. In this case, petitioner and the Eniceo heirs failed to discharge this burden.

Petitioner invokes the belated approval by the DENR Secretary, made within 25 years from the issuance of the homestead, to nullify the sale of the Antipolo property. The sale of the Antipolo property cannot be annulled on the ground that the DENR Secretary gave his approval after 21 years from the date the deed of sale in favor of respondent was executed. Section 118 of Commonwealth Act No. 141 or the Public Land Act (CA 141), as amended by Commonwealth Act No. 456,[44] reads:

SEC. 118. EXCEPT IN FAVOR OF THE GOVERNMENT OR ANY OF ITS BRANCHES, UNITS, OR INSTITUTIONS, OR LEGALLY CONSTITUTED BANKING CORPORATIONS, LANDS ACQUIRED UNDER FREE PATENT OR HOMESTEAD PROVISIONS SHALL NOT BE SUBJECT TO ENCUMBRANCE OR ALIENATION FROM THE DATE OF THE APPROVAL OF THE APPLICATION AND FOR A TERM OF FIVE YEARS FROM AND AFTER THE DATE OF THE ISSUANCE OF THE PATENT OR GRANT X X X No alienation, transfer, or conveyance of any homestead after five years and before twenty-five years after the issuance of title shall be valid without the approval of the Secretary of Agriculture and Natural Resources,[45] which approval shall not be denied except on constitutional and legal grounds. In Spouses Alfredo v. Spouses Borras,[46] the Court explained the implications of Section 118 of CA 141. Thus: A grantee or homesteader is prohibited from alienating to a private individual a land grant within five years from the time that the patent or grant is issued. A violation of this prohibition renders a sale void. This , however, expires on the fifth year. From then on until the next 20 years, the land grant may be alienated provided the Secretary of Agriculture and Natural Resources approves the alienation. The Secretary is required to approve the alienation unless there are “constitutional and legal grounds” to deny the approval. In this case, there are no apparent or legal grounds for the Secretary to disapprove the sale of the Subject Land. The failure to secure the approval of the Secretary does not ipso factomake a sale void. The absence of approval by the Secretary does not a sale made after the expiration of the 5-year period, for in such event the requirement of Section 118 of the Public Land Act becomes merely directory or a formality. The approval may be secured later, producing the effect of ratifying and adopting the transaction as if the sale had been previously authorized. (Underscoring supplied) Equitable Mortgage

Petitioner contends that the deed of sale in favor of respondent is an equitable mortgage because the Eniceo heirs remained in possession of the Antipolo property despite the execution of the deed of sale.

An equitable mortgage is “one which although lacking in some formality, or form or words, or other requisites demanded by a statute, nevertheless reveals the intention of the parties to charge real property as security for a debt, and contains nothing impossible or contrary to law.”[47] The essential requisites of an equitable mortgage are:

1. The parties entered into a contract denominated as a contract of sale; and

2. Their intention was to secure existing debt by way of a mortgage.[48]

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In Lim v. Calaguas,[49] the Court held that in order for the presumption of equitable mortgage to apply, there must be: (1) something in the language of the contract; or (2) in the conduct of the parties which shows clearly and beyond doubt that they intended the contract to be a mortgage and not a pacto de retro sale.[50] Proof by parol evidence should be presented in court. Parol evidence is admissible to support the allegation that an instrument in writing, purporting on its face to transfer the absolute title to property, was in truth and in fact given merely as security for the payment of a loan. The presumption of equitable mortgage under Article 1602 of the Civil Code is not conclusive. It may be rebutted by competent and satisfactory proof of the contrary.[51]

Petitioner claims that an equitable mortgage can be presumed because the Eniceo heirs remained in possession of the Antipolo property. Apart from the fact that the Eniceo heirs remained in possession of the Antipolo property, petitioner has failed to substantiate its claim that the contract of sale was intended to secure an existing debt by way of mortgage. In fact, mere tolerated possession is not enough to prove that the transaction was an equitable mortgage.[52]

Furthermore, petitioner has not shown any proof that the Eniceo heirs were indebted to respondent. On the contrary, the deed of sale executed in favor of respondent was drafted clearly to convey that the Eniceo heirs sold and transferred the Antipolo property to respondent. The deed of sale even inserted a provision about defrayment of registration expenses to effect the transfer of title to respondent.

In any event, as pointed out by respondent in his Memorandum, this defense of equitable mortgage is available only to petitioner’s predecessors-in-interest who should have demanded, but did not, for the reformation of the deed of sale. [53] A perusal of the records shows that the Eniceo heirs never presented the defense of equitable mortgage before the trial court. In their Answer[54] and Memorandum[55] filed before the trial court, the Eniceo heirs claimed that the alleged deed of sale dated 10 September 1973 between Rufina Eniceo and Maria Eniceo was fake and spurious. The Eniceo heirs contended that even assuming there was a contract, no consideration was involved. It was only in the Appellees’ Brief [56] filed before the CA that the Eniceo heirs claimed as an alternative defense that the deed should be presumed as an equitable mortgage.

IN PHILIPPINE PORTS AUTHORITY V. CITY OF ILOILO,[57] WE RULED THAT A PARTY WHO ADOPTS A CERTAIN THEORY UPON WHICH THE CASE IS TRIED AND DECIDED BY THE LOWER COURT WILL NOT BE PERMITTED TO CHANGE THE THEORY ON APPEAL. A THEORY OF THE CASE NOT BROUGHT TO THE ATTENTION OF THE LOWER COURT WILL NOT BE CONSIDERED BY A REVIEWING COURT, AS A NEW THEORY CANNOT BE RAISED FOR THE FIRST TIME AT SUCH LATE STAGE. ALTHOUGH PETITIONER RAISED THE DEFENSE OF EQUITABLE MORTGAGE IN THE LOWER COURT, HE CANNOT CLAIM THAT THE DEED WAS AN EQUITABLE MORTGAGE BECAUSE PETITIONER WAS NOT A PRIVY TO THE DEED OF SALE DATED 10 SEPTEMBER 1973. PETITIONER MERELY STEPPED INTO THE SHOES OF THE ENICEO HEIRS. PETITIONER, WHO MERELY ACQUIRED ALL THE RIGHTS OF ITS PREDECESSORS, CANNOT ESPOUSE A

THEORY THAT IS CONTRARY TO THE THEORY OF THE CASE CLAIMED BY THE ENICEO HEIRS.

The Court notes that the Eniceo heirs have not appealed the CA’s decision, hence, as to the Eniceo heirs, the CA’s decision that the contract was a sale and not an equitable mortgage is now final. Since petitioner merely assumed the rights of the Eniceo heirs, petitioner is now estopped from questioning the deed of sale dated 10 September 1973.

Petitioner is not a buyer in good faith

Petitioner maintains that the subsequent sale must be upheld because petitioner is a buyer in good faith, having exercised due diligence by inspecting the property and the title sometime in February 1995.

In Agricultural and Home Extension Development Group v. Court of Appeals,[58] a buyer in good faith is defined as “one who buys the property of another without notice that some other person has a right to or interest in such property and pays a full and fair price for the same at the time of such purchase or before he has notice of the claim or interest of some other person in the property.”

In Balatbat v. Court of Appeals,[59] the Court held that in the realm of double sales, the registration of an adverse claim places any subsequent buyer of the registered land in bad faith because such annotation was made in the title of the property before the Register of Deeds and he could have discovered that the subject property was already sold.[60] The Court explained further, thus:

A purchaser of a valued piece of property cannot just close his eyes to facts which should put a reasonable man upon his guard and then claim that he acted in good faith and under the belief that there were no defect in the title of the vendor. One who purchases real estate with knowledge of a defect or lack of title in his vendor cannot claim that he has acquired title thereto in good faith as against the true owner of the land or of an interest therein; and the same rule must be applied to one who has knowledge of facts which should have put him upon such inquiry and investigation as be necessary to acquaint him with the defects in the title of his vendor.[61]

Petitioner does not dispute that respondent registered his adverse claim with the Registry of Deeds on 14 March 1995. The registration of the adverse claim constituted, by operation of law, notice to the whole world.[62] From that date onwards, subsequent buyers were deemed to have constructive notice of respondent’s adverse claim.

PETITIONER PURCHASED THE ANTIPOLO PROPERTY ONLY ON 20 MARCH 1995 AND 5 APRIL 1995 AS SHOWN BY THE DATES IN THE DEEDS OF SALE. ON THE SAME DATES, THE REGISTRY OF DEEDS ISSUED NEW TCTS IN FAVOR OF PETITIONER WITH THE ANNOTATED ADVERSE CLAIM. CONSEQUENTLY, THE ADVERSE CLAIM REGISTERED PRIOR TO THE SECOND SALE CHARGED PETITIONER WITH CONSTRUCTIVE NOTICE OF THE DEFECT IN THE TITLE OF ENICEO HEIRS. THEREFORE, PETITIONER CANNOT BE DEEMED AS A PURCHASER IN GOOD FAITH WHEN THEY BOUGHT AND REGISTERED THE ANTIPOLO PROPERTY.

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IN CARBONELL V. COURT OF APPEALS,[63] THIS COURT RULED THAT IN DOUBLE SALES, THE FIRST BUYER ALWAYS HAS PRIORITY RIGHTS OVER SUBSEQUENT BUYERS OF THE SAME PROPERTY. BEING THE FIRST BUYER, HE IS NECESSARILY IN GOOD FAITH COMPARED TO SUBSEQUENT BUYERS. THE GOOD FAITH OF THE FIRST BUYER REMAINS ALL THROUGHOUT DESPITE HIS SUBSEQUENT ACQUISITION OF KNOWLEDGE OF THE SUBSEQUENT SALE. ON THE OTHER HAND, THE SUBSEQUENT BUYER, WHO MAY HAVE ENTERED INTO A CONTRACT OF SALE IN GOOD FAITH, WOULD BECOME A BUYER IN BAD FAITH BY HIS SUBSEQUENT ACQUISITION OF ACTUAL OR CONSTRUCTIVE KNOWLEDGE OF THE FIRST SALE. [64] THE SEPARATE OPINION OF THEN JUSTICE TEEHANKEE IS INSTRUCTIVE, THUS:

The governing principle here is prius 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 only as provided by the Code and that is where the second buyer first registers in good faith the second sale ahead of the first. Such knowledge of the first buyer does bar her from availing of her rights under the law, among them, to first her purchase as against the second buyer. But in converso knowledge gained by the second buyer of the first sale defeats his rights even if he is first to register the second sale, since such knowledge taints his prior registration with bad faith. This is the price exacted by Article 1544 of the Civil Code for the second buyer being able to displace the first buyer: that before the second buyer can obtain priority over the first, he must show that he acted in good faith throughout (i.e., in ignorance of the first sale and of the first buyer’s rights) – from the time of acquisition until the title is transferred to him by registration or failing registration, by delivery of possession. The second buyer must show continuing good faith and innocence or lack of knowledge of the first sale until his contract ripens into full ownership through prior registration as provided by law.[65]

Laches

PETITIONER CONTENDS THAT RESPONDENT IS GUILTY OF LACHES BECAUSE HE SLEPT ON HIS RIGHTS BY FAILING TO REGISTER THE SALE OF THE ANTIPOLO PROPERTY AT THE EARLIEST POSSIBLE TIME. PETITIONER CLAIMS THAT DESPITE RESPONDENT’S KNOWLEDGE OF THE SUBSEQUENT SALE IN 1991, RESPONDENT STILL FAILED TO HAVE THE DEED OF SALE REGISTERED WITH THE REGISTRY OF DEEDS.

The essence of laches is the failure or neglect, for an unreasonable and unexplained length of time, to do that which, through due diligence, could have been done earlier, thus giving rise to a presumption that the party entitled to assert it had either abandoned or declined to assert it.[66] Respondent discovered in 1991 that a new owner’s copy of OCT No. 535 was issued to the Eniceo heirs. Respondent filed a criminal case against the Eniceo heirs for false testimony. When respondent learned that the Eniceo heirs were planning to sell the Antipolo property, respondent caused the annotation of an adverse claim. On 16 January 1996, when respondent learned that OCT No. 535 was cancelled and new TCTs were issued, respondent filed a civil complaint with the trial court against the

Eniceo heirs and petitioner. Respondent’s actions negate petitioner’s argument that respondent is guilty of laches.

True, unrecorded sales of land brought under Presidential Decree No. 1529 or the Property Registration Decree (PD 1529) are effective between and binding only upon the immediate parties. The registration required in Section 51 of PD 1529 is intended to protect innocent third persons, that is, persons who, without knowledge of the sale and in good faith, acquire rights to the property.[67] Petitioner, however, is not an innocent purchaser for value.

WHEREFORE, we DENY the petition. We AFFIRM the 20 December 2004 Decision and 10 October 2005 Resolution of the Court of Appeals in CA-G.R. CV No. 68828.

SO ORDERED.

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THIRD DIVISION

SPOUSES SAMUEL ULEP (Deceased) and SUSANA REPOGIA-ULEP; SAMUEL ULEP is substituted by his surviving spouses SUSANA REPOGIA-ULEP and his children: SALLY, RENATO, RODELIO and RICHARD, all surnamed ULEP, and VALENTINA ULEP, Petitioners, - versus - HONORABLE COURT OF APPEALS, former Eight Division, IGLESIA NI CRISTO, MAXIMA RODICO and spouses WARLITO PARINGIT and ENCARNACION PARINGIT- GANTE, Respondents.

G.R. No. 125254 Present: PANGANIBAN, J., Chairman SANDOVAL-GUTIERREZ, CORONA, CARPIO MORALES and GARCIA, JJ. Promulgated: October 11, 2005

x----------------------------------------------------------------------------------x

 D E C I S I O N GARCIA, J.: Under consideration is this petition for review under Rule 45 of the Rules of Court seeking the reversal and setting aside of the Decision [1] dated August 15, 1995 of the Court of Appeals (CA) in CA-G.R. CV. No. 39333, and its Resolution[2] dated April 25, 1996, denying petitioners’ motion for reconsideration. The assailed decision modified the June 17, 1991 decision[3] of the Regional Trial Court at Urdaneta, Pangasinan, Branch 48, in its Civil Case No. U-3929, an action for Quieting of Title, Reconveyance and Declaration of Nullity of Titles and Subdivision Plan, with Damages, thereat commenced by the petitioners against the herein private respondents. The factual antecedents: Principal petitioners SAMUEL ULEP, now deceased and substituted by his heirs, and VALENTINA ULEP are brother-and-sister. Together with their siblings, namely, Atinedoro Ulep and Rosita Ulep, they are children of the late Valentin Ulep. During his lifetime, the father Valentin Ulep owned a parcel of land, identified as Lot 840 with an area of 3,270 square meters, located at Asingan, Pangasinan. Sometime in 1950, the older Ulep sold the one-half (1/2) eastern portion of Lot 840, comprising an area of 1,635 square meters, to respondent Maxima Rodico, while the remaining one-half (1/2) western portion with the same area, to his son Atinedoro Ulep married to Beatriz Ulep, and to his other daughter Valentina Ulep. On June 5, 1952, all the transferees of Lot 840, namely, Maxima Rodico (for the eastern portion) and Atinedoro Ulep and Valentina Ulep (for the western portion), were jointly issued in their names Transfer Certificate of Title No. 12525. On June 18, 1971, Atinedoro Ulep, his wife Beatriz and sister Valentina Ulep sold the one-half (1/2) portion of the area sold to them by their father to their brother Samuel Ulep and the latter’s wife, Susana Repogia-Ulep. The portion

sold to Samuel and Susana has an area of 817.5 square meters. The document of sale was registered with the Office of the Registry of Deeds of Pangasinan on February 20, 1973. Later, an area of 507.5 square meters of the western portion of Lot 840 was sold by the spouses Atinedoro Ulep and Beatriz Ulep to respondentWarlito Paringit and the latter’s spouse Encarnacion Gante, who were then issued TCT No. 12688 on September 23, 1975. Evidently, all the foregoing transactions were done and effected without an actual ground partition or formal subdivision of Lot 840. In June 1977, respondent Iglesia ni Cristo (INC) begun constructing its chapel on Lot 840. In the process, INC encroached portions thereof allegedly pertaining to petitioners and blocked their pathways. This prompted Samuel Ulep and sister Rosita Ulep to make inquiries with the Office of the Register of Deeds of Pangasinan. To their consternation, they discovered from the records of said office that a deed of sale bearing date December 21, 1954, was purportedly executed by their brother Atinedoro Ulep his, wife Beatriz and their sister Valentina Ulep in favor of INC over a portion of 620 square meters, more or less, of Lot 840, and that on the basis of said deed, INC was issued TCT No. 12689 on September 23, 1975 [4] over the portion allegedly sold to it by the three. Samuel was further shocked to find out that on July 9, 1975, an affidavit of subdivision was executed by respondents INC, Maxima Rodico and thespouses Warlito Paringit and Encarnation Gante, on the basis of which affidavit Lot 840 was subdivided into four (4) lots, namely: (1) Lot 840-A, covered by TCT No. 16205 in his (Samuel’s) name that of his wife, Susana Repogia-Ulep; (2) Lot 840-B, covered by TCT No. 12688 in the names of Warlito Paringit and the latter’s wife Encarnacion Gante; (3) Lot-C 840-C, covered by TCT No. 12689 in the name of INC; and (4) Lot 840-D, covered by TCT No. 12690[5] in the name of Maxima Rodico. Such was the state of things when, on March 29, 1983, in the Regional Trial Court at Pangasinan, the spouses Samuel Ulep and Susana Repogia-Ulep, the spouses Atinedoro Ulep and Beatriz Ulep and their sister Valentina Ulep, filed their complaint for Quieting of Title, Reconveyance and Declaration of Nullity of Title and Subdivision Plan with Damages against respondents INC, Maxima Rodico and the spouses Warlito Paringit and Encarnacion Gante. In their complaint, docketed as Civil Case No. U-3929, the Uleps basically alleged that they and respondents are co-owners of Lot 840 in the following proportions: 1,635 square meters to Maxima Rodico; 817.5 square meters to spouses Samuel Ulep and Susana Repogia-Ulep; 507.5 square meters to spouses Warlito Paringit and Encarnacion Gante; 210 square meters to spouses Atinedoro Ulep and Beatriz Ulep, and Valentina Ulep; 100 square meters to Iglesia Ni Cristo.[6] In the same complaint, the spouses Atinedoro Ulep and Beatriz Ulep and their sister Valentina Ulep denied having executed a deed of sale in favor of INC over a portion of 620 square meters of Lot 840, claiming that their signatures appearing on the deed were forged. At the most, so they claimed, what they sold to INC was

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only 100 square meters and not 620 square meters. Petitioners Samuel Ulep and Valentina Ulep, along with the spouses Atinedoro Ulep and Beatriz Ulep, likewise averred that the subject lot was subdivided without their knowledge and consent. In their common “Answer,” respondents Maxima Rodico and the spouses Warlito Paringit and Encarnacion Gante maintained that the segregation of their shares was known to petitioners and that it was done with the consent of Samuel Ulep himself. For its part, INC, in its separate “Answer”, asserted that it purchased from the spouses Atinedoro Ulep and Beatriz Ulep and their sister Valentina Ulep the portion containing 620 square meters of Lot 840 on December 21, 1954, as evidenced by a deed of sale duly registered with the Registry of Deeds of Pangasinan. During the pendency of the proceedings in Civil Case No. U-3929, Atinedoro Ulep died. Less than a month thereafter, or more specifically on November 16, 1987, Atinedoro’s widow Beatriz Ulep and their children executed a deed of renunciation, thereunder waiving all their rights and interests over Lot 840 and relinquishing the same in favor of the spouses Samuel Ulep and Susana Repogia-Ulep.[7] Eventually, in a decision dated June 17, 1991, the trial court rendered judgment, as follows: There being no res adjudicata in this case as already decided by the Court of Appeals, this Court renders judgment as borne out by the evidence presented in favor of the [petitioners] and against the [respondents], ordering the latter and all persons claiming title under them to vacate and surrender a portion of 520 sq. m. of the land in question in favor of the [petitioners] in such a way that [respondent] INC owns only 100 sq. m.; declaring and annulling the following documents; 1. Deed of sale dated December 21, 1954 allegedly executed by plaintiffs-spouses Atinedoro Ulep and Beatriz Aguilar and Valentina Ulep in favor of [respondent] INC, (Exh. A); 2. TCT No. 12689 issued to Iglesia Ni Cristo (Exh. K-1); 3. The affidavit of confirmation of subdivision, (Exh. K and Exh. 2); and 4. TCT No. 12605 (Exh. K-4) and a new TCT No. be issued to include the original 817.5 sq. m. in favor of Samuel Ulep and Susan Repogia; Declaring Lot No. 840 to be owned by the following parties in the following proportions: (a) 1,635 sq. m. eastern portion to [respondent] Maxima Rodico already covered by TCT No. 12690 (Exh. K-3); (b) 817.5 sq. m. to [petitioners] Samuel Ulep and Susana Repogia and a new TCT to be issued; (c) ½ of 210 sq. m. to [petitioners] Samuel Ulep and Susana Repogia; and the other one-half or 105 sq. m. to [petitioner] Valentina Ulep in accordance with Exh. “C,” a deed of renunciation executed by the heirs of Atinedoro Ulep who died in 1987 and his surviving spouse Beatriz Aguilar and a new Transfer Certificate of Title be issued;

(d) 507.5 sq. m. to [respondents] Warlito Paringit and Encarnacion Gante, already covered by TCT No. 12688 (Exh. K-2); (e) 100 sq. m. to [respondent] Iglesia Ni Cristo; and a new title to be issued; and ordering the Register of Deeds of Pangasinan, to issue new Transfer Certificate of Title in favor of [petitioners] Samuel Ulep and Susana Repogia covering 817.5 sq. m.; and another new Transfer Certificate of Title covering 105 sq. m. in favor of Valentina Ulep and the other ½ of 210 sq. m. or 105 sq. m. in favor of Samuel Ulep and Susana Repogia pursuant to Exh. “C”; and still another new Transfer Certificate of Title covering 100 sq. m. in favor of Iglesia Ni Cristo and for the latter to pay the costs. SO ORDERED.[8] (Words in bracket ours). Dissatisfied, respondent INC interposed an appeal to the Court of Appeals (CA), which appellate recourse was thereat docketed as CA-G.R. CV No. 39333. For their part, respondents Maxima Rodico and the spouses Warlito Paringit and Encarnacion Gante opted not to appeal. As stated at the threshold hereof, the appellate court, in its Decision dated August 15, 1995, modified that of the trial court, thus: WHEREFORE, premises considered, the appealed judgment is MODIFIED as above indicated. Accordingly, the decretal portion of said judgment should read as follows: “1. The Deed of Absolute Sale dated December 21, 1954 executed by plaintiffs-spouses Atinedoro Ulep and Beatriz Aguilar and Valentina Ulep in favor of [respondent] INC is declared valid (Exh. K-1). “2. Lot No. 840 is declared as owned by the following parties in the following proportions: (f) 1,635 sq. m. eastern portion to [respondent] Maxima Rodico already covered by TCT No. 12690 (Exh. K-3); (g) 297.5 sq. m. to [petitioner]-spouses Samuel Ulep and Susana Repogia; (h) ½ of 210 sq. m. to [petitioner]-spouses Samuel Ulep and Susana Repogia; and the other one-half or 105 sq. m. to Valentina Ulep in accordance with Exh. “C,” a deed of renunciation executed by the heirs of Atinedoro Ulep who died in 1987 and his surviving spouse Beatriz Aguilar; (i) 507.5 sq. m. to [respondents] Warlito Paringit and Encarnacion Gante, already covered by TCT No. 12688 (Exh. K-2); (j) 620 sq. m. to [respondent] INC, already covered by TCT No. 12689 (Exh. K-1). “3. TCT No. 16205 registered in the names of [petitioner-spouses] Samuel and Susan Ulep (Exh. K-4) is annulled. “The Register of Deeds of Pangasinan is ordered to issue a new TCT in favor of [petitioner-spouses] Samuel Ulep and Susana Repogia covering only 297.5 sq. m.; and another new TCT covering 105 sq. m. in favor of Valentina Ulep and the other ½ of 210 sq. m. or 105 sq. m. in favor of [petitioner-spouses] Samuel Ulep and Susana Repogia pursuant to Exh. “C”. NoCosts.” SO ORDERED.[9] (Words in brackets ours). In so ruling, the Court of Appeals explained:

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There is no adequate evidentiary demonstration in the record that the deed of sale (dated December 21, 1954 executed by Atinedoro Ulep, his wife Beatriz and sister Valentina Ulep in favor of INC over the 620 square-meter area of the western portion of Lot 840) is void and inefficacious on account of forgery. As a public instrument which enjoys the presumption of regularity, clear and convincing evidence is necessary to contradict the terms thereof.xxx xxx xxx In the present case, the biased, interested testimony of [petitioners] cannot overcome the evidentiary force of the deed of sale which was acknowledged before a notary public, and hence, a public document.xxx xxx xxx The sale of 620 sq. m. in favor of [respondent] INC executed by vendors Atinedoro and Valentina Ulep is dated December 21, 1954, while the sale of 817.50 sq. meters by the same vendors to [petitioners] Samuel and Susana Ulep was made on June 18, 1971. [Respondent] INC registered its 620 sq. meters on December 21, 1954 by reason of which TCT No. 12689 was issued in its name. [Petitioner-spouses] Samuel and Susana Ulep registered the land sold to them on February 9, 1977 and TCT No. 16205 was issued in their names. Evidently, applying Article 1544, [petitioner] INC’s ownership and title over the 620 sq. meters prevail. The land consisting of 620 sq. meters was first sold to INC and its title was registered first. Thus, the same vendors could have sold only the remaining 297.50 sq. meters of Lot 840 to [petitioner-spouses] Samuel and Susana Ulep and TCT No. 16205 issued in the latter’s name for 817.50 sq. meters is null and void. There is no evidence that [respondent] INC is guilty of bad faith in acquiring the 620 sq. meters portion of Lot 840. (Words in bracket ours). Their motion for reconsideration having been denied by the same court in its equally challenged Resolution of April 25, 1996, petitioners are now with us via the present recourse, faulting the appellate court as follows: I. THE HONORABLE COURT OF APPEALS ERRED IN NOT AFFIRMING THE DECISION DATED JUNE 17, 1991 (ANNEX A) OF THE TRIAL COURT, REGIONAL TRIAL COURT, FIRST JUDICIAL REGION, BRANCH 48, URDANETA PANGASINAN IN CIVIL CASE NO. 3929. II. AND IN THE ALTERNATIVE, THE HONORABLE COURT OF APPEALS ERRED IN NOT AWARDING PETITIONERS SAMUEL ULEP AND SUSANA REPOGIA THE AREA OF 817.5 SQUARE METERS AND IN NOT REDUCING THE SHARE OF PRIVATE RESPONDENTS, SPOUSES WARLITO PARINGIT AND ENCARNACION GANTE FROM 507.5 SQUARE METERS TO 197 SQUARE METERS.[10] Petitioners initially submit that the factual findings of the trial court should not have been disturbed by the appellate court, the same being entitled to great weight and respect.

We have consistently held that factual findings of the Court of Appeals and other lower courts are, as a rule, final and conclusive upon this Court, except,inter alia, where their findings are at odd with each other,[11] as here. Simply put, the issue before us is whether or not the Court of Appeals committed reversible error in modifying the decision of the trial court. Evidently, the issue necessitates an inquiry into the facts. While, as a rule, factual issues are not within the province of this Court, nonetheless, in light of the conflicting factual findings of the two (2) courts below, an examination of the facts obtaining in this case is in order. Petitioners contend that respondent INC is entitled to only 100 square meters and not 620 square meters of the western portion of Lot 840. To them, the deed of sale conveying 620 square meters thereof to INC was void as the signatures of the vendors therein, namely, the spouses Atinedoro Ulep and Beatriz Ulep and Valentina Ulep, were forged. They submit that what should instead be upheld was the sale of 817.5 square meters in their favor by the same vendors. As the Court sees it, the present controversy is a classic case of double sale. On December 21, 1954, Atinedoro Ulep, his wife Beatriz Ulep and sister Valentina Ulep sold the disputed area (620 square-meter) of Lot 840 to INC. Subsequently, on January 18, 1971, a second sale was executed by the same vendors in favor of spouses Samuel Ulep and Susana Ulep. The Court is, therefore, called upon to determine which of the two groups of buyers has a better right to the area in question.Article 1544 of the Civil Code provides the statutory solution: Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property. Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith. Otherwise stated, the law provides that a double sale of immovable transfers ownership to (1) the first registrant in good faith; (2) then, the first possessor in good faith; and (3) finally, the buyer who in good faith presents the oldest title.[12] Jurisprudence teaches that the governing principle is primus tempore, potior jure (first in time, stronger in right). Knowledge gained by the first buyer of the second sale cannot defeat the first 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 registerfirst 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

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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.[13] Per records, the sale of the disputed 620 square-meter portion of Lot 840 to respondent INC was made on December 21, 1954 and registered with the Registry of Deeds of Pangasinan on January 5, 1955. In fact, INC was issued a title over the same portion on September 23, 1975. On the other hand, the conveyance to the spouses Samuel Ulep and Susana Repogia-Ulep happened on January 18, 1971 and the spouses registered their document of conveyance only on February 22, 1973.[14] Clearly, not only was respondent INC the first buyer of the disputed area. It was also the first to register the sale in its favor long before petitioners 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 yearsfrom the time INC caused the registration of its own document of sale. “Registration” means any entry made in the books of the Registry which records solemnly and permanently the right of ownership and other real rights.[15] However, mere registration is not sufficient. Good faith must concur with registration, else registration becomes an exercise in futility.[16] In the instant case, the registration made by respondent INC of its deed of sale more than satisfies this requirement. The same thing cannot be said of petitioners Samuel Ulep and Susana Ulep. Said petitioners, by their own admission, were aware that there existed an agreement between INC and vendors Atinedoro Ulep, his wife Beatriz and sister Valentina Ulep involving a portion of 100 square meters of Lot 840. Knowledge of such transaction should have put the spouses Samuel Ulep and Susana Ulep upon such inquiry or investigation as might be necessary to acquaint them with the possible defects in the title of their vendors. They should have acted with that measure of precaution which may reasonably be required of a prudent man in a similar situation. After all, good faith, or the lack of it, is, in the last analysis, a question of intention. But in ascertaining the intention by which one is actuated on a given occasion, courts are necessarily controlled by the evidence as to the conduct and outward acts by which the inward motive may, with safety, be determined. So it is that ‘the honesty of intention,’ ‘the honest lawful intent,’ which constitutes good faith implies a ‘freedom from knowledge and circumstances which ought to put a person on inquiry.’ [17] Hence, proof of such knowledge overcomes the presumption of good faith. Here, the spouses Samuel Ulep and Susana Ulep were fully aware, or could have been, if they had chosen to inquire, of the rights of INC under the deed of sale duly annotated on the common title of the spouses Atinedoro Ulep and Beatriz Ulep and Valentina Ulep. Verily, the sale to INC should prevail over the sale made to spouses Samuel and Susana because INC was the first registrant in good faith. Petitioners’ allegation of forgery relative to the deed of sale executed on December 21, 1954 by the spouses Atinedoro Ulep, his wife Beatriz and sister

Valentina Ulep over the 620 square-meter portion of Lot 840 cannot be sustained. As a rule, forgery cannot be presumed and must be proved by clear, positive and convincing evidence, the burden for which lies on the party alleging it. The fact of forgery can only be established by a comparison between the alleged forged signature and the authentic and genuine signature of the person whose signature is theorized o have been forged.[18] Here, petitioners’ claim of forgery is unsupported by any substantial evidence other than their own self-serving testimonies. As it were, they failed to present handwriting experts and other persons familiar with the handwriting of the spouses Atinedoro Ulep, his wife Beatriz and sister Valentina Ulep that would show that their signatures appearing in the questioned deed of sale in favor of respondent INC were forged. Due to the technicality of the procedure involved in the examination of forged documents, the expertise of questioned document examiners is usually helpful. These handwriting experts can help determine fundamental, significant differences in writing characteristics between the questioned and the standard or sample specimen signatures, as well as the movement and manner of execution strokes. Petitioners insist that the conveyance of only 100 square meters to INC was in fact evidenced by a deed of sale notarized by a certain Atty. Benjamin Fernandez.[19] However, they sorely failed to produce in court the said alleged deed of sale. They could have, at the very least, presented Atty. Fernandez to prove the existence of that deed, but they did not. The only plausible conclusion is that no such deed exists. On the other hand, to bolster its claim of ownership, respondent INC presented the December 21, 1954 deed of sale executed in its favor by the spouses Atinedoro and Beatriz Ulep and Valentina Ulep over a portion of 620 square meters of Lot 840. To be sure, INC’s deed of sale was duly notarized by Atty. Bernabe Salcedo Calimlim.[20] Generally, a notarized document carries the evidentiary weight conferred upon it with respect to its due execution, and documents acknowledged before a notary public have in their favor the presumption of regularity.[21] Thus, the notarized deed of sale executed on December 21, 1954 by Atinedoro Ulep, his wife Beatriz and sister Valentina Ulep over the contested area in favor of respondent INC deserves full credence and is valid and enforceable in the absence, as here, of overwhelming evidence to the contrary. In a last-ditch but futile attempt to persuade the Court, petitioners alternatively pray that INC’s portion of 620 square meters of Lot 840, assuming that INC is entitled to it, should be taken from the western portion of the same lot sold to respondent spouses Warlito Paringit and Encarnacion Gante, and not from them. To petitioners, the share of the spouses Warlito and Encarnacion should accordingly be reduced from 507.5 square meters to only 197 square meters. We note, however, that petitioners never raised before the trial court nor before the appellate court the issue of Warlito’s and Encarnacion’s entitlement to 507.5 square meters. Quite the contrary, petitioners even alleged in their complaint that the spouses Warlito Paringit and Encarnacion Gante are owners of 507.5 square

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meters of Lot 840. They never questioned the spouses’ ownership of said portion. This issue was only posed by petitioners in the instant petition before this Court. It is certainly too late for them to raise said issue for the first time at this late stage of the proceedings. Points of law, theories, issues and arguments not brought to the attention of the lower court need not be, and ordinarily will not be, considered by a reviewing court, as these cannot be raised for the first time on appeal. Basic considerations of fair play, justice and due process underlie the rule. It would be unfair to the adverse party who would have no opportunity to present evidence in contra to the new theory, which it could have done had it been aware of it at the time of the hearing before the trial court.[22]

Of course, this rule admits of certain exceptions. For one, issues of lack of jurisdiction, though not raised below, may be considered by the reviewing court as they may be raised at any stage. For another, the reviewing court may also consider an issue not properly raised during trial when there is plain error. Likewise, it may entertain such arguments when there are jurisprudential developments affecting the issues, or when the issues raised present a matter of public policy.[23] Unfortunately for petitioners, however, none of these exceptions exists in this case. It is thus too late in the day for petitioners to raise in this recourse the sale made by the spouses Atinedoro Ulep and Beatriz Ulep of the 507.5 square-meter area of Lot 840 to the spouses Warlito Paringit and Encarnacion Gante. To allow petitioners to do so would be utterly unfair to the latter. WHEREFORE, the petition is DENIED and the assailed decision and resolution of the Court of Appeals AFFIRMED in toto. Costs against petitioners. SO ORDERED.

SECOND DIVISION[G.R. No. 132161. January 17, 2005]CONSOLIDATED RURAL BANK (CAGAYAN VALLEY), INC., petitioner, vs. THE HONORABLE COURT OF APPEALS and HEIRS OF TEODORO DELA CRUZ, respondents.D E C I S I O NTINGA, J.:Petitioner Consolidated Rural Bank, Inc. of Cagayan Valley filed the instant Petition for Certiorari[1] under Rule 45 of the Revised Rules of Court, seeking the review of the Decision[2] of the Court of Appeals Twelfth Division in CA-G.R. CV No. 33662, promulgated on 27 May 1997, which reversed the judgment[3] of the lower court in favor of petitioner; and the Resolution[4]of the Court of Appeals, promulgated on 5 January 1998, which reiterated its Decision insofar as respondents Heirs of Teodoro dela Cruz (the Heirs) are concerned.From the record, the following are the established facts:Rizal, Anselmo, Gregorio, Filomeno and Domingo, all surnamed Madrid (hereafter the Madrid brothers), were the registered owners of Lot No. 7036-A of plan Psd-10188, Cadastral Survey 211, situated in San Mateo, Isabela per Transfer Certificate of Title (TCT) No. T-8121 issued by the Register of Deeds of Isabela in September 1956.[5]

On 23 and 24 October 1956, Lot No. 7036-A was subdivided into several lots under subdivision plan Psd- 50390. One of the resulting subdivision lots was Lot No. 7036-A-7 with an area of Five Thousand Nine Hundred Fifty-Eight (5,958) square meters.[6]

On 15 August 1957, Rizal Madrid sold part of his share identified as Lot No. 7036-A-7, to Aleja Gamiao (hereafter Gamiao) and Felisa Dayag (hereafter, Dayag) by virtue of a Deed of Sale,[7] to which his brothers Anselmo, Gregorio, Filomeno and Domingo offered no objection as evidenced by their Joint Affidavit dated 14

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August 1957.[8] The deed of sale was not registered with the Office of the Register of Deeds of Isabela. However, Gamiao and Dayag declared the property for taxation purposes in their names on March 1964 under Tax Declaration No. 7981.[9]

On 28 May 1964, Gamiao and Dayag sold the southern half of Lot No. 7036-A-7, denominated as Lot No. 7036-A-7-B, to Teodoro dela Cruz,[10] and the northern half, identified as Lot No. 7036-A-7-A,[11] to Restituto Hernandez.[12] Thereupon, Teodoro dela Cruz and Restituto Hernandez took possession of and cultivated the portions of the property respectively sold to them.[13]

Later, on 28 December 1986, Restituto Hernandez donated the northern half to his daughter, Evangeline Hernandez-del Rosario.[14] The children of Teodoro dela Cruz continued possession of the southern half after their father’s death on 7 June 1970.In a Deed of Sale[15] dated 15 June 1976, the Madrid brothers conveyed all their rights and interests over Lot No. 7036-A-7 to Pacifico Marquez (hereafter, Marquez), which the former confirmed[16] on 28 February 1983.[17] The deed of sale was registered with the Office of the Register of Deeds of Isabela on 2 March 1982.[18]

Subsequently, Marquez subdivided Lot No. 7036-A-7 into eight (8) lots, namely: Lot Nos. 7036-A-7-A to 7036-A-7-H, for which TCT Nos. T-149375 to T-149382 were issued to him on 29 March 1984.[19] On the same date, Marquez and his spouse, Mercedita Mariana, mortgaged Lots Nos. 7036-A-7-A to 7036-A-7-D to the Consolidated Rural Bank, Inc. of Cagayan Valley (hereafter, CRB) to secure a loan of One Hundred Thousand Pesos (P100,000.00).[20] These deeds of real estate mortgage were registered with the Office of the Register of Deeds on 2 April 1984.On 6 February 1985, Marquez mortgaged Lot No. 7036-A-7-E likewise to the Rural Bank of Cauayan (RBC) to secure a loan of Ten Thousand Pesos (P10,000.00).[21]

As Marquez defaulted in the payment of his loan, CRB caused the foreclosure of the mortgages in its favor and the lots were sold to it as the highest bidder on 25 April 1986.[22]

On 31 October 1985, Marquez sold Lot No. 7036-A-7-G to Romeo Calixto (Calixto).[23]

Claiming to be null and void the issuance of TCT Nos. T-149375 to T-149382; the foreclosure sale of Lot Nos. 7036-A-7-A to 7036-A-7-D; the mortgage to RBC; and the sale to Calixto, the Heirs-now respondents herein-represented by Edronel dela Cruz, filed a case[24] for reconveyance and damages the southern portion of Lot No. 7036-A (hereafter, the subject property) against Marquez, Calixto, RBC and CRB in December 1986.Evangeline del Rosario, the successor-in-interest of Restituto Hernandez, filed with leave of court a Complaint in Intervention[25] wherein she claimed the northern portion of Lot No. 7036-A-7.In the Answer to the Amended Complaint,[26] Marquez, as defendant, alleged that apart from being the first registrant, he was a buyer in good faith and for value.

He also argued that the sale executed by Rizal Madrid to Gamiao and Dayag was not binding upon him, it being unregistered. For his part, Calixto manifested that he had no interest in the subject property as he ceased to be the owner thereof, the same having been reacquired by defendant Marquez.[27]

CRB, as defendant, and co-defendant RBC insisted that they were mortgagees in good faith and that they had the right to rely on the titles of Marquez which were free from any lien or encumbrance.[28]

After trial, the Regional Trial Court, Branch 19 of Cauayan, Isabela (hereafter, RTC) handed down a decision in favor of the defendants, disposing as follows:WHEREFORE, in view of the foregoing considerations, judgment is hereby rendered:1. Dismissing the amended complaint and the complaint in intervention;2. Declaring Pacifico V. Marquez the lawful owner of Lots 7036-A-7 now Lots 7036-A-7-A to 7036-A-7-H, inclusive, covered by TCT Nos. T-149375 to T-149382, inclusive;3. Declaring the mortgage of Lots 7036-A-7-A, 7036-A-7-B, 7036-A-7-C and 7036-A-7-D in favor of the defendant Consolidated Rural Bank (Cagayan Valley) and of Lot 7036-A-7-E in favor of defendant Rural Bank of Cauayan by Pacifico V. Marquez valid;4. Dismissing the counterclaim of Pacifico V. Marquez; and5. Declaring the Heirs of Teodoro dela Cruz the lawful owners of the lots covered by TCT Nos. T-33119, T-33220 and T-7583.No pronouncement as to costs.SO ORDERED.[29]

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

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From the foregoing provisions and in the absence of proof that Marquez has actual or constructive knowledge of plaintiffs’ and intervenors’ claim, the Court has to rule that as the vendee who first registered his sale, Marquez’ ownership over Lot 7036-A-7 must be upheld.[30]

The Heirs interposed an appeal with the Court of Appeals. In their Appellant’s Brief,[31] they ascribed the following errors to the RTC: (1) it erred in finding that Marquez was a buyer in good faith; (2) it erred in validating the mortgage of the properties to RBC and CRB; and (3) it erred in not reconveying Lot No. 7036-A-7-B to them.[32]

Intervenor Evangeline del Rosario filed a separate appeal with the Court of Appeals. It was, however, dismissed in a Resolution dated 20 September 1993 for her failure to pay docket fees. Thus, she lost her standing as an appellant.[33]

On 27 May 1997, the Court of Appeals rendered its assailed Decision[34] reversing the RTC’s judgment. The dispositive portion reads:WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE. Accordingly, judgment is hereby rendered as follows:1. Declaring the heirs of Teodoro dela Cruz the lawful owners of the southern half portion and Evangeline Hernandez-del Rosario the northern half portion of Lot No. 7036-A-7, now covered by TCT Nos. T-149375 to T-149382, inclusive;2. Declaring null and void the deed of sale dated June 15, 1976 between Pacifico V. Marquez and the Madrid brothers covering said Lot 7036-A-7;3. Declaring null and void the mortgage made by defendant Pacifico V. Marquez of Lot Nos. 7036-A-7-A, 7036-A-7-B, 7036-A-7-C and 7036-A-7-D in favor of the defendant Consolidated Rural Bank and of Lot 7036-A-7-E in favor of defendant Rural Bank of Cauayan; and4. Ordering Pacifico V. Marquez to reconvey Lot 7036-A-7 to the heirs of Teodoro dela Cruz and Evangeline Hernandez-del Rosario.No pronouncement as to costs.SO ORDERED.[35]

In upholding the claim of the Heirs, the Court of Appeals held that Marquez failed to prove that he was a purchaser in good faith and for value. It noted that while Marquez was the first registrant, there was no showing that the registration of the deed of sale in his favor was coupled with good faith. Marquez admitted having knowledge that the subject property was “being taken” by the Heirs at the time of the sale.[36] The Heirs were also in possession of the land at the time. According to the Decision, these circumstances along with the subject property’s attractive location—it was situated along the National Highway and was across a gasoline station—should have put Marquez on inquiry as to its status. Instead, Marquez closed his eyes to these matters and failed to exercise the ordinary care expected of a buyer of real estate.[37]

Anent the mortgagees RBC and CRB, the Court of Appeals found that they merely relied on the certificates of title of the mortgaged properties. They did not ascertain the status and condition thereof according to standard banking practice. For failure to observe the ordinary banking procedure, the Court of Appeals considered them to have acted in bad faith and on that basis declared null and void the mortgages made by Marquez in their favor.[38]

Dissatisfied, CRB filed a Motion for Reconsideration[39] pointing out, among others, that the Decision promulgated on 27 May 1997 failed to establish good faith on

the part of the Heirs. Absent proof of possession in good faith, CRB avers, the Heirs cannot claim ownership over the subject property.In a Resolution[40] dated 5 January 1998, the Court of Appeals stressed its disbelief in CRB’s allegation that it did not merely rely on the certificates of title of the properties and that it conducted credit investigation and standard ocular inspection. But recalling that intervenor Evangeline del Rosario had lost her standing as an appellant, the Court of Appeals accordingly modified its previous Decision, as follows:WHEREFORE, the decision dated May 27, 1997, is hereby MODIFIED to read as follows:WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE insofar as plaintiffs-appellants are concerned. Accordingly, judgment is hereby rendered as follows:1. Declaring the Heirs of Teodoro dela Cruz the lawful owners of the southern half portion of Lot No. 7036-A-7;2. Declaring null and void the deed of sale dated June 15, 1976 between Pacifico V. Marquez and the Madrid brothers insofar as the southern half portion of Lot NO. (sic) 7036-A-7 is concerned;3. Declaring the mortgage made by defendant Pacifico V. Marquez in favor of defendant Consolidated Rural Bank (Cagayan Valley) and defendant Rural Bank of Cauayan as null and void insofar as the southern half portion of Lot No. 7036-A-7 is concerned;4. Ordering defendant Pacifico V. Marquez to reconvey the southern portion of Lot No. 7036-A-7 to the Heirs of Teodoro dela Cruz.No pronouncement as to costs.SO ORDERED.[41]Hence, the instant CRB petition. However, both Marquez and RBC elected not to challenge the Decision of the appellate court.Petitioner CRB, in essence, alleges that the Court of Appeals committed serious error of law in upholding the Heirs’ ownership claim over the subject property considering that there was no finding that they acted in good faith in taking possession thereof nor was there proof that the first buyers, Gamiao and Dayag, ever took possession of the subject property. CRB also makes issue of the fact that the sale to Gamiao and Dayag was confirmed a day ahead of the actual sale, clearly evincing bad faith, it adds. Further, CRB asserts Marquez’s right over the property being its registered owner.The petition is devoid of merit. However, the dismissal of the petition is justified by reasons different from those employed by the Court of Appeals.Like the lower court, the appellate court resolved the present controversy by applying the rule on double sale provided in Article 1544 of the Civil Code. They, however, arrived at different conclusions. The RTC made CRB and the other defendants win, while the Court of Appeals decided the case in favor of the Heirs.Article 1544 of the Civil Code reads, thus:ART. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property.

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Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property.Should there be no inscription, the ownership shall pertain to the person who in good faith was first in possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith.The provision is not applicable in the present case. It contemplates a case of double or multiple sales by a single vendor. More specifically, it covers a situation where a single vendor sold one and the same immovable property to two or more buyers.[42] According to a noted civil law author, it is necessary that the conveyance must have been made by a party who has an existing right in the thing and the power to dispose of it.[43] It cannot be invoked where the two different contracts of sale are made by two different persons, one of them not being the owner of the property sold.[44] And even if the sale was made by the same person, if the second sale was made when such person was no longer the owner of the property, because it had been acquired by the first purchaser in full dominion, the second purchaser cannot acquire any right.[45]

In the case at bar, the subject property was not transferred to several purchasers by a single vendor. In the first deed of sale, the vendors were Gamiao and Dayag whose right to the subject property originated from their acquisition thereof from Rizal Madrid with the conformity of all the other Madrid brothers in 1957, followed by their declaration of the property in its entirety for taxation purposes in their names. On the other hand, the vendors in the other or later deed were the Madrid brothers but at that time they were no longer the owners since they had long before disposed of the property in favor of Gamiao and Dayag.Citing Manresa, the Court of Appeals in 1936 had occasion to explain the proper application of Article 1473 of the Old Civil Code (now Article 1544 of the New Civil Code) in the case ofCarpio v. Exevea, [46] thus:In order that tradition may be considered performed, it is necessary that the requisites which it implies must have been fulfilled, and one of the indispensable requisites, according to the most exact Roman concept, is that the conveyor had the right and the will to convey the thing. The intention to transfer is not sufficient; it only constitutes the will. It is, furthermore, necessary that the conveyor could juridically perform that act; that he had the right to do so, since a right which he did not possess could not be vested by him in the transferee.This is what Article 1473 has failed to express: the necessity for the preexistence of the right on the part of the conveyor. But even if the article does not express it, it would be understood, in our opinion, that that circumstance constitutes one of the assumptions upon which the article is based.This construction is not repugnant to the text of Article 1473, and not only is it not contrary to it, but it explains and justifies the same. (Vol. 10, 4th ed., p. 159)[47]

In that case, the property was transferred to the first purchaser in 1908 by its original owner, Juan Millante. Thereafter, it was sold to plaintiff Carpio in June 1929. Both conveyances were unregistered. On the same date that the property was sold to the plaintiff, Juan Millante sold the same to defendant Exevea. This time, the sale was registered in the Registry of Deeds. But despite the fact of

registration in defendant’s favor, the Court of Appeals found for the plaintiff and refused to apply the provisions of Art. 1473 of the Old Civil Code, reasoning that “on the date of the execution of the document, Exhibit 1, Juan Millante did not and could not have any right whatsoever to the parcel of land in question.”[48]

Citing a portion of a judgment dated 24 November 1894 of the Supreme Court of Spain, the Court of Appeals elucidated further:Article 1473 of the Civil Code presupposes the right of the vendor to dispose of the thing sold, and does not limit or alter in this respect the provisions of the Mortgage Law in force, which upholds the principle that registration does not validate acts or contracts which are void, and that although acts and contracts executed by persons who, in the Registry, appear to be entitled to do so are not invalidated once recorded, even if afterwards the right of such vendor is annulled or resolved by virtue of a previous unrecorded title, nevertheless this refers only to third parties.[49]

In a situation where not all the requisites are present which would warrant the application of Art. 1544, the principle of prior tempore, potior jure or simply “he who is first in time is preferred in right,”[50] should apply.[51] The only essential requisite of this rule is priority in time; in other words, the only one who can invoke this is the first vendee. Undisputedly, he is a purchaser in good faith because at the time he bought the real property, there was still no sale to a second vendee.[52] In the instant case, the sale to the Heirs by Gamiao and Dayag, who first bought it from Rizal Madrid, was anterior to the sale by the Madrid brothers to Marquez. The Heirs also had possessed the subject property first in time. Thus, applying the principle, the Heirs, without a scintilla of doubt, have a superior right to the subject property.Moreover, it is an established principle that no one can give what one does not have¾nemo dat quod non habet. Accordingly, one can sell only what one owns or is authorized to sell, and the buyer can acquire no more than what the seller can transfer legally.[53] In this case, since the Madrid brothers were no longer the owners of the subject property at the time of the sale to Marquez, the latter did not acquire any right to it.In any event, assuming arguendo that Article 1544 applies to the present case, the claim of Marquez still cannot prevail over the right of the Heirs since according to the evidence he was not a purchaser and registrant in good faith.Following Article 1544, in the double sale of an immovable, the rules of preference are:(a) the first registrant in good faith;(b) should there be no entry, the first in possession in good faith; and(c) in the absence thereof, the buyer who presents the oldest title in good faith. [54]

Prior registration of the subject property does not by itself confer ownership or a better right over the property. Article 1544 requires that before the second buyer can obtain priority over the first, he must show that he acted in good faith throughout (i.e., in ignorance of the first sale and of the first buyer’s rights)¾from

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the time of acquisition until the title is transferred to him by registration or failing registration, by delivery of possession.[55]

In   the   instant   case,   the   actions   of  Marquez   have   not   satisfied   the requirement of good faith from the time of the purchase of the subject property   to   the  time of   registration.  Found  by   the  Court  of  Appeals, Marquez  knew at   the  time of   the  sale   that   the subject  property  was being claimed or “taken” by the Heirs.   This was a detail  which could indicate a defect  in the vendor’s title which he failed to  inquire into.  Marquez also admitted that he did not take possession of the property and at the time he testified he did not even know who was in possession. Thus, he testified on direct examination in the RTC as follows:ATTY. CALIXTO –Q Can you tell us the circumstances to your buying the land in question?A In 1976 the Madrid brothers confessed to me their problems about their lots in San Mateo that they were being taken by Teodoro dela Cruz and Atty. Teofilo A. Leonin; that they have to pay the lawyer’s fee of P10,000.00 otherwise Atty. Leonin will confiscate the land. So they begged me to buy their properties, some of it. So that on June 3, 1976, they came to Cabagan where I was and gave them P14,000.00, I think. We have talked that they will execute the deed of sale.Q Why is it, doctor, that you have already this deed of sale, Exh. 14, why did you find it necessary to have this Deed of Confirmation of a Prior Sale, Exh. 15?A Because as I said a while ago that the first deed of sale was submitted to the Register of Deeds by Romeo Badua so that I said that because when I became a Municipal Health Officer in San Mateo, Isabela, I heard so many rumors, so many things about the land and so I requested them to execute a deed of confirmation.[56]

. . .ATTY. CALIXTO-Q At present, who is in possession on the Riceland portion of the lot in question?A I can not say because the people working on that are changing from time to time.Q Why, have you not taken over the cultivation of the land in question?A Well, the Dela Cruzes are prohibiting that we will occupy the place.Q So, you do not have any possession?A None, sir.[57]

One who purchases real property which is in actual possession of others should, at least, make some inquiry concerning the rights of those in possession. The actual possession by people other than the vendor should, at least, put the purchaser upon inquiry. He can scarcely, in the absence of such inquiry, be regarded as a bona fide purchaser as against such possessions.[58] The rule of caveat emptor requires the purchaser to be aware of the supposed title of the vendor and one who buys without checking the vendor’s title takes all the risks and losses consequent to such failure.[59]

It is further perplexing that Marquez did not fight for the possession of the property if it were true that he had a better right to it. In our opinion, there were circumstances at the time of the sale, and even at the time of registration, which would reasonably require a purchaser of real property to investigate to determine whether defects existed in his vendor’s title. Instead, Marquez willfully closed his eyes to the possibility of the existence of these flaws. For failure to exercise the measure of precaution which may be required of a prudent man in a like situation, he cannot be called a purchaser in good faith.[60]

As this Court explained in the case of Spouses Mathay v. Court of Appeals:[61]

Although it is a recognized principle that a person dealing on a registered land need not go beyond its certificate of title, it is also a firmly settled rule that where there are circumstances which would put a party on guard and prompt him to investigate or inspect the property being sold to him, such as the presence of occupants/tenants thereon, it is, of course, expected from the purchaser of a valued piece of land to inquire first into the status or nature of possession of the occupants, i.e., whether or not the occupants possess the land en concepto de dueño, in concept of owner. As is the common practice in the real estate industry, an ocular inspection of the premises involved is a safeguard a cautious and prudent purchaser usually takes. Should he find out that the land he intends to buy is occupied by anybody else other than the seller who, as in this case, is not in actual possession, it would then be incumbent upon the purchaser to verify the extent of the occupant’s possessory rights. The failure of a prospective buyer to take such precautionary steps would mean negligence on his part and would thereby preclude him from claiming or invoking the rights of a “purchaser in good faith.”[62]

This rule equally applies to mortgagees of real property. In the case of Crisostomo v. Court of Appeals,[63] the Court held:It is a well-settled rule that a purchaser or mortgagee cannot close his eyes to facts which should put a reasonable man upon his guard, and then claim that he acted in good faith under the belief that there was no defect in the title of the vendor or mortgagor. His mere refusal to believe that such defect exists, or his willful closing of his eyes to the possibility of the existence of a defect in the vendor’s or mortgagor’s title, will not make him an innocent purchaser or mortgagee for value, if it afterwards develops that the title was in fact defective, and it appears that he had such notice of the defects as would have led to its discovery had he acted with the measure of a prudent man in a like situation.[64]

Banks, their business being impressed with public interest, are expected to exercise more care and prudence than private individuals in their dealings, even those involving registered lands. Hence, for merely relying on the certificates of title and for its failure to ascertain the status of the mortgaged properties as is the standard procedure in its operations, we agree with the Court of Appeals that CRB is a mortgagee in bad faith.In this connection, Marquez’s obstention of title to the property and the subsequent transfer thereof to CRB cannot help the latter’s cause. In a situation where a party has actual knowledge of the claimant’s actual, open and notorious

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possession of the disputed property at the time of registration, as in this case, the actual notice and knowledge are equivalent to registration, because to hold otherwise would be to tolerate fraud and the Torrens system cannot be used to shield fraud. [65]

While certificates of title are indefeasible, unassailable and binding against the whole world, they merely confirm or record title already existing and vested. They cannot be used to protect a usurper from the true owner, nor can they be used for the perpetration of fraud; neither do they permit one to enrich himself at the expense of others.[66]

We also find that the Court of Appeals did not err in awarding the subject property to the Heirs absent proof of good faith in their possession of the subject property and without any showing of possession thereof by Gamiao and Dayag.As correctly argued by the Heirs in their Comment,[67] the requirement of good faith in the possession of the property finds no application in cases where there is no second sale.[68] In the case at bar, Teodoro dela Cruz took possession of the property in 1964 long before the sale to Marquez transpired in 1976 and a considerable length of time—eighteen (18) years in fact¾before the Heirs had knowledge of the registration of said sale in 1982. As Article 526 of the Civil Code aptly provides, “(H)e is deemed a possessor in good faith who is not aware that there exists in his title or mode of acquisition any flaw which invalidates it.” Thus, there was no need for the appellate court to consider the issue of good faith or bad faith with regard to Teodoro dela Cruz’s possession of the subject property.Likewise, we are of the opinion that it is not necessary that there should be any finding of possession by Gamiao and Dayag of the subject property. It should be recalled that the regularity of the sale to Gamiao and Dayag was never contested by Marquez.[69] In fact the RTC upheld the validity of this sale, holding that the Madrid brothers are bound by the sale by virtue of their confirmation thereof in the Joint Affidavit dated 14 August 1957. That this was executed a day ahead of the actual sale on 15 August 1957 does not diminish its integrity as it was made before there was even any shadow of controversy regarding the ownership of the subject property.Moreover, as this Court declared in the case of Heirs of Simplicio Santiago v. Heirs of Mariano E. Santiago,[70] tax declarations “are good indicia of possession in the concept of an owner, for no one in his right mind would be paying taxes for a property that is not in his actual or constructive possession.”[71]

WHEREFORE, the Petition is DENIED. The dispositive portion of the Court of Appeals’ Decision, as modified by its Resolution dated 5 January 1998, is AFFIRMED. Costs against petitioner.SO ORDERED.

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Republic of the PhilippinesSupreme CourtBaguio City SECOND DIVISION

THE ROMAN CATHOLIC CHURCH, represented by the Archbishop of Caceres, Petitioner, - versus - REGINO PANTE, Respondent.

G.R. No. 174118 Present: CARPIO, J., Chairperson, BRION, PEREZ, SERENO, and REYES, JJ. Promulgated: April 11, 2012

x------------------------------------------------------------------------------x D E C I S I O N BRION, J.:

Through a petition for review on certiorari,[1] the petitioner Roman Catholic Church (Church) seeks to set aside the May 18, 2006 decision[2] and the August 11, 2006 resolution[3] of the Court of Appeals (CA) in CA-G.R.-CV No. 65069. The CA reversed the July 30, 1999 decision[4] of the Regional Trial Court (RTC) of Naga City, Branch 24, in Civil Case No. 94-3286. THE FACTUAL ANTECEDENTS The Church, represented by the Archbishop of Caceres, owned a 32-square meter lot that measured 2x16 meters located in Barangay Dinaga, Canaman, Camarines Sur.[5]On September 25, 1992, the Church contracted with respondent Regino Pante for the sale of the lot (thru a Contract to Sell and to Buy [6]) on the belief that the latter was an actual occupant of the lot. The contract between them fixed the purchase price at P11,200.00, with the initial P1,120.00 payable as down payment, and the remaining balance payable in three years or until September 25, 1995. On June 28, 1994, the Church sold in favor of the spouses Nestor and Fidela Rubi (spouses Rubi) a 215-square meter lot that included the lot previously sold to Pante. The spouses Rubi asserted their ownership by erecting a concrete fence over the lot sold to Pante, effectively blocking Pante and his family’s access from their family home to the municipal road. As no settlement could be reached between the parties, Pante instituted with the RTC an action to annul the sale between the Church and the spouses Rubi, insofar as it included the lot previously sold to him.[7] The Church filed its answer with a counterclaim, seeking the annulment of its contract with Pante. The Church alleged that its consent to the contract was obtained by fraud when Pante, in bad faith, misrepresented that he had been an actual occupant of the lot sold to him, when in truth, he was merely using the 32-square meter lot as a passageway from his house to the town proper. It contended that it was its policy to sell its lots only to actual occupants. Since the spouses Rubi and their predecessors-in-interest have long been occupying the 215-square meter lot that included the 32-square meter lot sold to Pante, the Church claimed that the spouses Rubi were the rightful buyers. During pre-trial, the following admissions and stipulations of facts were made:

1. The lot claimed by Pante is a strip of land measuring only 2x16 meters;2. The lot had been sold by the Church to Pante on September 25, 1992;3. The lot was included in the sale to the spouses Rubi by the Church; and4. Pante expressly manifested and represented to the Church that he had been actually occupying the lot he offered to buy.[8]

In a decision dated July 30, 1999,[9] the RTC ruled in favor of the Church, finding that the Church’s consent to the sale was secured through Pante’s misrepresentation that he was an occupant of the 32-square meter lot. Contrary to his claim, Pante was only using the lot as a passageway; the Church’s policy, however, was to sell its lots only to those who actually occupy and reside thereon. As the Church’s consent was secured through its mistaken belief that Pante was a qualified “occupant,” the RTC annulled the contract between the Church and Pante, pursuant to Article 1390 of the Civil Code.[10] The RTC further noted that full payment of the purchase price was made only on September 23, 1995, when Pante consigned the balance of P10,905.00 with the RTC, after the Church refused to accept the tendered amount. It considered the three-year delay in completing the payment fatal to Pante’s claim over the subject lot; it ruled that if Pante had been prompt in paying the price, then the Church would have been estopped from selling the lot to the spouses Rubi. In light of Pante’s delay and his admission that the subject lot had been actually occupied by the spouses Rubi’s predecessors, the RTC upheld the sale in favor of the spouses Rubi. Pante appealed the RTC’s decision with the CA. In a decision dated May 18, 2006,[11] the CA granted Pante’s appeal and reversed the RTC’s ruling. The CA characterized the contract between Pante and the Church as a contract of sale, since the Church made no express reservation of ownership until full payment of the price is made. In fact, the contract gave the Church the right to repurchase in case Pante fails to pay the installments within the grace period provided; the CA ruled that the right to repurchase is unnecessary if ownership has not already been transferred to the buyer. Even assuming that the contract had been a contract to sell, the CA declared that Pante fulfilled the condition precedent when he consigned the balance within the three-year period allowed under the parties’ agreement; upon full payment, Pante fully complied with the terms of his contract with the Church. After recognizing the validity of the sale to Pante and noting the subsequent sale to the spouses Rubi, the CA proceeded to apply the rules on double sales in Article 1544 of the Civil Code: Article 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property. Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith. [Emphasis ours.] Since neither of the two sales was registered, the CA upheld the full effectiveness of the sale in favor of Pante who first possessed the lot by using it as a passageway since 1963.

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The Church filed the present petition for review on certiorari under Rule 45 of the Rules of Court to contest the CA’s ruling. THE PETITION The Church contends that the sale of the lot to Pante is voidable under Article 1390 of the Civil Code, which states: Article 1390. The following contracts are voidable or annullable, even though there may have been no damage to the contracting parties: (1) Those where one of the parties is incapable of giving consent to a contract;(2) Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud. These contracts are binding, unless they are annulled by a proper action in court. They are susceptible of ratification. [Emphasis ours.] It points out that, during trial, Pante already admitted knowing that the spouses Rubi have been residing on the lot. Despite this knowledge, Pante misrepresented himself as an occupant because he knew of the Church’s policy to sell lands only to occupants or residents thereof. It thus claims that Pante’s misrepresentation effectively vitiated its consent to the sale; hence, the contract should be nullified. For the Church, the presence of fraud and misrepresentation that would suffice to annul the sale is the primary issue that the tribunals below should have resolved. Instead, the CA opted to characterize the contract between the Church and Pante, considered it as a contract of sale, and, after such characterization, proceeded to resolve the case in Pante’s favor. The Church objects to this approach, on the principal argument that there could not have been a contract at all considering that its consent had been vitiated. THE COURT’S RULING The Court resolves to deny the petition. No misrepresentation existed vitiating theseller’s consent and invalidating the contractConsent is an essential requisite of contracts[12] as it pertains to the meeting of the offer and the acceptance upon the thing and the cause which constitute the contract.[13] To create a valid contract, the meeting of the minds must be free, voluntary, willful and with a reasonable understanding of the various obligations the parties assumed for themselves.[14] Where consent, however, is given through mistake, violence, intimidation, undue influence, or fraud, the contract is deemed voidable.[15] However, not every mistake renders a contract voidable. The Civil Code clarifies the nature of mistake that vitiates consent: Article 1331. In order that mistake may invalidate consent, it should refer to the substance of the thing which is the object of the contract, or to those conditions which have principally moved one or both parties to enter into the contract. Mistake as to the identity or qualifications of one of the parties will vitiate consent only when such identity or qualifications have been the principal cause of the contract.A simple mistake of account shall give rise to its correction. [Emphasis ours.] For mistake as to the qualification of one of the parties to vitiate consent, two requisites must concur:

1. the mistake must be either with regard to the identity or with regard to the qualification of one of the contracting parties; and2. the identity or qualification must have been the principal consideration for the celebration of the contract.[16]

In the present case, the Church contends that its consent to sell the lot was given on the mistaken impression arising from Pante’s fraudulent misrepresentation that he had been the actual occupant of the lot. Willful misrepresentation existed because of its policy to sell its lands only to their actual occupants or residents. Thus, it considers the buyer’s actual occupancy or residence over the subject lot a qualification necessary to induce it to sell the lot. Whether the facts, established during trial, support this contention shall determine if the contract between the Church and Pante should be annulled. In the process of weighing the evidentiary value of these established facts, the courts should consider both the parties’ objectives and the subjective aspects of the transaction, specifically, the parties’ circumstances – their condition, relationship, and other attributes – and their conduct at the time of and subsequent to the contract. These considerations will show what influence the alleged error exerted on the parties and their intelligent, free, and voluntary consent to the contract.[17]

Contrary to the Church’s contention, the actual occupancy or residency of a buyer over the land does not appear to be a necessary qualification that the Church requires before it could sell its land. Had this been indeed its policy, then neither Pante nor the spouses Rubi would qualify as buyers of the 32-square meter lot, as none of them actually occupied or resided on the lot. We note in this regard that the lot was only a 2x16-meter strip of rural land used as a passageway from Pante’s house to the municipal road. We find well-taken Pante’s argument that, given the size of the lot, it could serve no other purpose than as a mere passageway; it is unthinkable to consider that a 2x16-meter strip of land could be mistaken as anyone’s residence. In fact, the spouses Rubi were in possession of the adjacent lot, but they never asserted possession over the 2x16-meter lot when the 1994 sale was made in their favor; it was only then that they constructed the concrete fence blocking the passageway. We find it unlikely that Pante could successfully misrepresent himself as the actual occupant of the lot; this was a fact that the Church (which has a parish chapel in the same barangay where the lot was located) could easily verify had it conducted an ocular inspection of its own property. The surrounding circumstances actually indicate that the Church was aware that Pante was using the lot merely as a passageway. The above view is supported by the sketch plan, [18] attached to the contract executed by the Church and Pante, which clearly labeled the 2x16-meter lot as a “RIGHT OF WAY”; below these words was written the name of “Mr. Regino Pante.” Asked during cross-examination where the sketch plan came from, Pante answered that it was from the Archbishop’s Palace; neither the Church nor the spouses Rubi contradicted this statement.[19] The records further reveal that the sales of the Church’s lots were made after a series of conferences with the occupants of the lots.[20] The then parish priest of Canaman, Fr. Marcaida, was apparently aware that Pante was not an actual occupant, but nonetheless, he allowed the sale of the lot to Pante, subject to the approval of the Archdiocese’s

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Oeconomous. Relying on Fr. Marcaida’s recommendation and finding nothing objectionable, Fr. Ragay (the Archdiocese’s Oeconomous) approved the sale to Pante. The above facts, in our view, establish that there could not have been a deliberate, willful, or fraudulent act committed by Pante that misled the Church into giving its consent to the sale of the subject lot in his favor . That Pante was not an actual occupant of the lot he purchased was a fact that the Church either ignored or waived as a requirement. In any case, the Church was by no means led to believe or do so by Pante’s act; there had been no vitiation of the Church’s consent to the sale of the lot to Pante. From another perspective, any finding of bad faith, if one is to be made , should be imputed to the Church. Without securing a court ruling on the validity of its contract with Pante, the Church sold the subject property to the spouses Rubi. Article 1390 of the Civil Code declares that voidable contracts are binding, unless annulled by a proper court action. From the time the sale to Pante was made and up until it sold the subject property to the spouses Rubi, the Church made no move to reject the contract with Pante; it did not even return the down payment he paid. The Church’s bad faith in selling the lot to Rubi without annulling its contract with Pante negates its claim for damages. In the absence of any vitiation of consent, the contract between the Church and Pante stands valid and existing. Any delay by Pante in paying the full price could not nullify the contract, since (as correctly observed by the CA) it was a contract of sale. By its terms, the contract did not provide a stipulation that the Church retained ownership until full payment of the price.[21] The right to repurchase given to the Church in case Pante fails to pay within the grace period provided[22] would have been unnecessary had ownership not already passed to Pante. The rule on double sales The sale of the lot to Pante and later to the spouses Rubi resulted in a double sale that called for the application of the rules in Article 1544 of the Civil Code: Article 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property. Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith. [Emphasis ours.] As neither Pante nor the spouses Rubi registered the sale in their favor, the question now is who, between the two, was first in possession of the property in good faith. Jurisprudence has interpreted possession in Article 1544 of the Civil Code to mean both actual physical delivery and constructive delivery.[23] Under either mode of delivery, the facts show that Pante was the first to acquire possession of the lot. Actual delivery of a thing sold occurs when it is placed under the control and possession of the vendee.[24] Pante claimed that he had been using the lot as a passageway, with the Church’s permission, since 1963. After purchasing the lot

in 1992, he continued using it as a passageway until he was prevented by the spouses Rubi’s concrete fence over the lot in 1994. Pante’s use of the lot as a passageway after the 1992 sale in his favor was a clear assertion of his right of ownership that preceded the spouses Rubi’s claim of ownership. Pante also stated that he had placed electric connections and water pipes on the lot, even before he purchased it in 1992, and the existence of these connections and pipes was known to the spouses Rubi.[25] Thus, any assertion of possession over the lot by the spouses Rubi (e.g., the construction of a concrete fence) would be considered as made in bad faith because works had already existed on the lot indicating possession by another. “[A] buyer of real property in the possession of persons other than the seller must be wary and should investigate the rights of those in possession. Without such inquiry, the buyer can hardly be regarded as a buyer in good faith and cannot have any right over the property."[26] Delivery of a thing sold may also be made constructively. Article 1498 of the Civil Code states that: Article 1498. 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. Under this provision, the sale in favor of Pante would have to be upheld since the contract executed between the Church and Pante was duly notarized, converting the deed into a public instrument.[27] In Navera v. Court of Appeals,[28] the Court ruled that: [A]fter the sale of a realty by means of a public instrument, the vendor, who resells it to another, does not transmit anything to the second vendee, and if the latter, by virtue of this second sale, takes material possession of the thing, he does it as mere detainer, and it would be unjust to protect this detention against the rights of the thing lawfully acquired by the first vendee. Thus, under either mode of delivery, Pante acquired prior possession of the lot. WHEREFORE, we DENY the petition for review on certiorari, and AFFIRM the decision of the Court of Appeals dated May 18, 2006, and its resolution dated August 11, 2006, issued in CA-G.R.-CV No. 65069. Costs against the Roman Catholic Church. SO ORDERED.

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SECOND DIVISION[G.R. No. 129107. September 26, 2001]ALFONSO L. IRINGAN, petitioner, vs. HON. COURT OF APPEALS and ANTONIO PALAO, represented by his Attorney-in-Fact, FELISA P. DELOS SANTOS,respondents.D E C I S I O NQUISUMBING, J.:This petition assails the Decision[1] dated April 30, 1997 of the Court of Appeals in CA G.R. CV No. 39949, affirming the decision of the Regional Trial Court and deleting the award of attorney’s fee.The facts of the case are based on the records.On March 22, 1985, private respondent Antonio Palao sold to petitioner Alfonso Iringan, an undivided portion of Lot No. 992 of the Tuguegarao Cadastre, located at the Poblacion of Tuguegarao and covered by Transfer Certificate of Title No. T-5790. The parties executed a Deed of Sale[2] on the same date with the purchase price of P295,000.00, payable as follows:(a) P10,000.00 – upon the execution of this instrument, and for this purpose, the vendor acknowledges having received the said amount from the vendee as of this date;(b) P140,000.00 – on or before April 30, 1985;(c) P145,000.00 – on or before December 31, 1985.[3]

When the second payment was due, Iringan paid only P40,000. Thus, on July 18, 1985, Palao sent a letter[4] to Iringan stating that he considered the contract as rescinded and that he would not accept any further payment considering that Iringan failed to comply with his obligation to pay the full amount of the second installment.On August 20, 1985, Iringan through his counsel Atty. Hilarion L. Aquino, [5] replied that they were not opposing the revocation of the Deed of Sale but asked for the reimbursement of the following amounts:(a) P50,000.00 – cash received by you;(b) P3,200.00 – geodetic engineer’s fee;(c) P500.00 – attorney’s fee;(d) the current interest on P53,700.00.[6]

In response, Palao sent a letter dated January 10, 1986, [7] to Atty. Aquino, stating that he was not amenable to the reimbursements claimed by Iringan.On February 21, 1989, Iringan, now represented by a new counsel – Atty. Carmelo Z. Lasam, proposed that the P50,000 which he had already paid Palao be reimbursed[8] or Palao could sell to Iringan, an equivalent portion of the land.Palao instead wrote Iringan that the latter’s standing obligation had reached P61,600, representing payment of arrears for rentals from October 1985 up to March 1989.[9] The parties failed to arrive at an agreement.On July 1, 1991, Palao filed a Complaint[10] for Judicial Confirmation of Rescission of Contract and Damages against Iringan and his wife.In their Answer,[11] the spouses alleged that the contract of sale was a consummated contract, hence, the remedy of Palao was for collection of the balance of the purchase price and not rescission. Besides, they said that they had always been ready and willing to comply with their obligations in accordance with said contract.In a Decision[12] dated September 25, 1992, the Regional Trial Court of Cagayan, Branch I, ruled in favor of Palao and affirmed the rescission of the contract. It disposed,

WHEREFORE, the Court finds that the evidence preponderates in favor of the plaintiff and against the defendants and judgment is hereby rendered as follows:(a) Affirming the rescission of the contract of sale;(b) Cancelling the adverse claim of the defendants annotated at the back of TCT No. T-5790;(c) Ordering the defendants to vacate the premises;(d) Ordering the defendants to pay jointly and severally the sum of P100,000.00 as reasonable compensation for use of the property minus 50% of the amount paid by them; and to pay P50,000.00 as moral damages; P10,000.00 as exemplary damages; and P50,000.00 as attorney’s fee; and to pay the costs of suit.SO ORDERED.[13]

As stated, the Court of Appeals affirmed the above decision. Hence, this petition for review.Iringan avers in this petition that the Court of Appeals erred:1. In holding that the lower court did not err in affirming the rescission of the contract of sale; and2. In holding that defendant was in bad faith for “resisting” rescission and was made liable to pay moral and exemplary damages.[14]

We find two issues for resolution: (1) whether or not the contract of sale was validly rescinded, and (2) whether or not the award of moral and exemplary damages is proper.On the first issue, petitioner contends that no rescission was effected simply by virtue of the letter[15] sent by respondent stating that he considered the contract of sale rescinded. Petitioner asserts that a judicial or notarial act is necessary before one party can unilaterally effect a rescission.Respondent Palao, on the other hand, contends that the right to rescind is vested by law on the obligee and since petitioner did not oppose the intent to rescind the contract, Iringan in effect agreed to it and had the legal effect of a mutually agreed rescission.Article 1592 of the Civil Code is the applicable provision regarding the sale of an immovable property.Article 1592. In the sale of immovable property, even though it may have been stipulated that upon failure to pay the price at the time agreed upon the rescission of the contract shall of right take place, the vendee may pay, even after the expiration of the period, as long as no demand for rescission of the contract has been made upon him either judicially or by a notarial act. After the demand, the court may not grant him a new term. (Italics supplied)Article 1592 requires the rescinding party to serve judicial or notarial notice of his intent to resolve the contract.[16]

In the case of Villaruel v. Tan King,[17] we ruled in this wise,…since the subject-matter of the sale in question is real property, it does not come strictly within the provisions of article 1124 (now Article 1191) of the Civil Code, but is rather subjected to the stipulations agreed upon by the contracting parties and to the provisions of article 1504 (now Article 1592) of the Civil Code.”[18]

Citing Manresa, the Court said that the requirement of then Article 1504, “refers to a demand that the vendor makes upon the vendee for the latter to agree to the resolution of the obligation and to create no obstacles to this contractual mode of extinguishing obligations.”[19]

Clearly, a judicial or notarial act is necessary before a valid rescission can take place, whether or not automatic rescission has been stipulated. It is to be noted

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that the law uses the phrase “even though”[20] emphasizing that when no stipulation is found on automatic rescission, the judicial or notarial requirement still applies.On the first issue, both the trial and appellate courts affirmed the validity of the alleged mutual agreement to rescind based on Article 1191 of the Civil Code, particularly paragraphs 1 and 2 thereof.Article 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.The injured party may choose between the fulfillment and the rescission of the obligation, with payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible. [Emphasis ours.]The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with articles 1385 and 1388 and the Mortgage Law.But in our view, even if Article 1191 were applicable, petitioner would still not be entitled to automatic rescission. In Escueta v. Pando,[21] we ruled that under Article 1124 (now Article 1191) of the Civil Code, the right to resolve reciprocal obligations, is deemed implied in case one of the obligors shall fail to comply with what is incumbent upon him. But that right must be invoked judicially. The same article also provides: “The Court shall decree the resolution demanded, unless there should be grounds which justify the allowance of a term for the performance of the obligation.”This requirement has been retained in the third paragraph of Article 1191, which states that “the court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.”Consequently, even if the right to rescind is made available to the injured party,[22] the obligation is not ipso facto erased by the failure of the other party to comply with what is incumbent upon him. The party entitled to rescind should apply to the court for a decree of rescission.[23] The right cannot be exercised solely on a party’s own judgment that the other committed a breach of the obligation.[24] The operative act which produces the resolution of the contract is the decree of the court and not the mere act of the vendor.[25] Since a judicial or notarial act is required by law for a valid rescission to take place, the letter written by respondent declaring his intention to rescind did not operate to validly rescind the contract.Notwithstanding the above, however, in our view when private respondent filed an action for Judicial Confirmation of Rescission and Damages[26] before the RTC, he complied with the requirement of the law for judicial decree of rescission. The complaint[27] categorically stated that the purpose was 1) to compel appellants to formalize in a public document, their mutual agreement of revocation and rescission; and/or 2) to have a judicial confirmation of the said revocation/rescission under terms and conditions fair, proper and just for both parties.[28] In Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc.,[29] we held that even a crossclaim found in the Answer could constitute a judicial demand for rescission that satisfies the requirement of the law.[30]

Petitioner contends that even if the filing of the case were considered the judicial act required, the action should be deemed prescribed based on the provisions of Article 1389 of the Civil Code.[31]

This provision of law applies to rescissible contracts, [32] as enumerated and defined in Articles 1380[33] and 1381.[34] We must stress however, that the “rescission” in Article 1381 is not akin to the term “rescission” in Article 1191 and Article 1592. [35] In Articles 1191 and 1592, the rescission is a principal action which seeks the resolution or cancellation of the contract while in Article 1381, the action is a subsidiary one limited to cases of rescission for lesion as enumerated in said article.[36]

The prescriptive period applicable to rescission under Articles 1191 and 1592, is found in Article 1144,[37] which provides that the action upon a written contract should be brought within ten years from the time the right of action accrues. The suit was brought on July 1, 1991, or six years after the default. It was filed within the period for rescission. Thus, the contract of sale between the parties as far as the prescriptive period applies, can still be validly rescinded.On the issue of moral and exemplary damages, petitioner claims that the Court of Appeals erred in finding bad faith on his part when he resisted the rescission [38] and claimed he was ready to pay but never actually paid respondent, notwithstanding that he knew that appellee’s principal motivation for selling the lot was to raise money to pay his SSS loan.[39] Petitioner would have us reverse the said CA findings based on the exception [40] that these findings were made on a misapprehension of facts.The records do not support petitioner’s claims. First, per the records, petitioner knew respondent’s reason for selling his property. As testified to by petitioner[41] and in the deposition[42] of respondent, such fact was made known to petitioner during their negotiations as well as in the letters sent to petitioner by Palao.[43] Second, petitioner adamantly refused to formally execute an instrument showing their mutual agreement to rescind the contract of sale, notwithstanding that it was petitioner who plainly breached the terms of their contract when he did not pay the stipulated price on time, leaving private respondent desperate to find other sources of funds to pay off his loan. Lastly, petitioner did not substantiate by clear and convincing proof, his allegation that he was ready and willing to pay respondent. We are more inclined to believe his claim of readiness to pay was an afterthought intended to evade the consequence of his breach. There is no record to show the existence of such amount, which could have been reflected, at the very least, in a bank account in his name, if indeed one existed; or, alternatively, the proper deposit made in court which could serve as a formal tender of payment.[44] Thus, we find the award of moral and exemplary damages proper.WHEREFORE, the petition is DENIED. The assailed decision dated April 30, 1997 of the Court of Appeals in CA G.R. CV No. 39949, affirming the Regional Trial Court decision and deleting the award of attorney’s fees, is hereby AFFIRMED. Costs against the petitioner.SO ORDERED.

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SECOND DIVISION[G.R. No. 120747. September 21, 2000]VICENTE GOMEZ, as successor-in-interest of awardee LUISA GOMEZ, petitioner, vs. COURT OF APPEALS, City of MANILA acting thru the City Tenants Security Committee now the Urban Settlement Office, Register of Deeds of Manila, respondents.D E C I S I O NBUENA, J.:Sought to be reversed in this petition for review on certiorari under Rule 45 of the Rules of Court is the decision[1] of the Court of Appeals in C.A. G.R. Sp. No. 32101 promulgated on 22 February 1995 which annulled and set aside the decision of the Regional Trial Court of Manila, Branch 12 in Civil Case No. 51930.Impugned similarly is the resolution[2] of the Court of Appeals dated 29 June 1995 denying petitioner’s motion for reconsideration.From the records, we find the following antecedents:Pursuant to the Land for the Landless Program of the City of Manila and in accordance with City Ordinance No. 6880, the Office of City Mayor issued Resolution No. 16-A,[3] Series of 1978, dated 17 May 1978, which effectively set guidelines and criteria for the award of city home lots to qualified and deserving applicants. Attached to said resolution and made as integral part thereof was a Contract to Sell [4] that further laid down terms and conditions which the lot awardee must comply with.On 30 June 1978, the City of Manila, through the City Tenants Security Committee (CTSC) presently known as the Urban Settlement Office (URBAN), passed Resolution 17-78[5]which in effect awarded to 46 applicants, 37 homelots in the former Ampil-Gorospe estate located in Tondo, Manila. Luisa Gomez, predecessor-in-interest of herein petitioner Vicente Gomez, was awarded Lot 4, Block 1, subject to the provisions of Resolution No. 3-78 of the CTSC and building, subdivision and zoning rules and regulations.Consequently, a certificate of award[6]dated 02 July 1978 was granted by the CTSC in favor of Luisa Gomez, who paid the purchase price of the lot in the amount of P3,556.00 on installment basis,[7] said payments being duly covered by official receipts.In 1979, Luisa Gomez traveled to the Unites States of America but returned to the Philippines in the same year.On 18 January 1980, Luisa Gomez finally paid in full the P 3,556.00 purchase price of the lot. Despite the full payment, Luisa still paid in installment an amount of P8,244.00, in excess of the purchase price, which the City of Manila, through the CTSC, accepted. Additionally, the lot was declared for taxation purposes and the corresponding real estate taxes thereon paid from 1980-1988. In 1982, Luisa, together with her spouse Daniel, left again for the United States of America where she died[8] on 09 January 1983. She is survived by her husband and four children, namely, Ramona G. Takorda, Edgardo Gomez, Erlinda G. Pena, and Rebecca G. Dizon.[9]

Subsequently, in a memorandum dated 07 February 1984, the Urban Settlements Officer and Member-Executive Secretary of the CTSC directed the Western Police District, City Hall Detachment, to conduct an investigation regarding reported violations of the terms and conditions of the award committed by the lot awardees.Thus, on 23 November 1984, a team headed by Pfc. Reynaldo Cristobal of the Western Police District, proceeded to the former Ampil-Gorospe estate where the subject lots are located, and conducted an investigation of alleged violations thereat.

On 19 December 1984, team leader Pfc. Reynaldo Cristobal rendered an investigation report[10] addressed to the City Mayor of Manila, as Chairman of the CTSC, stating, among others, the following findings:“X X X After the said operation, it was found out that of all the lot awardees in the said estate, the following were confirmed to have violated the terms and conditions of their respective awards as indicated opposite their names, to wit:“X X X 2. Name of awardee : Daniel GomezAddress : No. 2557-C Juan Luna St. Tondo, ManilaViolation: The place was found actually occupied by Mrs. Erlinda Perez and her family together with Mr. Mignony Lorghas and family, who are paying monthly rentals of P 210.00 each to Vicente Gomez, brother of awardee. Daniel Gomez is now presently residing in the United States of America and only returns for vacation once in a while as a ‘Balikbayan’ X X X.”Thus, on 01 July 1986, the CTSC, headed by then City Mayor Gemiliano Lopez, Jr. as Chairman, issued Resolution No. 015-86,[11] adopting the findings of the investigation report submitted by Pfc. Cristobal, and ordering the cancellation of the lot awards of Daniel Gomez and other awardees who were found to have committed violations, and further declaring the forfeiture of payments made by said awardees as reasonable compensation for the use of the homelots.In a letter[12] dated 04 August 1986, herein petitioner Vicente Gomez, acting as attorney-in-fact[13] of his brother Daniel Gomez (spouse of Luisa Gomez) asked for reconsideration of the CTSC resolution revoking the award of the lot.On 28 June 1988, Daniel Gomez, spouse of awardee Luisa Gomez, died in the United States of America. Eventually, on 01 February 1989, the surviving children of the deceased spouses, who were American citizens and residents of the United States of America, executed an affidavit of adjudication with deed of donation[14] disposing gratuitously Lot No. 1, Block 4, in favor of their uncle Vicente Gomez.On 20 February 1989, petitioner Vicente Gomez filed a memorandum[15] before the CTSC praying that Resolution 15-86 be set aside and that the award of the lot be restored to Luisa Gomez, or her heirs or successor-in-interest , preferably Vicente Gomez.Thereafter, two supplemental memoranda, dated 26 July 1989[16] and 10 January 1990,[17] were submitted by petitioner before the CTSC reiterating the prayer in the initial memorandum.On 05 February 1990, herein petitioner filed before the Regional Trial Court (RTC) of Manila, Branch 12, a petition for certiorari, prohibition and mandamus docketed as Civil Case No. 90-51930, entitled “ Vicente Gomez, as successor-in-interest of Awardee, Luisa Gomez, petitioner, versus City Tenant’s Security Committee (now Urban Settlement Office) and Register of Deeds of Manila, respondents.”In an order[18] dated 24 April 1990, the lower court directed the petitioner to amend its petition so as to implead the proper government agency.Hence, petitioner filed an amended petition[19] impleading the City of Manila as respondent, to which the latter submitted an answer.[20]

Accordingly, after the presentation of evidence, the lower court promulgated its decision[21] dated 20 January 1993, the decretal portion of which reads:“Wherefore, the petition is hereby granted :

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“1. Ordering the City of Manila through its agency the City Tenants Security Committee (now Urban Settlement Office) to set aside the order of cancellation of the award for Lot No. 4, Block 1 (formerly of the Ampil-Gorospe estate) in favor of Luisa Gomez, her heirs and successor-in-interest, the herein petitioner;“2. Prohibiting the City of Manila through its agency including the Register of Deeds of Manila from awarding the same lot and issuing the corresponding certificate of title therefor to any other person;“3. Ordering the City of Manila through its agency the City Tenant’s Security Committee (now Urban Settlement Office) to execute a Deed of Absolute Sale over the aforementioned lot in favor of the petitioner as successor-in-interest of the awardee and further ordering them to stop and/or refrain from disturbing the peaceful physical possession thereof of (sic) the petitioner; and“4. Ordering the City of Manila through its agency the City Tenant’s Security Committee (now Urban Settlement Office) to refund to the petitioner his overpayments amounting to P8,244.00 and to pay the costs of suit.”On appeal, the Court of Appeals reversed the lower court’s decision prompting petitioner to file a motion for reconsideration which the appellate court denied via its assailed resolution dated 29 June 1995.Hence, the instant appeal where the core of controversy revolves around the propriety of CTSC’s act of canceling the lot award, through Resolution No. 015-86, and further declaring the forfeiture of amounts paid by the awardee, as reasonable compensation for the use of the home lot.The petition is unmeritorious.A thorough scrutiny of the records and an even more exhaustive perusal of the evidence, both documentary and testimonial, would lead to the inevitable conclusion that the fact of cancellation of the award covering Lot 4, Block 1, by the City of Manila, acting through the CTSC, was properly exercised within the bounds of law and contractual stipulation between the parties.Viewed broadly, petitioner anchors his case on the premise, albeit erroneous, that upon full payment of the purchase price of the lot in January 1980, Luisa Gomez, actual awardee, already acquired a vested right over the real property subject of the present controversy. Thus, according to petitioner, upon the death of Luisa Gomez on 09 January 1983, the alleged vested right was transmitted by operation of law to her lawful heirs, pursuant to Article 777 of the Civil Code. Additionally, petitioner submits that by virtue of the affidavit of adjudication with Deed of Donation executed on 01 February 1989 in his favor by the surviving children of Luisa, he, in effect, became the successor-in-interest of Luisa and thus entitled to whatever rights enjoyed by the latter over the property.In the light of existing law and jurisprudence and based on the evidence adduced, this Court finds difficulty giving credence and weight to petitioner’s submissions. We therefore rule that the cancellation of the award of Lot 4, Block 1, through the expediency of Resolution No. 015-86, was proper.Primarily, it must be stressed that the contract entered into between the City of Manila and awardee Luisa Gomez was not one of sale but a contract to sell, which, under both statutory and case law, has its own attributes, peculiarities and effects.Speaking through Mr. Justice Florenz Regalado, this Court in Adelfa Properties, Inc. vs. Court of Appeals,[22] mapped out the bold distinctions between these species of contracts, to wit:

“In a contract of sale, the title passes to the vendee upon the delivery of the thing sold; whereas in a contract to sell, by agreement, the ownership is reserved in the vendor and is not to pass until the full payment of the price. In a contract of sale, the vendor has lost and cannot recover ownership until and unless the contract is resolved or rescinded; whereas in a contract to sell, title is retained by the vendor until the full payment of the purchase price, such payment being a positive suspensive condition and failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from being effective. Thus, a deed of sale is considered absolute in nature where there is neither a stipulation in the deed that title to the property sold is reserved in the seller until the full payment of the price, nor one giving the vendor the right to unilaterally resolve the contract the moment the buyer fails to pay within a fixed period.”To our mind, however, this pronouncement should not curtail the right of the parties in a contract to sell to provide additional stipulations, nor bar them from imposing conditions relative to the transfer of ownership.To be sure, a contract of sale may either be absolute or conditional. One form of conditional sales is what is now popularly termed as a “Contract to Sell”, where ownership or title is retained until the fulfillment of a positive suspensive condition normally the payment of the purchase price in the manner agreed upon.[23] (Emphasis ours)From the above disquisition in Galang and applying Article 1306 of the Civil Code, the contracting parties are accorded the liberality and freedom to establish such stipulations, clauses, terms and conditions as they may deem convenient, provided the same are not contrary to law, morals, good custom, public order or public policy. In the law on contracts, such fundamental principle is known as the autonomy of contracts.Under the present circumstances, we see no hindrance that prohibits the parties from stipulating other lawful conditions, aside from full payment of the purchase price, which they pledge to bind themselves and upon which transfer of ownership depends.In the instant case, we uphold the Contract to Sell, duly annexed and attached to Resolution 16-A, which explicitly provides for additional terms and conditions upon which the lot awardees are bound. Although unsigned, the Contract to Sell, in addition to the provisions of Resolution 16-A, constitutes the law between the contracting parties. After all, under the law there exists a binding contract between the parties whose minds have met on a certain matter notwithstanding that they did not affix their signatures to its written form.[24]

For a contract, like a contract to sell, involves a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. Contracts, in general, are perfected by mere consent, which is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute.[25]

As to the matter of acceptance, the same may be evidenced by some acts, or conduct, communicated to the offeror, either in a formal or an informal manner, that clearly manifest the intention or determination to accept the offer to buy or sell.[26]

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In the case at bar, acceptance on the part of the vendee was manifested through a plethora of acts, such as payment of the purchase price, declaration of the property for taxation purposes, and payment of real estate taxes thereon, and similar acts showing vendee's assent to the contract.Verily, Resolution 16-A and the Contract to Sell which was annexed, attached and made to form part of said resolution, clearly laid down the terms and conditions which the awardee-vendee must comply with. Accordingly, as an awardee, Luisa Gomez, her heirs and successors-in-interest alike, are duty-bound to perform the correlative obligations embodied in Resolution 16-A and the Contract to Sell.Resolution 16-A, Series of 1978, explicitly provides that aside from the requirement of Filipino citizenship and legal age, the basic criteria for award of the lot pursuant to the Land for the Landless Program of the City of Manila shall be the following:“a) Occupancy - The applicant must be the legal and actual or physical occupant of the lot in question at the time of its acquisition by the City. He must be the owner of the house and lot, must be using the same for his residential purposes, and must have had a lessee-lessor relationship with the previous owner of the land or landed estate of which the subject lot is a part.“b) Non-ownership of land - The applicant and/or his spouse, if he is married, must not be an owner of any parcel of land in Manila, Metropolitan Manila or elsewhere in the Philippines. Neither must he and/or his spouse be a prospective owner or a buyer on installment basis of any lot other than that which he is occupying and for which he is applying for award from the City.“c) Capacity to pay- The applicant must have such financial means and/or support as will enable him to make regular payments of amortizations or installments for the lot if the same is awarded to him.”Of equal importance are the essential terms and conditions embraced in the Contract to Sell, which awardee Luisa Gomez, her heirs and successors-in-interest, violated, to wit:“X X X Par.(3). The vendee shall occupy and use the lot exclusively for his/her residential purpose . X X X“X X X Par. (5). The vendee hereby warrants and declares under oath that he/she is a bonafide and actual occupant and tenant of the lot; X X X and that he/she fully understands that any false statement or misrepresentation hereof (sic) shall be sufficient cause for the automatic cancellation of his/her rights under this agreement as well as ground for criminal prosecution.“Par. (6). Until complete payment of the purchase price and compliance with all the vendee’s obligations herein, title to the lot remains in the name of the owner. During the effectivity of this agreement, however, the owner may transfer its title or assign its rights and interest under this agreement to any person, corporation, bank or financial institution.“Title shall pass to the vendee upon execution of a final deed of sale in his/her favor. X X X“Par. (8). In order not to defeat the purpose of this social land reform program of the City of Manila, and to prevent real estate speculations within

twenty years from complete payment of the purchase price and execution of the final deed of sale, the lot and residential house or improvement thereon shall not be sold, transferred, mortgaged, leased or otherwise alienated or encumbered without the written consent of the City Mayor.“Par. (9). During the effectivity of this agreement, the residential house or improvement thereon shall not be leased, sold, transferred or otherwise alienated by the vendee without the written consent of the owner. X X X“Par. (14). In the event that the vendee dies before full payment of the purchase price of the lot, his/her surviving spouse, children heirs and/or successors-in-interest shall succeed in all his/her rights and interest, as well as assume all/his/her obligations under this agreement.“Par. (15). This agreement shall be binding upon the heirs, executors and administrators of the vendee.” (emphasis ours)Petitioner urges that awardee Luisa Gomez did not commit any violation of the lot award. On the contrary, the records would indubitably show that Luisa Gomez, including her heirs and successors-in-interest, have performed acts that constitute gross, if not brazen, violation of the aforementioned terms and conditions of the award, as evidenced by the investigation report submitted by Pfc. Cristobal, dated 19 December 1984.Results of the investigation conducted on 23 November 1984, reveal that the lot was actually occupied and leased by a certain Erlinda Perez and Mignony Lorghas, together with their respective families, who were paying rentals to petitioner Vicente Gomez for the lease of the subject premises.Moreover, in a conference held on 13 January 1989 at the Office of the Acting Urban Settlement Officer, Lorghas admitted that she has been leasing the property and paying rent to petitioner Vicente Gomez, thus:[27]

“Atty. Bernardo: Mrs. Lorghas, how long have you been renting the property?Mrs. Lorghas: I was living there since 1960 until today. I was renting a small room downfloor (sic). When the family of Mr. Gomez died, kami na ang tumira sa itaas until now.Atty. Bernardo : Magkano ang upa mo?Mrs. Lorghas: P300 a month.Atty. Bernardo: Kanino?Mrs. Lorghas: Kay Vicente Gomez.Atty. Bernardo: Meron bang resibo?Mrs. Lorghas: Wala po.Atty. Bernardo: Noong 1973, kayo na rin ang nakatira sa lugar ni Gomez.Mrs. Lorghas: Opo.”Certainly, said acts constitute a brazen transgression of Resolution 16-A and clear contravention of the Contract to Sell, specifically par. (3), (8) and (9) thereof.The contract provides in no uncertain terms, that the abovementioned terms and conditions shall bind the heirs, executors and administrators of the vendee. The contract further states that breach thereof would result to the automatic cancellation of the vendee’s rights thereunder.Thus, par.(10) (b) (a) of the Contract to Sell, which reads:“ X X X any violation of the terms and conditions of this agreement shall automatically cause the cancellation of the vendee’s rights under this agreement without necessity of prior notice or judicial declaration X X X.”Such kind of stipulation was upheld by this Court in the Adelfa case where we categorically declared that Article 1592 of the Civil Code, which requires rescission either by judicial action, or notarial act, does not apply to a contract to sell.[28]

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Moreover, judicial action for rescission of a contract is not necessary where the contract provides for automatic rescission in case of breach,[29] as in the contract involved in the present controversy.Likewise, this Court sustains the forfeiture of the payments made by awardee as reasonable compensation for the use of the lot. At this juncture, par. (1) of the Contract to Sell furnishes support to this conclusion:“X X X In case of the cancellation of the vendee’s rights under this agreement as hereinafter stipulated, all payments made by him/her shall be forfeited and considered as rentals for the use of the lot X X X.”Further, Article 1486 of the Civil Code provides that a stipulation that the installments or rents paid shall not be returned to the vendee or lessee shall be valid insofar as the same may not be unconscionable under the circumstances.[30]

Applying the foregoing, we are of the considered view that the payment of the purchase price of P3,556.00, constitutes fair and reasonable rental for the period in which said property was under the control of awardee Luisa Gomez, her heirs and successors-in-interest. Undeniably, the awardee together with her heirs and successors-in-interest, have gained benefits, financial or otherwise, for a period of eight years - from the time of actual award of the lot to the time of cancellation thereof (1978-1986).Nonetheless, we ought to stress that in the present case, forfeiture of the installments paid as rentals, only applies to the purchase price of P3,556.00 and not to the overpayment of the amount of P8,244.00.Under these circumstances, the vendor should refund the amount of P8,244.00 representing the overpayment made, plus interest, to be computed in accordance with the “rule of thumb” enunciated in the landmark case of Eastern Shipping Lines, Inc. vs. Court of Appeals[31] and reiterated in the case of Philippine National Bank vs. Court of Appeals.[32]

For us to uphold the forfeiture of the amount representing the overpayment would be to revolt against the dictates of justice and fairness. A contrary ruling would unjustly enrich the vendor to the prejudice of the vendee.In the same vein, the provisions of Article 777 of the Civil Code notwithstanding, we hold that the surviving children of awardee Luisa Gomez are not qualified transferees of Lot 4, Block 1 for failure to conform with the prerequisites set by Resolution 16-A, to wit, Filipino citizenship and actual occupancy, which in the present case, are basic criteria for the award of the lot, pursuant to the “Land for the Landless Program” of the City of Manila.The records reveal that the children of Luisa Gomez are American citizens and permanent residents of the United States of America. Notably, Resolution 16-A specifically enumerates Filipino citizenship and actual occupancy of the lot for residential purposes, as qualifications for entitlement to the lot award. For this court to consider said surviving children as qualified awardee-transferees would render illusory the purposes for which Resolution 16-A and the “Land for the Landless Program” of the City of Manila were adopted.Even assuming arguendo that the surviving children of Luisa Gomez are entitled to the lot by virtue of Article 777 of the Civil Code, said heirs nevertheless

abandoned their right when they violated the terms and conditions of the award by donating the subject property to petitioner Vicente Gomez.As paragraph (15) of the agreement provides that the heirs of the vendee shall be bound thereby, it is then incumbent upon said heirs to render strict compliance with the provisions thereof.In particular, paragraph (8) of the Contract proscribes the sale, transfer, mortgage, lease, alienation or encumbrance of the lot, residential house, or improvement thereon, without the written consent of the City Mayor, within a period of twenty (20) years from complete payment of the purchase price and execution of the final deed of sale. The execution of the Deed of Donation by the surviving children of Luisa Gomez on February 1, 1989, in favor of Vicente Gomez, was clearly within the prohibited period of 20 years from the full payment of the purchase price on January 18, 1980.Without doubt, the prohibition applies to them.Furthermore, the subject lot and residential house were occupied by, and leased to, third persons, in crystalline and evident derogation of the terms of the award.WHEREFORE, premises considered, the instant petition is DISMISSED for lack of merit, and the assailed decision of the Court of Appeals with respect to the cancellation of the award of Lot 4, Block 1, is AFFIRMED SUBJECT TO MODIFICATION as to the forfeiture of amounts paid by the vendee.As modified, the City of Manila, is hereby ordered to refund with dispatch the amount of P8,244.00 representing the overpayment made by petitioner plus interest.SO ORDERED.

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    SECOND DIVISION VIRGILIO A. CADUNGOG, G.R. No. 161223 Petitioner, Present: PUNO, J., Chairman, - versus - AUSTRIA-MARTINEZ, CALLEJO, SR., TINGA, and CHICO-NAZARIO, JJ. JOCELYN O. YAP, Promulgated: Respondent. September 12, 2005x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x D E C I S I O N CALLEJO, SR., J.: This is a petition for review on certiorari of the Decision[1] of the Court of Appeals (CA) in CA-G.R. CV No. 72761 which reversed and set aside the Decision of the Regional Trial Court (RTC) of Oslob, Cebu, Branch 62, in Civil Case No. OS-96-46. Antecedents Franklin Ong and his sister, Jocelyn Ong-Yap, are first cousins of Virgilio Cadungog. Cresenciano Ong Aranas, the Municipal Mayor of Ginatilan, Cebu, from 1955 to 1978,[2] is their uncle. On August 17, 1979, Virgilio executed a Deed of Sale with Right of Repurchase[3] in which he sold to his cousin, Franklin Ong, the following six parcels of land located in Ginatilan, Cebu for P7,144.28: Parcel Number Tax Dec. No. Area

1 000821 1,170 square meters2 4978 1,444 square meters3 29586 4,257 square meters4 5478 1,140 square meters5 5486 980 square meters6 5486 1,020 square meters

Parcel Nos. 5 and 6 are located in Sitio Cayam, Ginatilan, Cebu.[4]

Under the deed, Virgilio had the right to repurchase the property within 10 years from the said date.[5]

Virgilio failed to redeem the property. Nevertheless, upon the prodding of Franklin, Virgilio, who was merely a letter-carrier, executed a Deed of Absolute Sale[6] in favor of Jocelyn in which it appears that he sold Parcel Nos. 1, 2 and 3 for the price of P5,000.00. Virgilio declared therein that he inherited Parcel Nos. 2 and 3 from his mother, Soledad, who inherited the same from her parents, Jose Aranas and Basilia Rocaberte, under a Deed of Partition executed by their heirs. Franklin signed as one of the witnesses to the deed.[7]

On December 23, 1996, Cresenciano Ong executed a Deed of Absolute Sale of Parcel No. 2 in favor of the APC Group, Inc. for P32,380.00. Cresenciano declared that he was the sole and absolute owner, in fee simple, of the said lot. [8] On January 23, 1997, Virgilio executed a Deed of Absolute Sale of Parcel No. 1 in

favor of the APC Group, Inc. for P35,400.00, alleging therein that he was the sole and exclusive owner of the property.[9] When Franklin learned of the said sales, he objected. Virgilio, thus, delivered to Franklin Check No. 0000997[10] dated May 24, 1997, drawn and issued by Cresenciano against his account with the Prudential Bank, in the amount of P25,000.00. Virgilio also delivered to Franklin Check No. 0000999[11] drawn and issued by Cresenciano against his account with the same bank in the amount of P25,000.00. On May 26, 1997, Franklin signed Receipts dated May 25 and 26, 1997, embodied in a piece of paper.[12] In the Receipt dated May 26, 1997, Franklin acknowledged to have received the P25,000.00 check “representing full payment for the refund of the lot sold in Ginatilan.”[13]

When Jocelyn learned that Virgilio had sold Parcel No. 1 to the APC Group, Inc., she filed a criminal complaint for estafa against him. After the requisite preliminary investigation, an Information for estafa was filed against Virgilio with the RTC. By way of riposte, Virgilio filed a Complaint before the RTC, on December 8, 1998, against Jocelyn for the declaration of nullity of the September 30, 1991 Deed of Absolute Sale. He alleged therein that he had executed the subject deed in favor of Jocelyn only because her brother, Franklin, had requested him to do so “to lessen Jocelyn’s tax liability in Canada.” He also alleged that he agreed to execute the deed on the belief that it would not be notarized, as no consideration was involved. He further claimed that he informed Franklin’s emissary (who brought the deed for his signature) that he owned Parcel No. 1, Cresenciano owned Parcel No. 2, and he did not know who owned Parcel No. 3. To his surprise, Jocelyn filed a criminal complaint for estafa against him before the Provincial Prosecutor’s Office, and later an Information before the RTC of Oslob, Cebu. He further claimed that he and his wife signed a one-page document; the acknowledgment page was merely added to it, as it, in fact, did not contain their signatures. Virgilio further stated that his uncle, Cresenciano Ong, sold Parcel No. 2, one of the lots included in the Deed of Sale dated September 30, 1991, to the APC Group, Inc. He himself then sold Parcel No. 1, with an area of 1,770 square meters, to the same vendee for P35,400.00. Virgilio prayed for the following reliefs: WHEREFORE, in view of the foregoing premises, it is most respectfully prayed of this Honorable Court that after notice and hearing judgment be rendered in favor of plaintiff and against the defendant declaring the aforesaid Deed of Absolute Sale as null and void from the very beginning for being without consideration and the defendant be ordered to pay the plaintiff the following:P200,000.00 – as moral damages; 100,000.00 – as exemplary damages; 20,000.00 – as attorney’s fee plus P1,500.00 per court appearance; 10,000.00 – as litigation expenses; Other reliefs and remedies consistent with justice and equity are likewise rayed for.[14]

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In her answer with special and affirmative defenses, Jocelyn averred that the Deed of Absolute Sale dated September 30, 1991 was genuine, and reflected the true and correct intention of Virgilio as the vendor. She pointed out that the document was notarized, a public document which carried evidentiary weight. She further alleged that Virgilio had, in fact, previously sold the questioned lots through a Deed of Sale with Right of Repurchase in favor of her brother Franklin. Her brother then told her that, since Virgilio could no longer repurchase the subject properties, “it would be better for him to execute a Deed of Absolute Sale in her favor.” She denied Virgilio’s allegations that the subject deed was fictitious, and averred that it was genuine in all respects and amply supported by valuable consideration. Jocelyn further averred that the filing of the instant case was a subterfuge or a mere afterthought on the part of Virgilio, as a defense in the criminal case for estafa she had filed against him. Moreover, Virgilio was in estoppel, and could not now be heard to negate the contents of the deed of absolute sale which he had previously executed in her favor.

Alleging that the complaint was filed in evident gross bad faith and that she suffered untold mental anguish, sleepless nights, anxiety and besmirched reputation, Jocelyn prayed that the case be dismissed, and that the following amounts in damages be awarded to her: P500,000.00 as moral damages; P100,000.00 as exemplary damage; P50,000.00 as attorney’s fees; and P100,000.00 as actual litigation expenses.[15]

The Testimonies of the Witnesses Cresenciano Ong Aranas testified that he was the owner of Parcel No. 2, which Virgilio had sold to Jocelyn. The said lot was part of a bigger parcel, with an area of 1,619 square meters situated in Malatbo, Ginatilan Cebu. He sold the said lot on December 23, 1996 to the APC Group, Inc., a mining company, for P32,380.00 as evidenced by a Deed of Absolute Sale.[16] He admitted that he allowed Virgilio to include the said lot in the Deed of Sale with Right of Repurchase which Virgilio executed in favor of Franklin on August 17, 1979. He, however, admitted that he did not execute any document authorizing Virgilio to sell Parcel No. 2 since the latter was his nephew.[17]

Upon Virgilio’s prodding, he issued two checks: Check No. 0000997[18] for P25,000.00 on May 24, 1997, and Check No. 0000999[19] for P25,000.00 on May 26, 1997. These checks were issued to redeem Parcel Nos. 1, 2 and 3, the lots subject of the Deed of Sale dated September 30, 1991.[20] Franklin signed receipts for said checks.[21] Ricardo Acojedo, caretaker of Virgilio’s properties and that of the Yap siblings, testified that he was in Virgilio’s house when a certain Emok Dacillo brought a deed of sale to be signed by Virgilio and his wife. He saw the couple sign the document, but did not get to read it. There was no other person who signed the document. After Virgilio said “the document should not be notarized,” he immediately handed it over to Emok.[22]

Virgilio testified that he and his wife, Rebecca, were in their house on the last week of September 1991, when Emok, an emissary of Franklin, arrived. Emok showed him the Deed of Absolute Sale dated September 30, 1991, and told him that Franklin wanted him and Rebecca to sign the deed. He read the document and was sure that it consisted of only one page. He told the emissary that he was the owner of Parcel No. 1; Parcel No. 2 was in the name of his uncle, Cresenciano; while the records of Parcel No. 3 could no longer be found at the Municipal Assessor’s Office. Nevertheless, he and his wife signed the deed. He also claimed that he was able to repurchase the lots subject of the Deed of Sale with Right of Repurchase on May 26, 1997 for P50,000.00 at the house of his aunt, Tasiana Belarmino.Virgilio admitted, however, that at the time he made the two payments, the period to repurchase the subject parcels of land had already expired.[23]

The defendant did not testify in her behalf. Atty. Emmanuel P. Rama testified for the defendant and declared that he notarized the subject deed, which to his knowledge was prepared by Franklin Ong. He was then in the office of his brother, who was the Vice-Governor of Cebu, when Franklin and Virgilio and his wife, Rebecca, arrived to have the deed notarized.[24] However, Virgilio, his wife, and the witnesses to the deed failed to sign on the left margin of its second page. Franklin, a bachelor of laws graduate, testified that he was employed as an Interpreter in Branch 14 of the Court of First Instance of Cebu;[25] he prepared the deed of sale with right of repurchase which Virgilio executed on August 17, 1979 and the September 30, 1991 Deed of Absolute Sale which Virgilio and his wife executed.[26] According to him, the lots subject of the complaint, together with the other lots sold under the first deed of sale, were not repurchased by Virgilio.[27] Franklin further narrated that sometime in 1991, Virgilio sought financial help because his house was about to be foreclosed by the Development Bank of the Philippines. He then gave P7,000.00 to Virgilio,and suggested that Parcel Nos. 1, 2 and 3 be sold to Jocelyn to augment his contribution. Franklin, however, agreed to buy Parcel Nos. 5 and 6 and inquired from Jocelyn if she was interested to buy Parcel Nos. 1, 2 and 3; Jocelyn replied that she was.[28] He then prepared a Deed of Absolute Sale over Parcel Nos. 1, 2 and 3, which Virgilio and his wife signed on September 30, 1991 before Notary Public Emmanuel P. Rama.[29] Virgilio agreed to sell the three lots for P5,000.00 only because the said amount was in addition to the P7,144.28 paid for the six parcels of land earlier sold to Franklin in 1979.[30] Franklin claimed he gave the P5,000.00 purchase price of the property to Virgilio on September 30, 1991.[31]

Franklin declared that the receipts[32] for P50,000.00 which he signed (and which Virgilio adduced in evidence) were refunds for Parcel Nos. 5 and 6 which he bought from Virgilio and later sold by the latter to the APC Group, Inc.; they were not payments for the repurchase of the six parcels of land subject of the first sale as Virgilio claimed.[33] After Jocelyn purchased Parcel Nos. 1, 2 and 3, their sister Loreta and their mother took charge and administered the property, and paid the realty taxes thereon.[34]

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Taciana Aranas Belarmino, an aunt of Virgilio, Franklin and Jocelyn, testified that she and her son, Fermin Belarmino, as well as her brother Cresenciano, witnessed Franklin sign the receipts dated May 25 and 26, 1997, for the total amount of P50,000.00, in their house. The payment was made to redeem Parcel Nos. 5 and 6, which Virgilio sold to the APC Group, Inc. [35] Franklin demanded P200,000.00, but Virgilio had only P50,000.00, (inclusive of the P25,000.00 Virgilio borrowed from Cresenciano).[36]

By way of rebuttal, Virgilio presented Federico Erac, the Postmaster of Ginatilan, who testified that he (Virgilio) was a letter-carrier and was at his place of work at the post office on September 30, 1991; hence, he could not have signed the Deed of Absolute Sale of Parcel Nos. 1, 2 and 3 in favor of Jocelyn in the Office of the Vice-Governor on the said date before Notary Public Emmanuel Rama.[37] He adduced in evidence his daily time record for September 30, 1991.[38]

After the trial, the court rendered judgment in favor of Virgilio. The fallo of the decision reads:WHEREFORE, the Deed of Absolute Sale dated September 30, 1991 allegedly executed by plaintiff in favor of defendant is declared NULL and VOID. SO ORDERED.[39]

The trial court held that, since Franklin failed to consolidate his title to the parcels of land following the lapse of the 10-year period for Virgilio to redeem the same, the period for redemption was deemed extended until the said lots were repurchased on May 25 and 26, 1997, upon payment of P50,000.00 to Franklin. The trial court ruled that there was a need for Franklin to consolidate the title over the parcels of land by court proceedings. It also held that the Deed of Absolute Sale dated September 30, 1991 had no consideration because the P5,000.00 stated therein, as the price of the property, was insufficient. Since the deed was not supported by any consideration, it was null and void. Jocelyn appealed the decision to the CA, assailing the trial court’s ruling on the following grounds: - I - The Honorable Trial Court erred in ruling that there was no action on the part of the defendant-appellant to consolidate the title in her name when plaintiff-appellee failed to repurchase the properties subject matter of the deed of sale with right to repurchase executed on August 17, 1979. -II- The Honorable Trial Court erred in ruling that on May 25 and 26, 1997 the amount of P50,000.00 was paid to the defendant-appellant through Franklin Ong and upon acceptance of the latter the real properties subject matter of the deed of sale with right to repurchase was deemed repurchased. - III - The Honorable Trial Court erred in ruling that the amount of P5,000.00 is not sufficient consideration for the purchase of three parcels of land.[40] The CA reversed the ruling of the trial court. The dispositive portion reads:WHEREFORE, the foregoing considered, the May 4, 2001 Decision of the Regional Trial Court of Oslob, Cebu is REVERSED AND SET ASIDE. A new one is entered declaring the Deed of Absolute Sale dated September 30, 1991 executed by Virgilio Cadungog in favor of Jocelyn Yap, valid and binding.

SO ORDERED.[41] The appellate court held that the period to redeem the subject properties had already elapsed as early as 1989, or 10 years after the execution of the Deed of Sale with Right of Repurchase on August 17, 1979. In view of Virgilio’s failure to redeem the same, he lost ownership over the disputed lots. Jocelyn acquired ownership over the property when she purchased the same from Virgilio on September 30, 1991 under the Deed of Absolute Sale. Citing Cruz v. Leis,[42] the CA ruled that Jocelyn could not be faulted for not consolidating the title over the subject lots, as the act of consolidating title is not a condition sine qua non to the transfer of ownership. The appellate court declared that theP50,000.00 Franklin received from Virgilio on May 25 and 26, 1997 was the refund of the cost of Parcel Nos. 5 and 6 which Virgilio sold to the APC Group, Inc., the same lots sold to Franklin in 1999. The CA further stated that the inadequacy of the purchase price does ot per se support the conclusion that the contract was a loan, or that the property was not at all sold. Citing Abapo v. Court of Appeals[43] and Article 1355 of the Civil Code, the CA ruled that such inadequacy of price is not sufficient to set aside the sale, unless it is grossly inadequate or purely shocking to the conscience. Moreover, except for his own self-serving testimony, Virgilio did not submit any other testimony to refute the said sale. Finally, the CA ruled that the subject deed of sale is a public document, having been executed and attested through the intervention of a notary public; as such, it is evidence of the facts therein expressed. While Virgilio’s officemate testified that he could not have been present for the notarization of the said document because he was at work on the said date, such testimony could not negate the existence of the said deed. Virgilio filed a motion for reconsideration, which the CA denied. Virgilio, now the petitioner, assails the said ruling and ascribes to the appellate court the following errors: GROUND I THE HONORABLE COURT OF APPEALS (SPECIAL FOURTH DIVISION) ERRED IN REVERSING THE DECISION OF THE RTC BRANCH 62 OF OSLOB, CEBU, DECLARING THE DEED OF ABSOLUTE SALE DATED SEPTEMBER 30, 1991, COVERING THREE (3) PARCELS OF LAND VALID AND BINDING AND IN NOT TAKING INTO ACCOUNT ITS FINDINGS WHICH CONSIDERED THAT THE DEED OF ABSOLUTE SALE DATED SEPTEMBER 30, 1991, COVERING THREE (3) PARCELS OF LAND IS NOT SUPPORTED BY ANY CONSIDERATION AND DID NOT REFLECT THE TRUE INTENTION OF THE PARTIES, A FICTITIOUS AND SIMULATED ONE, HENCE NON-EXISTENT AND VOIDAB INITIO. GROUND II THE HONORABLE COURT OF APPEALS (SPECIAL FOURTH DIVISION) ALSO ERRED IN NOT TAKING INTO CONSIDERATION THAT THE DEED OF ABSOLUTE SALE DATED SEPTEMBER 30, 1991, COVERING THREE (3) PARCELS OF LAND WAS TAINTED WITH DECEPTION AS THE CONSENT WAS OBTAINED THROUGH DECEIT ANDDISHONEST MEANS. GROUND III THE HONORABLE COURT OF APPEALS (SPECIAL FOURTH DIVISION) ERRED IN NOT TAKING INTO CONSIDERATION THAT SINCE THE DEED OF ABSOLUTE SALE DATED SEPTEMBER 30, 1991, COVERING THREE PARCELS OF LAND, WHICH WAS COMPOSED ORIGINALLY OF ONLY ONE (1) PAGE, WAS NOT INTENDED TO BE ACKNOWLEDGED AND NOTARIZED BY A NOTARY PUBLIC, WAS ALREADY COMPOSED OF

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TWO (2) PAGES AND ACKNOWLEDGED AND NOTARIZED BY A NOTARY PUBLIC, THE SECOND PAGE OF WHICH DID NOT CONTAIN THE SIGNATURES OF THE PARTIES AND THEIR INSTRUMENTAL WITNESSES. APPARENTLY, THIS INDICATES A FRAUDULENT ACT WORTHY OF CONSIDERATION OF THE HONORABLE COURT OF APPEALS. GROUND IV THE HONORABLE COURT OF APPEALS (SPECIAL FOURTH DIVISION) ERRED IN NOT TAKING INTO ACCOUNT OVER THE FACT THAT RESPONDENT FAILED TO CONSOLIDATE HER OWNERSHIP OVER THE DISPUTED LAND SUBJECT TO THE FICTITIOUS AND SIMULATED SALE DATED SEPTEMBER 30, 1991, COVERING THREE (3) PARCELS OF LAND. APPARENTLY, INDICATING AN ACT CONTRADICTORY TO WHAT A NORMAL PERSON MIGHT HAVE ACTED UNDER SIMILAR CIRCUMSTANCE. GROUND V THE HONORABLE COURT OF APPEALS (SPECIAL FOURTH DIVISION) ERRED IN FAILING TO UPHOLD THE FACTUAL FINDINGS OF THE RTC BRANCH 62 OF OSLOB, CEBU WHICH WAS IN THE POSITION TO EVALUATE AND APPRECIATE THE MERITS OF THE CASE AND HAD THE OPPORTUNITY OF OBSERVING THE DEMEANORAND SINCERITY OF THE WITNESSES.[44]

The petitioner reiterates that the subject deed is fictitious and simulated, having been executed merely to afford respondent Jocelyn Yap a claim for the reduction of her tax liabilities in Canada. The petitioner points out that the true intention of the parties was never that of sale, but only for accommodation purposes. The petitioner, likewise, points out that his cousin Franklin added a second page to the one-page agreement and had it notarized; the second page of the deed bore the acknowledgment of the notary public, which, however, did not contain the signatures of the supposed parties and their instrumental witnesses. According to the petitioner, Franklin, through false pretenses, succeeded in obtaining his consent in executing a simulated deed of sale over the subject parcel of land. Moreover, considering the clear and convincing evidence that he was at work on the date the deed of sale was purportedly executed, the notary public could not have notarized the document in his presence and the other parties concerned. The petitioner insists that the transaction subject of the dispute is “wantonly devoid of any consideration, did not reflect the true intention of the parties, and was obtained through fraudulent means, fictitious and simulated; hence, void from the very beginning.”

The petitioner further points out that after the supposed sale, the respondent made no move to consolidate her ownership over the property, or other similar behavior or acts of dominion.

Finally, the petitioner contends that it is the findings of the trial court which should prevail, considering that it was in a better position to evaluate and appreciate the merits of the case and had the opportunity to observe the demeanor and sincerity of the witnesses presented. The respondent, for her part, avers that the petitioner and his wife appeared before Notary Public Emmanuel P. Rama and acknowledged the Deed of Absolute Sale dated September 30, 1991. Such notarized deed enjoys the presumption of regularity; there must be clear and convincing evidence to contradict the same. The respondent insists that the petitioner failed to overturn the testimony of Atty. Rama, and that his bare denial will not suffice to overcome

the positive value of the notarized document. The respondent further posits that the appellate court correctly ruled that the consideration of the three lots was P5,000.00, and that mere inadequacy of price is not sufficient to set aside a contract of sale. The respondent further alleges that the petition is one under Rule 45 of the Rules of Court. Only errors of law, not of facts, are reviewable under the said rule, and in this case, no error of law was alleged by the petitioner. Moreover, the CA correctly held that the P50,000.00 was not a redemption price, but a refund of the costs of Parcel Nos. 5 and 6, which the petitioner sold to APC Group, Inc. The petition is meritorious. We note that the issues raised by the petitioner are factual. Under Rule 45 of the Rules of Court, only questions of law may be raised in a petition for review on certiorari. However, the Court may delve into and resolve factual issues in exceptional cases, such as when the finding of facts and the conclusions based therein by the trial court are frontally inconsistent with those of the appellate court, or that the factual findings of the trial court and appellate court are not based on the evidence on record, or arbitrary or capricious.[45] In the present case, the trial court held that the petitioner was able to repurchase the 6 parcels of land on May 25 and 26, 1997, after the lapse of 18 years from the execution of the deed of sale with right of repurchase (August 17, 1979) when he paid to Franklin the total amount of P50,000.00. The court held that the 10-year period fixed in the deed for the petitioner to repurchase the property was deemed extended because Franklin failed to consolidate his title over the property. On the other hand, the CA held that the petitioner failed to repurchase the property, and that the respondent acquired ownership over Parcel Nos. 1, 2 and 3 when the petitioner sold the same to her under the September 30, 1991 Deed of Absolute Sale. We agree with the CA that the petitioner, as vendor a retro, failed to repurchase the property within the 10-year period fixed by the parties in the Deed of Sale with Right of Repurchase. Consequently, Franklin Ong, the vendee a retro, had acquired absolute title and ownership over the six parcels of land after August 17, 1979 when the petitioner, as vendor a retro, failed to repurchase the same within the stipulated period. A sale with pacto de retro transfers the legal title to the vendee a retro.[46] The essence of a pacto de retro sale is that the title and ownership of the property sold are immediately vested in the vendee a retro, subject to the resolutory condition of repurchase by a vendor a retro within the stipulated period.[47] Failure on the part of a vendor a retro to repurchase the property within the period agreed upon by them, or, in the absence thereof, as provided for by law, vests upon the vendee a retro absolute title and ownership over the property sold by operation of law.[48] The failure of the vendee a retro to consolidate his title under Art. 1607 of the New Civil Code does not impair such title and ownership because the method prescribed thereunder is merely for the purpose of registering and consolidating titles to the property.[49] Franklin Ong, and not the petitioner, was the lawful owner of the six parcels of land. The petitioner, thus,

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had no right to mortgage or sell the same to the respondent on September 30, 1991 under the deed of absolute sale. As the Latin adage goes: NEMO DAT QUOD NON HABET.[50] Hence, the ruling of the CA that the respondent acquired ownership over the three parcels of land from the petitioner under the Deed of Absolute Sale dated September 30, 1991 is erroneous. Not being the owner of the parcels of land, the petitioner could not have lawfully sold the same to the respondent. We are not convinced that the petitioner and the respondent had agreed to the sale of Parcel Nos. 1, 2 and 3 for P5,000.00. The respondent was a resident of Canada on September 30, 1991. There is no evidence that on or before said date, the petitioner had talked to the respondent relative to the sale of the said lots. Although Franklin testified that he talked to the respondent relative to the sale and that the latter had agreed, no evidence was adduced to show a special power of attorney authorizing him (Franklin) to agree to the purchase of the property for P5,000.00. The declaration in the September 30, 1991 Deed of Absolute Sale with Right of Repurchase, that the petitioner receivedP5,000.00 from the respondent on September 30, 1991, or prior thereto, is negated by the fact that the respondent was then in Canada. What is so worrisome is that Franklin, a law graduate, even induced the petitioner to execute the deed of sale in favor of his sister, the respondent herein, despite the fact that he, and not the petitioner, was the owner of the three parcels of land. Franklin even falsely declared in the September 30, 1991 deed, which he prepared for the petitioner, that the latter was the owner of the parcels of land, when he knew, for a fact, that he was the lawful owner of the property. In fact, when he learned that Cresenciano Ong Aranas had sold Parcel No. 2 to the APC Group, Inc. and that the petitioner had also sold Parcel No. 1, Franklin vehemently objected. He relented only when the petitioner gave theP50,000.00 to him in consideration for his agreement to the said sale of Parcel Nos. 1 and 2 to the APC Group, Inc. There is no evidence on record that the P50,000.00 which the petitioner paid was a refund of the purchase price of Parcel Nos. 5 and 6 as regards the sale to APC Group, Inc. In fact, there is no evidence on record to show that the petitioner had sold Parcel Nos. 5 and 6 to the APC Group, Inc. IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The decision of the Court of Appeals in CA-G.R. CV No. 72761 is REVERSED and SET ASIDE. The decision of the Regional Trial Court nullifying the September 30, 1991 Deed of Absolute Sale executed by the petitioner in favor of the respondent isREINSTATED. No costs. SO ORDERED.

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Republic of the Philippinesupreme CourtManilaTHIRD DIVISION HEIRS OF JOSE REYES, JR., namely: MAGDALENA C. REYES, OSCAR C. REYES, GAMALIEL C. REYES, NENITA R. DELA CRUZ, RODOLFO C. REYES, and RODRIGO C. REYES, Petitioners, -versus - AMANDA S. REYES, CONSOLACION S. REYES, EUGENIA R. ELVAMBUENA, LUCINA R. MENDOZA, PEDRITO S. REYES, MERLINDA R. FAMODULAN, EDUARDO S. REYES, and JUNE S. REYES, Respondents.

G.R. No. 158377 Present: CARPIO MORALES., Chairperson,BRION,BERSAMIN,ABAD,* andVILLARAMA, JR., JJ. Promulgated: August 13, 2010

x-----------------------------------------------------------------------------------------xD E C I S I O N BERSAMIN, J.: The petitioners[1] assail the decision dated July 31, 2002 rendered in C.A.-G.R. CV No. 53039,[2] by which the Court of Appeals (CA) affirmed the decision dated May 21, 1996 of the Regional Trial Court (RTC), Branch 9, in Malolos, Bulacan.[3]

Antecedents Antonio Reyes and his wife, Leoncia Mag-isa Reyes (Leoncia), were owners of a parcel of residential land with an area of 442 square meters, more or less, located in Pulilan, Bulacan and covered by Tax Declaration No. 7590. On that land they constructed their dwelling. The couple had four children, namely: Jose Reyes, Sr. (Jose, Sr.), Teofilo Reyes (Teofilo), Jose Reyes, Jr. (Jose, Jr.) and Potenciana Reyes-Valenzuela (Potenciana). Antonio Reyes died intestate, and was survived by Leoncia and their three sons, Potenciana having predeceased her father. Potenciana also died intestate, survived by her children, namely: Gloria ReyesValenzuela, Maria Reyes Valenzuela, and Alfredo Reyes Valenzuela. Jose, Jr., and his family resided in the house of the parents, but Teofilo constructed on the property his own house, where he and his family resided. On July 9, 1955, Leoncia and her three sons executed a deed denominated Kasulatan ng Biling Mabibiling Muli,[4] whereby they sold the land and its existing improvements to the Spouses Benedicto Francia and Monica Ajoco (Spouses Francia) for P500.00, subject to the vendors’ right to repurchase for the same amount sa oras na sila'y makinabang. Potenciana’s heirs did not assent to that deed. Nonetheless, Teofilo and Jose, Jr. and their respective families remained in possession of the property and paid the realty taxes thereon. Leoncia and her children did not repay the amount of P500.00. The Spouses Francia both died intestate (i.e., Monica Ajoco on September 16, 1963, and Benedicto Francia on January 13, 1964). Alejandro Reyes (Alejandro), the son of Jose, Sr., first partially paid to the Spouses Francia the amount of P265.00 for the obligation of Leoncia, his uncles and his father. Alejandro later paid the balance of P235.00. Thus, on August 11,

1970, the heirs of Spouses Francia executed a deed entitled Pagsasa-ayos ng Pag-aari at Pagsasalin,[5]whereby they transferred and conveyed to Alejandro all their rights and interests in the property for P500.00. On August 21, 1970, Alejandro excuted a Kasulatan ng Pagmeme-ari,[6] wherein he declared that he had acquired all the rights and interests of the heirs of the Spouses Francia, including the ownership of the property, after the vendors had failed to repurchase within the given period. On the basis of the Kasulatan ng Pagmeme-ari, Tax Declaration No. 3703 covering the property[7] was canceled by Tax Declaration No. 8715,[8] effective 1971, issued to Alejandro. From then on, he had paid the realty taxes for the property. Nevertheless, on October 17, 1970, Alejandro, his grandmother (Leoncia), and his father (Jose, Sr.) executed a Magkakalakip na Salaysay,[9] by which Alejandro acknowledged the right of Leoncia, Jose, Jr., and Jose, Sr. to repurchase the property at any time for the same amount of P500.00. On October 22, 1970, Leoncia died intestate.[10] She was survived by Jose, Sr., Teofilo, Jose, Jr. and the heirs of Potenciana. Even after Leonica’s death, Teofilo and Jose, Jr., with their respective families, continued to reside in the property. Subsequently, Tax Declaration 1228,[11] under the name of Alejandro, was issued effective 1980. All of Leoncia’s sons eventually died intestate, survived by their respective heirs, namely: Name of Decedent Surviving Heirs Teofilo Romeo Reyes, Leonardo Reyes, and Leonora C. Reyes Jose, Jr. Rodrigo Reyes, Nenita Reyes- dela Cruz, Rodolfo Reyes, Oscar Reyes, Gamaliel Reyes, Magdalena Reyes (petitioners herein), Efren Reyes and Amado Reyes dela Cruz Jose, Sr. Alejandro Reyes (respondents’ predecessor)[12]

On September 2, 1993, Alejandro also died intestate.[13] Surviving him were his wife, Amanda Reyes, and their children, namely: Consolacion Reyes, Eugenia Reyes-Elvambuena, Luciana Reyes-Mendoza, Pedrito S. Reyes, Merlinda Reyes-Famodulan, Eduardo Reyes and June S. Reyes (respondents herein). In 1994, respondent Amanda Reyes asked the heirs of Teofilo and Jose, Jr., to vacate the property because she and her children already needed it. After the petitioners refused to comply, she filed a complaint against the petitioners in the barangay, seeking their eviction from the property. When no amicable settlement was reached, the Barangay Lupon issued a certification to file action to the respondents on September 26, 1994.[14] In the interim, petitioner Nenita R. de la Cruz and her brother Romeo Reyes also constructed their respective houses on the property.[15] RTC Proceedings and Ruling

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On September 28, 1994, the respondents initiated ths suit for quieting of title and reconveyance in the RTC.[16] The complaint, docketed as Civil Case No. 817-M-94 and entitled Amanda Reyes, et al. v. Heirs of Jose Reyes, Jr., et al., was later amended.[17] They alleged that their predecessor Alejandro had acquired ownership of the property by virtue of the deed Pagsasa-ayos ng Pag-aari at Pagsasalin executed on August 11, 1970 by the heirs of the Spouses Francia; that on the basis of such deed of assignment, Alejandro had consolidated his ownership of the property via his Kasulatan ng Pagmeme-ari; and that under the Magkasanib na Salaysay, Alejandro had granted to Leoncia, his father Jose, Sr., and his uncles, Teofilo and Jose, Jr. the right to repurchase the property, but they had failed to do so. The respondents prayed for judgment in their favor, as follows: WHEREFORE, it is respectfully prayed that judgment be rendered: 1. Quieting the title to the property by declaring the plaintiffs (respondents herein) as the rightful and lawful owners thereof; 2. Ordering the defendants (petitioners herein) to vacate subject premises and reconvey and or surrender possession thereof to the plaintiffs; 3. Ordering the defendants to recognize the right of the plaintiffs as the lawful owners of subject property; 4. Ordering the defendants to pay plaintiffs the following: a. Moral damages in the amount of P50,000.00; b. Exemplary damages in the amount of P20,000.00; c. Attorney's fees of P20,000.00, acceptance fee of P10,000.00 and P500.00 per recorded Court appearance of counsel; d. The costs of this suit. Plaintiffs further pray for such other relief which the Honorable Court may deem just and equitable under the premises.[18] In their answer,[19] the petitioners averred that the Kasulatan ng Biling Mabibiling Muli was an equitable mortgage, not a pacto de retro sale; that the mortgagors had retained ownership of the property; that the heirs of the Spouses Francia could not have validly sold the property to Alejandro through the Pagsasaayos ng Pag-aari at Pagsasalin; that Alejandro’s right was only to seek reimbursement of the P500.00 he had paid from the co-owners, namely: Leoncia, Teofilo, Jose, Jr. and Jose, Sr. and the heirs of Potenciana; and that Alejandro could not have also validly consolidated ownership through the Kasulatan ng Pagmeme-ari, because a consolidation of ownership could only be effected via a court order. The petitioners interposed a counterclaim for the declaration of the transaction as an equitable mortgage, and of their property as owned in common by all the heirs of Leoncia, Teofilo, Jose, Jr. and Jose, Sr. On May 21, 1996, the RTC ruled in favor of the respondents, declaring that Alejandro had acquired ownership of the property in 1965 by operation of law upon the failure of the petitioners’ predecessors to repurchase the property; that the joint affidavit executed by Alejandro, Leoncia and Jose, Jr. and Jose, Sr., to extend the period of redemption was inefficacious, because there was no more

period to extend due to the redemption period having long lapsed by the time of its execution; and that the action should be dismissed insofar as the heirs of Potenciana were concerned, considering that Potenciana, who had predeceased her parents, had no successional rights in the property. Accordingly, the RTC decreed as follows: WHEREFORE, on the basis of the evidence adduced and the law/jurisprudence applicable thereon, judgment is hereby rendered: a) sustaining the validity of the “Kasulatan ng Biling Mabibiling Muli” (Exh. B/Exh. 1) executed on July 9, 1955 by Leoncia Mag-isa and her sons Teofilo, Jose, Sr. and Jose, Jr., all surnamed Reyes, in favor of Spouses Benedicto Francia and Monica Ajoco as well as the “Pagsasa-ayos ng Pag-aari at Pagsasalin” (Settlement of Estate and Assignment) [Exh. C/Exh. 4] executed on August 11, 1970 by the heirs of spouses Benedicto Francia and Monica Ajoco in favor of the spouses Alejandro Reyes and Amanda Salonga; b) declaring the aforementioned “Kasulatan Ng Biling Mabibili Muli” (Exh. B/ Exh. 1) to be a contract of sale with right to repurchase and not an equitable mortgage; c) confirming the consolidation of ownership, by operation of law, of spouses Alejandro M. Reyes and Amanda Salonga over the residential lot mentioned and referred to in Exhibit B/Exhibit 1 and Exhibit C/Exhibit 4; d) allowing the registration with the Registry of Deeds for the Province of Bulacan of the “Kasulatan ng Pagmeme-ari” (Document of Ownership) [Exh. E/Exh. 5] executed by Alejandro M. Reyes on August 21, 1970 or of any appropriate deed of consolidation of ownership over the residential lot covered by Exhibit E/Exhibit 5 which the plaintiffs, as eventual owners by succession of the aforementioned proeprty, may deem proper to execute; e) ordering the defendants and all persons claiming rights under them to vacate the residential lot subject of the above-entitled case and to restore possession thereof unto the plaintiffs; f) directing the defendants (except the heirs of Potenciana Reyes-Valenzuela) to pay unto the plaintiffs the amount of P20,000.00 as attorney's fees; and g) dismissing the complaint in so far as the defendant heirs of Potenciana Reyes-Valenzuela are concerned as well as their counterclaim for damages and attorney's fees. No pronouncement as to costs.SO ORDERED. [20] Aggrieved, the petitioners appealed to the CA. CA Ruling In the CA, the petitioners assailed the RTC’s dispositions, except the dismissal of the complaint as against Potenciana’s heirs. In its decision dated July 31, 2002, the CA ruled that the transaction covered by the Kasulatan ng Biling Mabibiling Muli was not a pacto de retro sale but an equitable mortgage under Article 1602 of the Civil Code; that even after the deed’s execution, Leoncia, Teofilo, Jose, Jr. and their families had remained in possession of the property and continued paying realty taxes for the property; that the purported vendees had not declared the property for taxation

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purposes under their own names; and that such circumstances proved that the parties envisaged an equitable mortgage in the Kasulatan ng Biling Mabibiling Muli. The CA observed that the heirs of the Spouses Francia had themselves admitted in paragraph 5 of the Pagsasa-ayos ng Pag-aari at Pagsasalin that the property had been mortgaged to their predecessors-in-interest, viz: Na, sa oras ng kamatayan ay nakaiwan sila ng isang lagay na lupang nakasanla sa kanila na makikilala sa kasulatang kalakip nito sa halagang LIMANG DAANG PISO (P500.00). Ngunit nuong nabubuhay pa ang magasawang Benedicto Francia at Monica Ajoco ay nakatanggap na ng halagang P265.00 kay Alejandro Reyes - Filipino, kasal kay Amanda Salonga, may sapat na gulang at naninirahan sa Pulilan, Bulacan.[21] However, the CA held that the appellants’ (petitioners herein) failure to file an action for the reformation of the Kasulatan ng Biling Mabibiling Muli to reflect the true intention of the parties within ten years from the deed’s execution on July 9, 1955, pursuant to Article 1144 of the Civil Code,[22] already barred them from claiming that the transaction executed between Leoncia and her children, on one hand, and the Spouses Francia, on the other hand, was an equitable mortgage. The CA agreed with the RTC that the Magkakalakip na Salaysay did not effectively extend the period for Leoncia and her children to repurchase the property, considering that the period to repurchase had long lapsed by the time the agreement to extend it was executed on October 17, 1970. Issues In this appeal, therefore, the petitioners insist that:[23] I.The Honorable Court of Appeals erred in finding that respondents (were) already barred from claiming that the transaction entered into by their predecessors-in-interest was an equitable mortgage and not a pacto de retro sale;II.The Honorable Court of Appeals erred in affirming the findings of the court a quo that the Magkasanib na Salaysay (Joint Affidavit), executed by Alejandro, Leoncia and Jose, Jr., wherein Leoncia and her children were granted by Alejandro the right to repurchase the property at anytime for the amount of P500.00, was of no legal significance. Ruling of the Court The petition is meritorious. A. The CA correctly concluded that the true agreement of the parties vis-à-vis the Kasulatan ng Biling Mabibiling Muli was an equitable mortgage, not a pacto de retro sale. There was no dispute that the purported vendors had continued in the possession of the property even after the execution of the agreement; and that the property had remained declared for taxation purposes under Leoncia’s name, with the realty taxes due being paid by Leoncia, despite the execution of the agreement. Such established circumstances are among the badges of an equitable mortgage enumerated in Article 1602, paragraphs 2 and 5 of the Civil Code, to wit: Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases:x x x(2) When the vendor remains in possession as lessee or otherwise;x x x(5) When the vendor binds himself to pay the taxes on the thing sold;x x x The existence of any one of the conditions enumerated under Article 1602 of the Civil Code, not a concurrence of all or of a majority thereof, suffices to give rise to the presumption that the contract is an equitable mortgage.

[24] Consequently, the contract between the vendors and vendees (Spouses Francia) was an equitable mortgage. B Are the petitioners now barred from claiming that the transaction under the Kasulatan ng Biling Mabibiling Muli was an equitable mortgage by their failure to redeem the property for a long period of time? The petitioners contend that prescription, if it must apply to them, should as well be applied to the respondents, who had similarly failed to enforce their right under the equitable mortgage within ten years from its execution on July 9, 1955. Consequently, they urge the upholding of the original intention of the parties to the Kasulatan ng Biling Mabibiling Muli, without taking prescription into account, because both parties did not enforce their respective rights within the ten-year prescriptive period, is more in keeping with fairness and equity. We agree with the petitioners. Considering that sa oras na sila’y makinabang, the period of redemption stated in the Kasulatan ng Biling Mabibiling Muli, signified that no definite period had been stated, the period to redeem should be ten years from the execution of the contract, pursuant to Articles 1142 and 1144 of the Civil Code.[25] Thus, the full redemption price should have been paid by July 9, 1955; and upon the expiration of said 10-year period, mortgagees Spouses Francia or their heirs should have foreclosed the mortgage, but they did not do so. Instead, they accepted Alejandro’s payments, until the debt was fully satisfied by August 11, 1970. The acceptance of the payments even beyond the 10-year period of redemption estopped the mortgagees’ heirs from insisting that the period to redeem the property had already expired. Their actions impliedly recognized the continued existence of the equitable mortgage. The conduct of the original parties as well as of their successors-in-interest manifested that the parties to the Kasulatan ng Biling Mabibiling Muli really intended their transaction to be an equitable mortgage, not a pacto de retro sale. In Cuyugan v. Santos,[26] the purported buyer under a so-called contract to sell with right to repurchase also accepted partial payments from the purported seller. We held that the acceptance of partial payments was absolutely incompatible with the idea of irrevocability of the title of ownership of the purchaser upon the expiration of the term stipulated in the original contract for the exercise of the right of redemption. Thereby, the conduct of the parties manifested that they had intended the contract to be a mortgage, not a pacto de retro sale. C. When Alejandro redeemed the property on August 11, 1970, he did not thereby become a co-owner thereof, because his father Jose, Sr. was then still alive. Alejandro merely became the assignee of the mortgage, and the property continued to be co-owned by Leoncia and her sons Jose, Sr., Jose Jr., and Teofilo. As an assignee of the mortgage and the mortgage credit, Alejandro acquired only the rights of his assignors, nothing more. He himself confirmed so in the Magkasanib na Salaysay, whereby he acknowledged the co-owners’ right to redeem the property from him at any time (sa ano mang oras) for the same redemption price of P500.00. It is worthy to note that Alejandro’s confirmation in the Magkasanib na Salaysay of the co-owners’ right to redeem was made despite 15 years having

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meanwhile elapsed from the execution of the original Kasulatan ng Biling Mabibiling Muli (July 9, 1955) until the execution of the Magkasanib na Salaysay (August 21, 1970). D. Neither did the petitioners’ failure to initiate an action for reformation within ten years from the execution of the Kasulatan ng Biling Mabibiling Muli bar them from insisting on their rights in the property. The records show that the parties in the Kasulatan ng Biling Mabibiling Muli had abided by their true agreement under the deed, to the extent that they and their successors-in-interest still deemed the agreement as an equitable mortgage despite the lapse of 15 years from the execution of the purported pacto de retro sale. Hence, an action for reformation of the Kasulatan ng Biling Mabibiling Muli was unnecessary, if not superfluous, considering that the reason underlying the requirement for an action for reformation of instrument has been to ensure that the parties to a contract abide by their true intended agreement. The Kasulatan ng Pagmeme-ari executed by Alejandro on August 21, 1970 was ineffectual to predicate the exclusion of the petitioners and their predecessors in interest from insisting on their claim to the property. Alejandro’s being an assignee of the mortgage did not authorize him or his heirs to appropriate the mortgaged property for himself without violating the prohibition against pactum commissorium contained in Article 2088 of the Civil Code, to the effect that “[t]he creditor cannot appropriate the things given by way of pledge or mortgage, or dispose of them[;] [a]ny stipulation to the contrary is null and void.” Aptly did the Court hold in Montevirgen v. Court of Appeals:[27]

The declaration, therefore, in the decision of July 1, 1971 to the effect that absolute ownership over the subject premises has become consolidated in the respondents upon failure of the petitioners to pay their obligation within the specified period, is a nullity, for consolidation of ownership is an improper and inappropriate remedy to enforce a transaction declared to be one of mortgage. It is the duty of respondents, as mortgagees, to foreclose the mortgage if he wishes to secure a perfect title to the mortgaged property if he buys it in the foreclosure sale. Moreover, the respondents, as Alejandro’s heirs, were entirely bound by his previous acts as their predecessors-in-interest. Thus, Alejandro’s acknowledgment of the effectivity of the equitable mortgage agreement precluded the respondents from claiming that the property had been sold to him with right to repurchase.[28]

E. What was the effect of the Magkasanib na Salaysay? Both the trial court and the CA declared that the Magkasanib na Salaysay, which extended the redemption period of the mortgaged property, was inefficacious, because the period to redeem could no longer be extended after the original redemption period had already expired. In contrast, the petitioners submit that disregarding the Magkasanib na Salaysay made no sense, considering that the respondents’ predecessors-in-interest admitted therein that the petitioners had a right to redeem the property. The respondents counter, however, that the Magkasanib na Salaysay, which acknowledged the other co-owners’ right to redeem the property, was void; that the petitioners could no longer claim to be co-owners entitled to redeem the property, because

the co-ownership had come to an end by Alejandro having openly repudiated the co-ownership; that Alejandro’s acts of repudiation had consisted of: (a) redeeming the property from the Spouses Francia; (b) acquiring the property from the heirs of Spouses Francia by virtue of a deed of assignment denominated as Pag-aayos ng Pag-aari at Pagsasalin; (c) executing an affidavit of consolidation of ownership over the property (Kasulatan ng Pagmeme-ari); (d) applying for the cancellation of the tax declaration of property in the name of Leoncia, and the subsequent issuance of a new tax declaration in his name; (e) his continuous possession of the property from 1955, which possession the respondents as his heirs had continued up to the present time, or for a period of almost 50 years already; and (f) the payment of the taxes by Alejandro and the respondents for more than 30 years without any contribution from the petitioners; and that such repudiation established that Alejandro and his successors-in-interest had already acquired sole title over the property through acquisitive prescription. The respondents’ and the lower courts’ positions cannot be sustained. The provisions of the Civil Code governing equitable ortgages disguised as sale contracts, like the one herein, are primarily designed to curtail the evils brought about by contracts of sale with right to repurchase, particularly the circumvention of the usury law and pactum commissorium.[29] Courts have taken judicial notice of the well-known fact that contracts of sale with right to repurchase have been frequently resorted to in order to conceal the true nature of a contract, that is, a loan secured by a mortgage. It is a reality that grave financial distress renders persons hard-pressed to meet even their basic needs or to respond to an emergency, leaving no choice to them but to sign deeds of absolute sale of property or deeds of sale with pacto de retro if only to obtain the much-needed loan from unscrupulous money lenders. [30] This reality precisely explains why the pertinent provision of the Civil Code includes a peculiar rule concerning the period of redemption, to wit: Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases:x x x(3)When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed;x x x Ostensibly, the law allows a new period of redemption to be agreed upon or granted even after the expiration of the equitable mortgagor’s right to repurchase, and treats such extension as one of the indicators that the true agreement between the parties is an equitable mortgage, not a sale with right to repurchase. It was indubitable, therefore, that the Magkasanib na Salaysay effectively afforded to Leoncia, Teofilo, Jose, Sr. and Jose, Jr. a fresh period within which to pay to Alejandro the redemption price of P500.00. F.Did Alejandro and his heirs (respondents herein) acquire the mortgaged property through prescription? It is true that Alejandro became a co-owner of the property by right of representation upon the death of his father, Jose Sr.[31] As a co-owner, however, his possession was like that of a trustee and was not regarded as adverse to his co-owners but in fact beneficial to all of them.[32]

Yet, the respondents except to the general rule, asserting that Alejandro, having earlier repudiated the co-ownership, acquired ownership of the property through prescription.The Court cannot accept the respondents’ posture. In order that a co-owner’s possession may be deemed adverse to that of the cestui que trust or the other co-owners, the following elements must concur: 1. The co-owner has performed unequivocal acts of repudiation of the co-ownership amounting to an ouster of the cestui que trust or the other co-owners;

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2. Such positive acts of repudiation have been made known to the cestui que trust or the other co-owners; 3. The evidence on the repudiation is clear and conclusive; and 4. His possession is open, continuous, exclusive, and notorious.[33] The concurrence of the foregoing elements was not established herein. For one, Alejandro did not have adverse and exclusive possession of the property, as, in fact, the other co-owners had continued to possess it, with Alejandro and his heirs occupying only a portion of it. Neither did the cancellation of the previous tax declarations in the name of Leoncia, the previous co-owner, and the issuance of a new one in Alejandro’s name, and Alejandro’s payment of the realty taxes constitute repudiation of the co-ownership. The sole fact of a co-owner declaring the land in question in his name for taxation purposes and paying the land taxes did not constitute an unequivocal act of repudiation amounting to an ouster of the other co-owner and could not constitute adverse possession as basis for title by prescription.[34] Moreover, according to Blatero v. Intermediate Appellate Court,[35] if a sale a retro is construed as an equitable mortgage, then the execution of an affidavit of consolidation by the purported buyer to consolidate ownership of the parcel of land is of no consequence and the “constructive possession” of the parcel of land will not ripen into ownership, because only possession acquired and enjoyed in the concept of owner can serve as title for acquiring dominion.[36]

In fine, the respondents did not present proof showing that Alejandro had effectively repudiated the co-ownership. Their bare claim that Alejandro had made oral demands to vacate to his co-owners was self-serving and insufficient. Alejandro’s execution of the affidavit of consolidation of ownership on August 21, 1970[37] and his subsequent execution on October 17, 1970 of the joint affidavit[38] were really equivocal and ambivalent acts that did not manifest his desire to repudiate the co-ownership. The only unequivocal act of repudiation was done by the respondents when they filed the instant action for quieting of title on September 28, 1994, nearly a year after Alejandro’s death on September 2, 1993. However, their possession could not ripen into ownership considering that their act of repudiation was not coupled with their exclusivepossession of the property G. The respondents can only demand from the petitioners the partition of the co-owned property and the reimbursement from their co-owners of the amount advanced by Alejandro to repay the obligation. They may also seek from their co-owners the proportional reimbursement of the realty taxes paid for the property, pursuant to Article 488 of the Civil Code.[39] In the alternative, they may opt to foreclose the equitable mortgage, considering that the petitioners’ period to redeem the mortgaged property, which was ten years from the execution on October 17, 1970 of the Magkakasanib na Salaysay, had already long lapsed. We clarify, however, that the respondents may take these recourses only through the appropriate actions commenced in court. H. The petitioners’ counterclaim for damages is dismissed for their failure to prove their entitlement to it.[40] WHEREFORE, we grant the petition for review on certiorari.

The decision dated July 31, 2002 rendered by the Court of Appeals is reversed and set aside, and another judgment is rendered: a) Upholding the validity of the Kasulatan ng Biling Mabibiling Muli (Deed of Sale with Right of Repurchase) executed on July 9, 1955 by Leoncia Mag-isa Reyes and her sons Teofilo, Jose, Sr. and Jose, Jr., all surnamed Reyes, in favor of the late Spouses Benedicto Francia and Monica Ajoco as well as the Pagsasa-ayos ng Pag-aari at Pagsasalin (Settlement of Estate and Assignment) executed on August 11, 1970 by the heirs of the late Spouses Benedicto Francia and Monica Ajoco in favor of the spouses Alejandro Reyes and Amanda Salonga; b) Declaring the Kasulatan ng Biling Mabibili Muli to be an equitable mortgage, not a contract of sale with right to repurchase; c) Finding the Magkakalakip na Salaysay executed on October 17, 1970 by and among Leoncia Mag-isa Reyes, Jose Reyes, Sr. and Alejandro Reyes valid and effective; c) Nullifying the Kasulatan ng Pagmeme-ari executed by Alejandro M. Reyes on August 21, 1970; and d) Dismissing the petitioners’ counterclaim. Costs of suit to be paid by the respondents. SO ORDERED.

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