RAMOS V. HERUELA (2005) Heirs of Jesus Mascunana v.
Heirs of Jesus Mascunana v. CA
G.R. NO. 145330
FACTS OF THE CASE:
The spouses Gomer and Leonor Ramos own a parcel of land, consisting
of 1,883 square meters, of the Register of Deeds of Cagayan de Oro
City. On 18 February 1980, the spouses Ramos made an agreement
with the spouses Santiago and Minda Heruela covering 306 square
meters of the land . According to the spouses Ramos, the agreement is
a contract of conditional sale. The spouses Heruela allege that the
contract is a sale on installment basis.
On 27 January 1998, the spouses Ramos filed a complaint for Recovery
of Ownership with Damages against the spouses Heruela. The spouses
Ramos allege that out of the P15,300 consideration for the sale of the
land, the spouses Heruela paid only P4,000. The last installment that
the spouses Heruela paid was on 18 December 1981. The spouses
Ramos assert that the spouses Heruela's unjust refusal to pay the
balance of the purchase price caused the cancellation of the Deed of
Conditional Sale. In June 1982, the spouses Ramos discovered that the
spouses Heruela were already occupying a portion of the land. Cherry
and Raymond Pallori ("spouses Pallori"), daughter and son-in-law,
respectively, of the spouses Heruela, erected another house on the
land. The spouses Heruela and the spouses Pallori refused to vacate the
land despite demand by the spouses Ramos.
ISSUE:
1.WHETHER THE OWNER-PETITIONER CAN RECOVER THEIR
OWNERSHIP OF THE PROPERTY FROM BUYER-RESPONDENTS
HELD:
No. The sale is an installment. Applying the Maceda Law or R.A. 6552,
which involves sale on real property, in case where less than two years
of installments were paid, the vendor-respondent shall give the buyer a
grace period of not less than sixty days from the date the installment
became due. If the buyer fails to pay the installments due at the
expiration of the grace period, the seller may cancel the contract after
thirty days from receipt by the buyer of the notice of cancellation or
the demand for rescission of the contract by a notarial act. The spouses
Heruela paid less than two years of installments. However, there was
neither a notice of cancellation nor demand for rescission by notarial
act to the spouses Heruela . The spouses Heruela shall pay the spouses
Ramos P11,300 as balance of the purchase price plus interest at 6%.
Upon payment, the spouses Ramos shall execute a deed of absolute
sale of the land and deliver the certificate of title in favor of the
spouses Heruela. In case of failure to thus pay within 60 days from
finality of this Decision, the spouses Heruela and the spouses Pallori
shall immediately vacate the premises without need of further
demand, and the down payment and installment payments of P4,000
paid by the spouses Heruela shall constitute rental for the land;
the deed that the title to the property remained with the vendor, or
(March)
Facts of the Case
Masunana bought a parcel of land from the Wuthrich siblings. Part of
which Mascunana, he later sold to Sumilhig.
The contract price is 4,690 with 3,690 as down payment. Their
agreement says:
That the balance of ONE THOUSAND PESOS (P1,000.00) shall be paid by
the VENDEE unto the VENDOR as soon as the above-portions of Lot
124 shall have been surveyed in the name of the VENDEE and all papers
pertinent and necessary to the issuance of a separate Certificate of
Title in the name of the VENDEE shall have been prepared.
Sumilhig later sold the same lot to Layumas. Years after, Layumas
wrote to the heirs of Mascunana (since Mascunana died already)
offering to pay the 1,000 balance of the purchase price of the property.
The addressee, however, refused to receive the mail matter.
Heirs Mascunana then filed a complaint for recovery of possession
against Barte ( an individual whom Layumas allowed to stay on the
subject property).
Issue: WON the contract of alienation of the subject lot in favor of
Sumilhig was a contract to sell or a contract of
sale
Held: Sale
Article 1458 of the New Civil Code provides:
By the contract of sale, one of the contracting parties obligates himself
to transfer the ownership of and to deliver a determinate thing, and
the other to pay therefor a price certain in money or its equivalent.
A contract of sale may be absolute or conditional.
Thus, there are three essential elements of sale, to wit:
a) Consent or meeting of the minds, that is, consent to transfer
ownership in exchange for the price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.
In this case, there was a meeting of the minds between the vendor and
the vendee, when the vendor undertook to deliver and transfer
ownership over the property covered by the deed of absolute sale to
the vendee for the price of P4,690.00 of which P3,690.00 was paid by
the vendee to the vendor as down payment. The vendor undertook to
have the property sold, surveyed and segregated and a separate title
therefor issued in the name of the vendee, upon which the latter would
be obliged to pay the balance of P1,000.00. There was no stipulation in
that the right to unilaterally resolve the contract upon the buyer’s
failure to pay within a fixed period was given to such vendor. Patently,
the contract executed by the parties is a deed of sale and not a
contract to sell. As the Court ruled in a recent case:
In Dignos v. Court of Appeals (158 SCRA 375), we have said that,
although denominated a “Deed of Conditional Sale,” a sale is still
absolute where the contract is devoid of any proviso that title is
reserved or the right to unilaterally rescind is stipulated, e.g., until or
unless the price is paid. Ownership will then be transferred to the
buyer upon actual or constructive delivery (e.g. by the execution of a
public document) of the property sold.
Where the condition is imposed upon the perfection of the contract
itself, the failure of the condition would prevent such perfection. If the
condition is imposed on the obligation of a party which is not fulfilled,
the other party may either waive the condition or refuse to proceed
with the sale. (Art. 1545, Civil Code).
Thus, in one case, when the sellers declared in a “Receipt of Down
Payment” that they received an amount as purchase price for a house
and lot without any reservation of title until full payment of the entire
purchase price, the implication was that they sold their property. In
People’s Industrial and Commercial Corporation v. Court of Appeals, it
was stated:.
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 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.
Applying these principles to this case, it cannot be gainsaid that the
contract of sale between the parties is absolute, not conditional. There
is no reservation of ownership nor a stipulation providing for a
unilateral rescission by either party. In fact, the sale was consummated
upon the delivery of the lot to respondent. Thus,
Art. 1477 provides that the ownership of the thing sold shall be
transferred to the vendee upon the actual or constructive delivery
thereof.
The condition in the deed that the balance of P1,000.00 shall be paid to
the vendor by the vendee as soon as the property sold shall have been
surveyed in the name of the vendee and all papers pertinent and
necessary to the issuance of a separate certificate of title in the name
of the vendee shall have been prepared is not a condition which
prevented the efficacy of the contract of sale. It merely provides the
manner by which the total purchase price of the property is to be paid.
The condition did not prevent the contract from being in full force and
effect:

The stipulation that the “payment of the full consideration based on a

survey shall be due and payable in five (5) years from the execution of a
formal deed of sale” is not a condition which affects the efficacy of the
contract of sale. It merely provides the manner by which the full
consideration is to be computed and the time within which the same is
to be paid. But it does not affect in any manner the effectivity of the
contract. …

In a contract to sell, ownership is retained by a seller and is not to be

transferred to the vendee until full payment of the price. Such payment
is a positive suspensive condition, the failure of which is not a breach of
contract but simply an event that prevented the obligation from
acquiring binding force.

It bears stressing that in a contract of sale, the non-payment of the

price is a resolutory condition which extinguishes the transaction that,
for a time, existed and discharges the obligation created under the
transaction.

A seller cannot unilaterally and extrajudicially rescind a contract of sale

unless there is an express stipulation authorizing it. In such case, the
vendor may file an action for specific performance or judicial rescission.
Article 1169 of the New Civil Code provides that in reciprocal
obligations, neither party incurs in delay if the other does not comply
or is not ready to comply in a proper manner with what is incumbent
upon him; from the moment one of the parties fulfills his obligation,
delay by the other begins. In this case, the vendor (Jesus Mascuñana)
failed to comply with his obligation of segregating Lot No. 124-B and
the issuance of a Torrens title over the property in favor of the vendee,
or the latter’s successors-in-interest, the respondents herein. Worse,
petitioner Jose Mascuñana was able to secure title over the property
under the name of his deceased father.
Ong v. CA (GR 97347, 6 July 1999)
Ong v. CA [G.R. No. 97347. July 6, 1999.]
First division, Ynares-Santiago (J): 4 concur
Facts:
On 10 May 1983, Jaime Ong and spouses Miguel and Alejandra Robles
executed an “Agreement of Purchase and Sale” respecting 2 parcels of
land situated at Barrio Puri, San Antonio, Quezon (agricultural including
rice mill, piggery) for P2M (initial payment of P600,000 broken into
P103,499.91 directly paid to seller on 22 March 1983 and P496,500.09
directly paid to BPI to answer for part of seller’s loan with the bank;
and balance of 1.4M to be paid in 4 equal quarterly installments of
P350,000 the first of which due and demandable on 15 June 1983);
binding themselves that upon the payment of the total purchase price
the seller delivers a good and sufficient deed of sale and conveyance
for the parcels of land free and clear from liens and encumbrances,
that seller delivers, surrenders and transfers the parcels of land
including all improvements thereon and to transfer the operations of
the piggery and rice mill to the buyer; and that all payments due and
demandable under the contract effected in the residence of the seller
unless otherwise designated by the parties in writing. On 15 May 1983,
Ong took possession of the subject parcels of land together with the
piggery, building, ricemill, residential house and other improvements
thereon. Pursuant to the contract, Ong paid the spouses the sum of
P103,499.91 2 by depositing it with the UUCPB.
Subsequently, Ong deposited sums of money with the BPI, in
accordance with their stipulation that petitioner pay the loan of the
spouses with BPI. To answer for his balance of P 1.4M, Ong issued 4
post-dated Metro Bank checks payable to the spouses in the amount of
P350,000.00 each (Check 137708-157711). When presented for
payment, however, the checks were dishonored due to insufficient
funds. Ong promised to replace the checks but failed to do so. To make
matters worse, out of the P496,500.00 loan of the spouses with BPI,
which ong, as per agreement, should have paid, Ong only managed to
dole out no more than P393,679.60. When the bank threatened to
foreclose the spouses’ mortgage, they sold 3 transformers of the rice
mill worth P51,411.00 to pay off their outstanding obligation with said
bank, with the knowledge and conformity of Ong. Ong, in return,
voluntarily gave the spouses authority to operate the rice mill. He,
however, continued to be in possession of the two parcels of land while
the spouses were forced to use the rice mill for residential purposes.
On 2 August 1985, the spouses, through counsel, sent Ong a demand
letter asking for the return of the properties. Their demand was left
unheeded, so, on 2 September 1985, they filed with the RTC Lucena
City, Branch 60, a complaint for rescission of contract and recovery of
properties with damages. Later, while the case was still pending with
the trial court, Ong introduced major improvements on the subject
properties by constructing a complete fence made of hollow blocks and
expanding the piggery. These prompted the spouses to ask for a writ of
preliminary injunction; which the trial court granted, and thus enjoined
Ong from introducing improvements on the properties except for
repairs. On 1 June 1989, the trial court rendered a decision in favor of
the spouses: ordering the contract entered into by the parties set
aside, ordering the delivery of the parcels of land and the
improvements thereon to the spouses, ordering the return of the sum
of P497,179.51 to Ong by the spouses, ordering Ong to pay the spouses
P100,000 for exemplary damages and P20,000 as attorney’s fees and
litigation expenses. From this decision, petitioner appealed to the
Court of Appeals, which affirmed the decision of the RTC but deleted
the award of exemplary damages. In affirming the decision of the trial
court, the Court of Appeals noted that the failure of petitioner to
completely pay the purchase price is a substantial breach of his
obligation which entitles the private respondents to rescind their
contract under Article 1191 of the New Civil Code. Hence, the petition
for review on certiorari.
The Supreme Court affirmed the decision rendered by the Court of
Appeals with the modification that the spouses are ordered to return
to Ong the sum P48,680.00 in addition to the amounts already
awarded; with costs against petitioner Ong.
1. Reevaluation of evidence not the function of the Supreme Court
It is not the function of the Supreme Court to assess and evaluate all
over again the evidence, testimonial and documentary, adduced by the
parties to an appeal, particularly where the findings of both the trial
court and the appellate court on the matter coincide. There is no
cogent reason shown that would justify the court to discard the factual
findings of the two courts below and to superimpose its own.
2. Rescission as a remedy to secure the reparation of damages caused
by a contract; Article 1380
Rescission, as contemplated in Articles 1380, et seq., of the New Civil
Code, is a remedy granted by law to the contracting parties and even to
third persons, to secure the reparation of damages caused to them by a
contract, even if this should be valid, by restoration of things to their
condition at the moment prior to the celebration of the contract. It
implies a contract, which even if initially valid, produces a lesion or a
pecuniary damage to someone.
3. Rescission applicable to reciprocal obligations under Article 1191
Article 1191 of the New Civil Code refers to rescission applicable to
reciprocal obligations. Reciprocal obligations are those which arise
from the same cause, and in which each party is a debtor and a creditor
of the other, such that the obligation of one is dependent upon the
obligation of the other. They are to be performed simultaneously such
that the performance of one is conditioned upon the simultaneous
fulfillment of the other.
4. Rescission of reciprocal obligations under Article 1191 distinguished
from rescission of contract under Article 1383
Rescission of reciprocal obligations under Article 1191 of the New Civil
Code should be distinguished from rescission of contracts under Article
1383. Although both presuppose contracts validly entered into and
subsisting and both require mutual restitution when proper, they are
not entirely identical. While Article 1191 uses the term “rescission,” the
original term which was used in the old Civil Code, from which the
article was based, was “resolution.” Resolution is a principal action
which is based on breach of a party, while rescission under Article 1383
is a subsidiary action limited to cases of rescission for lesion under
Article 1381 of the New Civil Code.
5. Rescissible contract under Article 1381
Article 1381 of the New Civil Code enumerates rescissible contracts as
“(1) those which are entered into by guardians whenever the wards
whom they represent suffer lesion by more than one fourth of the
value of the things which are the object thereof;
(2) those agreed upon in representation of absentees, if the latter
suffer the lesion stated in the preceding number; (3) those undertaken
in fraud of creditors when the latter cannot in any manner collect the
claims due them; (4) those which refer to things under litigation if they
have been entered into by the defendant without the knowledge and
approval of the litigants or of competent judicial authority; (5) all other
contracts specially declared by law to be subject to rescission.” In the
present case, the contract entered into by the parties obviously does
not fall under any of those mentioned by Article 1381. Consequently,
Article 1383 is inapplicable.
6. Contract to sell distinguished from contract of sale
In a contract of sale, the title to the property passes to the vendee
upon the delivery of the thing sold; while 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. In a contract to
sell, the payment of the purchase price is a positive suspensive
condition, the failure of which is not a breach, casual or serious, but a
situation that prevents the obligation of the vendor to convey title
from acquiring an obligatory force.
7. “Agreement of Purchase and Sale” is in the nature of contract to sell
A careful reading of the parties’ “Agreement of Purchase and Sale”
shows that it is in the nature of a contract to sell. The spouses bound
themselves to deliver a deed of absolute sale and clean title covering
the two parcels of land upon full payment by the buyer of the purchase
price of P2M. This promise to sell was subject to the fulfillment of the
suspensive condition of full payment of the purchase price by the Ong.
The non-fulfillment of the condition of full payment rendered the
contract to sell ineffective and without force and effect. It must be
stressed that the breach contemplated in Article 1191 of the New Civil
Code is the obligor’s failure to comply with an obligation already
extant, not a failure of a condition to render binding that obligation.
Failure to pay, in this instance, is not even a breach but merely an
event which prevents the vendor’s obligation to convey title from
acquiring binding force. Hence, the agreement of the parties the
present case may be set aside, but not because of a breach on the part
of Ong for failure to complete payment of the purchase price. Rather,
his failure to do so brought about a situation which prevented the
obligation of the spouses to convey title from acquiring an obligatory
force.
8. Contract was not novated as to the manner and time of payment;
Novation not presumed
Article 1292 of the New Civil Code states that, “In order that an
obligation may be extinguished by another which substitutes the same,
it is imperative that it be so declared in unequivocal terms, or that the
old and the new obligations be on every point incompatible with each
other.”
Novation is never presumed, it must be proven as a fact either by
express stipulation of the parties or by implication derived from an
irreconcilable incompatibility between the old and the new obligation.
In the present case, the parties never even intended to novate their
previous agreement. It is true that Ong paid the spouses small sums
of money amounting to P48,680.00, in contravention of the manner of
payment stipulated in their contract. These installments were,
however, objected to by the spouses, and ong replied that these
represented the interest of the principal amount which he owed them.
Records further show that Ong agreed to the sale of MERALCO
transformers by the spousess to pay for the balance of their subsisting
loan with BPI. Although the parties agreed to credit the proceeds from
the sale of the transformers to petitioner’s obligation, he was supposed
to reimburse the same later to respondent spouses. This can only mean
that there was never an intention on the part of either of the parties to
novate petitioner’s manner of payment.
9. Requisites of novation
In order for novation to take place, the concurrence of the following
requisites is indispensable: (1) there must be a previous valid
obligation; (2) there must be an agreement of the parties concerned to
a new contract; (3) there must be the extinguishment of the old
contract; and (4) there must be the validity of the new contract. In the
present case, the requisites are not found. The subsequent acts of the
parties hardly demonstrate their intent to dissolve the old obligation as
a consideration for the emergence of the new one. Novation is never
presumed, there must be an express intention to novate.
10. Builder in bad faith
As regards the improvements introduced by Ong to the premises and
for which he claims reimbursement, the Court found no reason to
depart from the ruling of the trial court and the appellate court that
petitioner is a builder in bad faith. He introduced the improvements on
the premises knowing fully well that he has not paid the consideration
of the contract in full and over the vigorous objections of respondent
spouses. Moreover, Ong introduced major improvements on the
premises even while the case against him was pending before the trial
court.
11. Deletion of award of exemplary damages correct
The award of exemplary damages was correctly deleted by the Court of
Appeals inasmuch as no moral, temperate, liquidated or compensatory
damages in addition to exemplary damages were awarded
Coronel v. CA [G.R. No. 103577. October 7, 1996.]
Third division, Melo (J): 3 concur, 1 took no part.
Facts: On 19 January 1985, Romulo Coronel, et al. executed a
document entitled “Receipt of Down Payment” in favor of Ramona
Patricia Alcaraz for P50,000 downpayment of the total amount of
P1.24M as purchase price for an inherited house and lot (TCT 119627,
Registry of Deeds of Quezon City), promising to execute a deed of
absolute sale of said property as soon as such has been transferred in
their name. The balance of P1.19M is due upon the execution of said
deed. On the same date, Concepcion D. Alcaraz, mother of Ramona,
paid the down payment of P50,000.00. On 6 February 1985, the
property originally registered in the name of the Coronels’ father was
transferred in their names (TCT 327043). However, on 18 February
1985, the Coronels sold the property to Catalina B. Mabanag for
P1,580,000.00 after the latter has paid P300,000.00. For this reason,
Coronels canceled and rescinded the contract with Alcaraz by
depositing the down payment in the bank in trust for Alcaraz.
On 22 February 1985, Alcaraz filed a complaint for specific performance
against the Coronels and caused the annotation of a notice of lis
pendens at the back of TCT 327403. On 2 April 1985, Mabanag caused
the annotation of a notice of adverse claim covering the same property
with the Registry of Deeds of Quezon City. On 25 April 1985, the
Coronels executed a Deed of Absolute Sale over the subject property
in favor of Mabanag. On 5 June 1985, a new title over the subject
property was issued in the name of Mabanag under TCT 351582.
In the course of the proceedings, the parties agreed to submit the case
for decision solely on the basis of documentary exhibits. Upon
submission of their respective memoranda and the corresponding
comment or reply thereto, and on 1 March 1989, judgment was
handed down in favor of the plaintiffs, ordering the defendant to
execute a deed of absolute sale of the land covered by TCT 327403 and
canceling TCT 331582 and declaring the latter without force and effect.
Claims for damages by plaintiffs and counterclaims by the defendants
and intervenors were dismissed. A motion for reconsideration was
thereafter filed, which was denied.
Petitioners interposed an appeal, but on 16 December 1991, the CA
rendered its decision fully agreeing with the trial court.
Hence, the instant petition.
The Supreme Court dismissed the petition and affirmed the appealed
judgment.
1. Receipt of downpayment a binding contract; Meeting of the minds
The document embodied the binding contract between Ramona
Patricia Alcaraz and the heirs of Constancio P. Coronel, pertaining to a
particular house and lot covered by TCT 119627, as defined in Article
1305 of the Civil Code of the Philippines.
2. Definition of contract of sale
The Civil Code defines a contract of sale, in Article 1458, as “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.” Sale, thus, by its very nature a
consensual contract because it is perfected by mere consent.
3. Elements of contract of sale; Contract to sell not contract of sale due
to the lack of first element; Distinction necessary when property is sold
to a third person
The essential elements of a contract of sale are (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. A Contract to Sell may not be considered as a Contract of
Sale because the first essential element is lacking. It is essential to
distinguish between a contract to sell and a conditional contract of sale
specially in cases where the subject property is sold by the owner not
to the party the seller contracted with, but to a third person.
4. Contract to sell: Seller agrees to sell property when purchase price is
delivered to him; seller reserves transfer of title until fulfillment of
suspensive condition (payment)
In a contract to sell, the prospective seller explicitly reserves the
transfer of title to the prospective buyer, meaning, the prospective
seller does not as yet agree or consent to transfer ownership of the
property subject of the contract to sell until the happening of an event,
which for present purposes taken to be the full payment of the
purchase price. What the seller agrees or obliges himself to do is to
fulfill his promise to sell the subject property when the entire amount
of the purchase price is delivered to him. In other words the full
payment of the purchase price partakes of a suspensive condition, the
non-fulfillment of which prevents the obligation to sell from arising and
thus, ownership is retained by the prospective seller without further
remedies by the prospective buyer.
5. Contract to sell: failure to deliver payment is not a breach but event
preventing vendor to convey title; obligation demandable upon full
payment of price; promise binding if supported by payment distinct
from the price When a contract is a contract to sell where the
ownership or title is retained by the seller and is not to pass until the
full payment of the price, such payment being a positive suspensive
condition and failure of which is not a breach, casual or serious, but
simply an event that prevented the obligation of the vendor to convey
title from acquiring binding force (Roque v. Lapuz).
Upon the fulfillment of the suspensive condition which is the full
payment of the purchase price, the prospective seller’s obligation to
sell the subject property by entering into a contract of sale with the
prospective buyer becomes demandable as provided in Article 1479 of
the Civil Code (“A promise to buy and sell a determinate thing for a
price certain is reciprocally demandable.”) An accepted unilateral
promise to buy or to sell a determinate thing for a price certain is
binding upon the promissor if the promise is supported by a
consideration distinct from the price.
6. Contract to sell defined
A contract to sell be defined as a bilateral contract whereby the
prospective seller, while expressly reserving the ownership of the
subject property despite delivery thereof to the prospective buyer,
binds himself to sell the said property exclusively to the prospective
buyer upon fulfillment of the condition agreed upon, that is, full
payment of the purchase price.
7. Contract to sell not a conditional contract of sale (existence of first
element)
A contract to sell may not even be considered as a conditional contract
of sale where the seller may likewise reserve title to the property
subject of the sale until the fulfillment of a suspensive condition,
because in a conditional contract of sale, the first element of consent is
present, although it is conditioned upon the happening of a contingent
event which may or may not occur.
8. Conditional contract of sale: if suspensive condition not fulfilled,
pefection abated; if fulfilled, contract of sale perfected and ownership
automatically transfers to buyer
If the suspensive condition is not fulfilled, the perfection of the
contract of sale is completely abated (cf. Homesite and Housing Corp.
vs. Court of Appeals, 133 SCRA 777 [1984]). However, if the suspensive
condition is fulfilled, the contract of sale is thereby perfected, such that
if there had already been previous delivery of the property subject of
the sale to the buyer, ownership thereto automatically transfers to the
buyer by operation of law without any further act having to be
performed by the seller.
9. Contract to sell: if suspensive condition fulfilled, seller has still to
convey title even if property is previously delivered
In a contract to sell, upon the fulfillment of the suspensive condition
which is the full payment of the purchase price, ownership will not
automatically transfer to the buyer although the property may have
been previously delivered to him. The prospective seller still has to
convey title to the prospective buyer by entering into a contract of
absolute sale.
10. Contract to sell: there is no double sale; if property sold to another,
the seller may be sued for damages
In a contract to sell, there being no previous sale of the property, a
third person buying such property despite the fulfillment of the
suspensive condition such as the full payment of the purchase price, for
instance, cannot be deemed a buyer in bad faith and the prospective
buyer cannot seek the relief of reconveyance of the property. There is
no double sale in such case. Title to the property will transfer to the
buyer after registration because there is no defect in the owner-seller’s
title per se, but the latter, of course, may be sued for damages by the
intending buyer.
11. Conditional contract of sale: sale becomes absolute upon fulfillment
of condition; if property sold to another, first buyer may seek
reconveyance
In a conditional contract of sale, upon the fulfillment of the suspensive
condition, the sale becomes absolute and this will definitely affect the
seller’s title thereto. In fact, if there had been previous delivery of the
subject property, the seller’s ownership or title to the property is
automatically transferred to the buyer such that, the seller will no
longer have any title to transfer to any third person. Applying Article
1544 of the Civil Code, such second buyer of the property who may
have had actual or constructive knowledge of such defect in the seller’s
title, or at least was charged with the obligation to discover such
defect, cannot be a registrant in good faith. Such second buyer cannot
defeat the first buyer’s title. In case a title is issued to the second
buyer, the first buyer may seek reconveyance of the property subject of
the sale.
12. Interpretation of contracts, natural and meaning of words unless
technical meaning was intended
It is a canon in the interpretation of contracts that the words used
therein should be given their natural and ordinary meaning unless a
technical meaning was intended (Tan vs. Court of Appeals, 212 SCRA
586 [1992]).
13. Document entitled
“Receipt of Down Payment” indicates Conditional Contract of Sale and
not contract to sell
The agreement could not have been a contract to sell because the
sellers made no express reservation of ownership or title to the subject
parcel of land. Furthermore, the circumstance which prevented the
parties from entering into an absolute contract of sale pertained to the
sellers themselves (the certificate of title was not in their names) and
not the full payment of the purchase price. Under the established facts
and circumstances of the case, had the certificate of title been in the
names of petitioners-sellers at that time, there would have been no
reason why an absolute contract of sale could not have been executed
and consummated right there and then. Moreover, unlike in a contract
to sell, petitioners did not merely promise to sell the property to
private respondent upon the fulfillment of the suspensive condition.
On the contrary, having already agreed to sell the subject property,
they undertook to have the certificate of title changed to their names
and immediately thereafter, to execute the written deed of absolute
sale. What is clearly established by the plain language of the subject
document is that when the said “Receipt of Down Payment” was
prepared and signed by petitioners, the parties had agreed to a
conditional contract of sale, consummation of which is subject only to
the successful transfer of the certificate of title from the name
of petitioners’ father to their names. The suspensive condition was
fulfilled on 6 February 1985 and thus, the conditional contract of sale
between the parties became obligatory, the only act required for the
consummation thereof being the delivery of the property by means of
the execution of the deed of absolute sale in a public instrument, which
petitioners unequivocally committed themselves to do as evidenced by
the “Receipt of Down Payment.”
14. Article 1475 and 1181 applies to present case; Perfection of a
contract of sale and Conditional obligation based on the happening of
the event
Article 1475 of the New Civil Code provides that “the contract of sale is
perfected at the moment there is a meeting of minds upon the thing
which is the object of the contract and upon the price.” From that
moment, the parties may reciprocally demand performance, subject to
the provisions of the law governing the form of contracts. Article 1181
of the same code provides that “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.” In the present case, since the condition
contemplated by the parties which is the issuance of a certificate of
title in petitioners’ names was fulfilled on 6 February 1985,
the respective obligations of the parties under the contract of sale
became mutually demandable, i.e. the sellers were obliged to present
the TCT already in their names to he buyer, and to immediately execute
the deed of absolute sale, while the buyer on her part, was obliged to
forthwith pay the balance of the purchase price amounting to
P1,190,000.00.
15. Condition deemed fulfilled when obligor voluntary prevents its
fulfillment; Condition fulfilled, such fact controlling over hypothetical
arguments
Article 1186 provides that “the condition shall be deemed fulfilled
when the obligor voluntarily prevents its fulfillment.” Thus, in the
present case, the petitioners having recognized that they entered into
a contract of sale subject to a suspensive condition, as evidenced in the
first paragraph in page 9 of their petition, cannot now contend that
there could have been no perfected contract of sale had the petitioners
not complied with the condition of first transferring the title of the
property under their names. It should be stressed and emphasized that
the condition was fulfilled on 6 February 1985, when TCT 327403 was
issued in petitioners’ name, and such fact is more controlling than
mere hypothetical arguments.
16. Retroactivity of conditional obligation to day of constitution of
obligation
Article 1187 provides that “the effects of conditional obligation to give,
once the condition has been fulfilled, shall retroact to the day of the
constitution of the obligation.” In obligations to do or not to do, the
courts shall determine, in each case, the retroactive effect of the
condition that has been complied with. In the present case, the rights
and obligations of the parties with respect to the perfected contract of
sale became mutually due and demandable as of the time of fulfillment
or occurrence of the suspensive condition on 6 February 1985. As of
that point in time, reciprocal obligations of both seller and buyer arose.
17. Succession as a mode of transferring ownership
Article 774 of the Civil Code defines Succession as a mode of
transferring ownership, providing “succession is a mode of acquisition
by virtue of which the property, rights and obligations to the extent
and value of the inheritance of a person are transmitted through his
death to another or others by his will or by operation of law.” In the
present case, petitioners-sellers being the sons and daughters of the
decedent Constancio P. Coronel are compulsory heirs who were called
to succession by operation of law. Thus, at the instance of their father’s
death, petitioners stepped into his shoes insofar as the subject
property is concerned, such that any rights or obligations pertaining
thereto became binding and enforceable upon them. It is expressly
provided that rights to the succession are transmitted from the
moment of death of the decedent (Article 777, Civil Code; Cuison vs.
Villanueva, 90 Phil. 850 [1952]).
18. Estoppel, as to lack of capacity
Article 1431 provides that “through estoppel an admission or
representation is rendered conclusive upon the person making it, and
cannot be denied or disproved as against the person relying thereon.”
In the present case, the petitioners, having represented themselves as
the true owners of the subject property at the time of sale, cannot
claim now that they were not yet the absolute owners thereof at the
time they entered into agreement.
19. Mere allegation is not evidence
The supposed grounds for petitioners’ rescission, are mere allegations
found only in their responsive pleadings, which by express provision of
the rules, are deemed controverted even if no reply is filed by the
plaintiffs (Sec. 11, Rule 6, Revised Rules of Court). The records are
absolutely bereft of any supporting evidence to substantiate
petitioners’ allegations. We have stressed time and again that
allegations must be proven by sufficient evidence (Ng Cho Cio vs. Ng
Diong, 110 Phil. 882 [1961]; Recaro vs. Embisan, 2 SCRA 598 [1961]).
Mere allegation is not an evidence (Lagasca vs. De Vera, 79 Phil. 376
[1947]).
20. No stipulation to authorize extrajudicial rescission of contract of
sale
Even assuming arguendo that Ramona P. Alcaraz was in the United
States of America on 6 February 1985, petitioners- sellers’ act of
unilaterally and extrajudicially rescinding the contract of sale cannot be
justified as there was no express stipulation authorizing the sellers to
extrajudicially rescind the contract of sale. (cf Dignos vs. CA, 158 SCRA
375 [1988]; Taguba vs. Vda. De Leon, 132 SCRA 722 [1984])
21. Estoppel, acceptance of check from buyer’s mother; buyer’s
absence not a ground for rescission
Petitioners are estopped from raising the alleged absence of Ramona P.
Alcaraz because although the evidence on record shows that the sale
was in the name of Ramona P. Alcaraz as the buyer, the sellers had
been dealing with Concepcion D. Alcaraz, Ramona’s mother, who had
acted for and in behalf of her daughter, if not also in her own behalf.
Indeed, the down payment was made by Concepcion D. Alcaraz with
her own personal check (Exh. “B”; Exh. “2″ ) for and in behalf of
Ramona P. Alcaraz.
There is no evidence showing that petitioners ever questioned
Concepcion’s authority to represent Ramona P. Alcaraz when they
accepted her personal check. Neither did they raise any objection as
regards payment being effected by a third person.
Accordingly, as far as petitioners are concerned, the physical absence
of Ramona P. Alcaraz is not a ground to rescind the contract of sale.
22. Buyer not in default as there is no proof that seller presented the
TCT and signify their readiness to execute the deed of absolute sale
Article 1169 of the Civil Code defines when a party in a contract
involving reciprocal obligations may be considered in default.
Said article provides that “those obliged to deliver or to do something,
incur in delay from the time the obligee judicially or extrajudicially
demands from them the fulfillment of their obligation. xxx In reciprocal
obligations, neither party incurs in delay if the other does not comply
or is not ready to comply in a proper manner with what is incumbent
upon him. From the moment one of the parties fulfill his obligation,
delay by the other begins.” In the present case, there is no proof
offered whatsoever to show that the seller actually presented the new
transfer certificate of title in their names and signified their willingness
and readiness to execute the deed of absolute sale in accordance with
their agreement. Ramona’s corresponding obligation to pay the
balance of the purchase price in the amount of P1,190,000.00 (as
buyer) never became due and demandable and, therefore, she cannot
be deemed to have been in default.
23. Double sale; Article 1544, paragraph 2 applies in the present case
Article 1544 of the Civil Code provides that “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 if 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.” In
the present case, the record of the case shows that the Deed of
Absolute Sale dated 25 April 1985 as proof of the second contract of
sale was registered with the Registry of Deeds of Quezon City giving
rise to the issuance of a new certificate of title in the name of Catalina
B. Mabanag on 5 June 1985. Thus, the second paragraph of Article 1544
shall apply.
24. Double sale presumes title to pass to first buyer, exceptions
Article 1544, the provision on double sale, presumes title or ownership
to pass to the first buyer, the exceptions being: (a) when the second
buyer, in good faith, registers the sale ahead of the first buyer, and (b)
should there be no inscription by either of the two buyers, when the
second buyer, in good faith, acquires possession of the property ahead
of the first buyer. Unless, the second buyer satisfies these
requirements, title or ownership will not transfer to him to the
prejudice of the first buyer.
25. Prius tempore, potior jure (first in time, stronger in right); First to
register in good faith
The governing principle is prius tempore, potior jure (first in time,
stronger in right). Knowledge by the first buyer of the second sale
cannot defeat the first buyer’s rights except when the second buyer
first registers in good faith the second sale (Olivares vs.Gonzales, 159
SCRA 33). Conversely, knowledge gained by the second buyer of the
first sale defeats his rights even if he is first to register, since knowledge
taints his registration with bad faith (see also Astorga vs. Court of
Appeals, G.R. No. 58530, 26 December 1984). It was further held that it
is essential, to merit the protection of Article 1544, second paragraph,
that the second realty buyer must act in good faith in registering his
deed of sale (Cruz v. Cabana, 129 SCRA 656, citing Carbonell vs. Court
of Appeals, 69 SCRA 99, Crisostomo vs. CA, G.R. No. 95843, 02
September 1992).
previously sold to Coronel, or, at least, she was charged with
knowledge that a previous buyer is claiming title to the same property.
Mabanag thus cannot close her eyes to the defect in petitioners’ title to
the property at the time of the registration of the property.
27. Double sale; Bad faith in registration does not confer registrant any
right
If a vendee in a double sale registers the sale after he has acquired
knowledge that there was a previous sale of the same property to a
third party or that another person claims said property in a previous
sale, the registration will constitute a registration in bad faith and will
not confer upon him any right. (Salvoro vs. Tanega, 87 SCRA 349
[1981];citing Palarca vs. Director of Land, 43 Phil. 146; Cagaoan vs.
Cagaoan, 43 Phil. 554; Fernandez vs. Mercader, 43 Phil. 581.)
28. Agency; The issue whether Concepcion, mother of Ramona, is an
agent or a co-buyer is undisturbed
Although there may be ample indications that there was in fact an
agency between Ramona as principal and Concepcion, her mother, as
agent insofar as the subject contract of sale is concerned, the issue of
whether or not Concepcion was also acting in her own behalf as a co-
buyer is not squarely raised in the instant petition, nor in such
assumption disputed between mother and daughter. The Court did not
touch this issue and did not disturb the lower courts’ ruling on this
point.

26. Double sale; good faith in recording of second sale, not in buying
In a case of double sale, what finds relevance and materiality is not
whether or not the second buyer was a buyer in good faith but
whether or not said second buyer registers such second sale in good
faith, that is, without knowledge of any defect in the title of the
property sold. In the present case, Mabanag could not have in good
faith registered the sale entered into on 18 February 1985 because as
early as 22 February 1985, a notice of lis pendens had been annotated
on the TCT in the names of petitioners, whereas Mabanag registered
the said sale sometime in April 1985. At the time of registration,
therefore, petitioner knew that the same property had already been
NABUS VS.PACSON
G.R. NO. 161318
NOVEMBER 25, 2009
FACTS:
In 1977, the spouses Nabus executed a Deed of
Conditional Sale (DOCS) in favor of the Spouses Pacson.
This deed covered 1,000sqm out of the 1,665sqm land owned by the
Nabuses. The deed states that after the Pacsons have paid the full
consideration of 170k, the corresponding transfer documents shall be
executed by the Nabuses. The Pacsons thereafter occupied the land
and built an auto shop thereon.
In 1977, Bate Nabus died,leaving Julie Nabus and her daughter Michelle
to execute a Deed of Extrajudicial Settlement over the property. Anew
TCT was issued in their names in 1984.
By 1984, the Pacsons have made 364 payments, leaving a balance
of57k.
Sometime later, Julie Nabus approached Joaquin Pacson for the
remaining balance.
While the Pacsons claimed they were ready to pay the balance, they
asked Nabus to return in 4 days as they wanted to make sure of the
remaining balance; wanted to see the new deeds issued in the
Nabuses’ name; wanted to see the guardianship papers of the Nabus
child. However, Julie Nabus did not return.
The Pacsons later discovered that the entire lothad been sold to a Betty
Tolero, and that a new title had been issued in Tolero’s name.
Aggrieved they prayed to annul Tolero’s title, as well as of the other
documents issued to the Nabuses.
Intheir defense, the Nabuses claimed that their DoCS was converted in
a contract of lease, as Joaquin Pacson had misgivings about buying the
land after knowing that it was in dispute.
They also claimed that Pacson’s signature in apage of the contract was
absent.
The RTC and the CA both ruled in favor of the Pacsons and ordered the
execution of a Deed of Absolute Sale in favor of the Pacsons, upon their
payment of the full purchase price.
The Nabuses appealed.
ISSUES:
1.WON the DOCS was converted to a Contract of Lease?
NO.
2.What is the nature of the contract between the Nabuses and the
Pacsons? CONTRACT TO SELL
HELD:
1. The DOCS was not converted to a Contract of Lease.
The receipts issued to the Pacsons contained the phrase “as partial
payment to lot” evidencing the intentof sale, rather than of lease.
Further, as found by the trial court, Joaquin Pacson’s non-signing of the
second page of a carbon copy of the Deed of Conditional
Sale was through sheer inadvertence, since the original contract and
the other copies of the contract were all signed by Joaquin Pacson and
the other parties to the contract.
2. The DOCS was a contract to sell, and because the Pacsons failed to
pay the full price, no obligation arose on the part of the Nabuses.
It is not the title of the contract, but its express terms or stipulations
that determine the kind of contract entered into by the parties. In this
case, the contract entitled "Deed of Conditional Sale" is actually a
contract to sell. The contract stipulated that "as soon as the full
consideration of the sale has been paid by the vendee, the
corresponding transfer documents shall be executed by the vendor to
the vendee for the portion sold."
Where the vendor promises to execute a deed of absolute sale upon
the completion by the vendee of the payment of the price,the contract
is only a contract to sell." The aforecited stipulation shows that the
vendors reserved title to the subject property until full payment of the
purchase price.
Unfortunately for the Spouses Pacson, since the Deed of Conditional
Sale executed in their favor was merely a contract to sell, the obligation
of the seller to sell becomes demandable only upon the happening of
the suspensive condition. The full payment of the purchase price is the
positive suspensive condition, the failure of which is not a breach of
contract, but simply an event that prevented the obligation of the
vendor to convey title from acquiring binding force.
Thus, for its non-fulfillment, there is no contract to speak of, the
obligor having failed to perform the suspensive condition which
enforces a juridical relation. With this circumstance, there can be no
rescission or fulfillment of an obligation that is still non-existent, the
suspensive condition not having occurred as yet.
Emphasis should be made that the breach contemplated in Article 1191
of the New Civil Code is the obligor’s failure to comply with an
obligation already extant, not a failure of a condition to render binding
that obligation.
Therefore, since the Pacsons failed to fulfill the suspensive condition,
the obligation on the part of the Nabuses to sell them the land never
arose, and the Nabuses were well within their rights when they sold
the land to Tolero. The Pacsons, of course, are entitled to
reimbursement.
SECOND DIVISION
[G.R. No. 125585. June 8, 2005.]
HEIRS OF EDUARDO MANLAPAT, represented by GLORIA MANLAPAT-
BANAAG and LEON M. BANAAG, JR., petitioners, vs. HON. COURT OF
APPEALS, RURAL BANK OF SAN PASCUAL, INC., and JOSE B. SALAZAR,
CONSUELO CRUZ and ROSALINA CRUZ-BAUTISTA, and the REGISTER
OF DEEDS of Meycauayan, Bulacan, respondents.
(FULL TEXT)
DECISION
TINGA, J p:
Before this Court is a Rule 45 petition assailing the Decision 1 dated 29
September 1994 of the Court of Appeals that reversed the Decision 2
dated 30 April 1991 of the Regional Trial Court (RTC) of Bulacan, Branch
6, Malolos. The trial court declared Transfer Certificates of Title (TCTs)
No. T-9326-P(M) and No. T-9327-P(M) as void ab initio and ordered the
restoration of Original Certificate of Title (OCT) No. P-153(M) in the
name of Eduardo Manlapat (Eduardo), petitioners' predecessor-in-
interest.
The controversy involves Lot No. 2204, a parcel of land with an area of
1,058 square meters, located at Panghulo, Obando, Bulacan. The
property had been originally in the possession of Jose Alvarez,
Eduardo's grandfather, until his demise in 1916. It remained
unregistered until 8 October 1976 when OCT No. P-153(M) was issued
in the name of Eduardo pursuant to a free patent issued in Eduardo's
name 3 that was entered in the Registry of Deeds of Meycauayan,
Bulacan. 4 The subject lot is adjacent to a fishpond owned by one
Ricardo Cruz (Ricardo), predecessor-in-interest of respondents
Consuelo Cruz and Rosalina Cruz-Bautista (Cruzes). 5
On 19 December 1954, before the subject lot was titled, Eduardo sold a
portion thereof with an area of 553 square meters to Ricardo. The sale
is evidenced by a deed of sale entitled "Kasulatan ng Bilihang Tuluyan
ng Lupang Walang Titulo (Kasulatan)" 6 which was signed by Eduardo
himself as vendor and his wife Engracia Aniceto with a certain Santiago
Enriquez signing as witness. The deed was notarized by Notary Public
Manolo Cruz. 7 On 4 April 1963, the Kasulatan was registered with the
Register of Deeds of Bulacan. 8
On 18 March 1981, another Deed of Sale 9 conveying another portion
of the subject lot consisting of 50 square meters as right of way was
executed by Eduardo in favor of Ricardo in order to reach the portion
covered by the first sale executed in 1954 and to have access to his
fishpond from the provincial road. 10 The deed was signed by Eduardo
himself and his wife Engracia Aniceto, together with Eduardo
Manlapat, Jr. and Patricio Manlapat. The same was also duly notarized
on 18 July 1981 by Notary Public Arsenio Guevarra. 11
In December 1981, Leon Banaag, Jr. (Banaag), as attorney-in-fact of his
father-in-law Eduardo, executed a mortgage with the Rural Bank of San
Pascual, Obando Branch (RBSP), for P100,000.00 with the subject lot as
collateral. Banaag deposited the owner's duplicate certificate of OCT
No. P-153(M) with the bank. ADCSEa
On 31 August 1986, Ricardo died without learning of the prior issuance
of OCT No. P-153(M) in the name of Eduardo. 12 His heirs, the Cruzes,
were not immediately aware of the consummated sale between
Eduardo and Ricardo.
Eduardo himself died on 4 April 1987. He was survived by his heirs,
Engracia Aniceto, his spouse; and children, Patricio, Bonifacio, Eduardo,
Corazon, Anselmo, Teresita and Gloria, all surnamed Manlapat. 13
Neither did the heirs of Eduardo (petitioners) inform the Cruzes of the
prior sale in favor of their predecessor-in-interest, Ricardo. Yet
subsequently, the Cruzes came to learn about the sale and the issuance
of the OCT in the name of Eduardo.
Upon learning of their right to the subject lot, the Cruzes immediately
tried to confront petitioners on the mortgage and obtain the surrender
of the OCT. The Cruzes, however, were thwarted in their bid to see the
heirs. On the advice of the Bureau of Lands, NCR Office, they brought
the matter to the barangay captain of Barangay Panghulo, Obando,
Bulacan. During the hearing, petitioners were informed that the Cruzes
had a legal right to the property covered by OCT and needed the OCT
for the purpose of securing a separate title to cover the interest of
Ricardo. Petitioners, however, were unwilling to surrender the OCT. 14
Having failed to physically obtain the title from petitioners, in July
1989, the Cruzes instead went to RBSP which had custody of the
owner's duplicate certificate of the OCT, earlier surrendered as a
consequence of the mortgage. Transacting with RBSP's manager, Jose
Salazar (Salazar), the Cruzes sought to borrow the owner's duplicate
certificate for the purpose of photocopying the same and thereafter
showing a copy thereof to the Register of Deeds. Salazar allowed the
Cruzes to bring the owner's duplicate certificate outside the bank
premises when the latter showed the Kasulatan. 15 The Cruzes
returned the owner's duplicate certificate on the same day after having
copied the same. They then brought the copy of the OCT to Register of
Deeds Jose Flores (Flores) of Meycauayan and showed the same to him
to secure his legal opinion as to how the Cruzes could legally protect
their interest in the property and register the same. 16 Flores
suggested the preparation of a subdivision plan to be able to segregate
the area purchased by Ricardo from Eduardo and have the same
covered by a separate title. 17
Thereafter, the Cruzes solicited the opinion of Ricardo Arandilla
(Arandilla), Land Registration Officer, Director III, Legal Affairs
Department, Land Registration Authority at Quezon City, who agreed
with the advice given by Flores. 18 Relying on the suggestions of Flores
and Arandilla, the Cruzes hired two geodetic engineers to prepare the
corresponding subdivision plan. The subdivision plan was presented to
the Land Management Bureau, Region III, and there it was approved by
a certain Mr. Pambid of said office on 21 July 1989.
After securing the approval of the subdivision plan, the Cruzes went
back to RBSP and again asked for the owner's duplicate certificate from
Salazar. The Cruzes informed him that the presentation of the owner's
duplicate certificate was necessary, per advise of the Register of Deeds,
for the cancellation of the OCT and the issuance in lieu thereof of two
separate titles in the names of Ricardo and Eduardo in accordance with
the approved subdivision plan. 19 Before giving the owner's duplicate
certificate, Salazar required the Cruzes to see Atty. Renato Santiago
(Atty. Santiago), legal counsel of RBSP, to secure from the latter a
clearance to borrow the title. Atty. Santiago would give the clearance
on the condition that only Cruzes put up a substitute collateral, which
they did. 20 As a result, the Cruzes got hold again of the owner's
duplicate certificate.
After the Cruzes presented the owner's duplicate certificate, along with
the deeds of sale and the subdivision plan, the Register of Deeds
cancelled the OCT and issued in lieu thereof TCT No. T-9326-P(M)
covering 603 square meters of Lot No. 2204 in the name of Ricardo and
TCT No. T-9327-P(M) covering the remaining 455 square meters in the
name of Eduardo. 21
On 9 August 1989, the Cruzes went back to the bank and surrendered
to Salazar TCT No. 9327-P(M) in the name of Eduardo and retrieved the
title they had earlier given as substitute collateral. After securing the
new separate titles, the Cruzes furnished petitioners with a copy of TCT
No. 9327-P(M) through the barangay captain and paid the real
property tax for 1989. 22
The Cruzes also sent a formal letter to Guillermo Reyes, Jr., Director,
Supervision Sector, Department III of the Central Bank of the
Philippines, inquiring whether they committed any violation of existing
bank laws under the circumstances. A certain Zosimo Topacio, Jr. of the
Supervision Sector sent a reply letter advising the Cruzes, since the
matter is between them and the bank, to get in touch with the bank for
the final settlement of the case. 23
In October of 1989, Banaag went to RBSP, intending to tender full
payment of the mortgage obligation. It was only then that he learned
of the dealings of the Cruzes with the bank which eventually led to the
subdivision of the subject lot and the issuance of two separate titles
thereon. In exchange for the full payment of the loan, RBSP tried to
persuade petitioners to accept TCT No. T-9327-P(M) in the name of
Eduardo. 24
As a result, three (3) cases were lodged, later consolidated, with the
trial court, all involving the issuance of the TCTs, to wit:
(1) Civil Case No. 650-M-89, for reconveyance with damages filed by
the heirs of Eduardo Manlapat against Consuelo Cruz, Rosalina Cruz-
Bautista, Rural Bank of San Pascual, Jose Salazar and Jose Flores, in his
capacity as Deputy Registrar, Meycauayan Branch of the Registry of
Deeds of Bulacan; SHcDAI
(2) Civil Case No. 141-M-90 for damages filed by Jose Salazar against
Consuelo Cruz, et. [sic] al.; and
(3) Civil Case No. 644-M-89, for declaration of nullity of title with
damages filed by Rural Bank of San Pascual, Inc. against the spouses
Ricardo Cruz and Consuelo Cruz, et al. 25
After trial of the consolidated cases, the RTC of Malolos rendered a
decision in favor of the heirs of Eduardo, the dispositive portion of
which reads:
WHEREFORE, premised from the foregoing, judgment is hereby
rendered:
1. Declaring Transfer Certificates of Title Nos. T-9326-P(M) and T-9327-
P(M) as void ab initio and ordering the Register of Deeds, Meycauayan
Branch to cancel said titles and to restore Original Certificate of Title
No. P-153(M) in the name of plaintiffs' predecessor-in-interest Eduardo
Manlapat;
2. Ordering the defendants Rural Bank of San Pascual, Jose Salazar,
Consuelo Cruz and Rosalina Cruz-Bautista, to pay the plaintiffs Heirs of
Eduardo Manlapat, jointly and severally, the following:
a) P200,000.00 as moral damages;
b) P50,000.00 as exemplary damages;
c) P20,000.00 as attorney's fees; and
d) the costs of the suit.
3. Dismissing the counterclaims.
SO ORDERED." 26
The trial court found that petitioners were entitled to the reliefs of
reconveyance and damages. On this matter, it ruled that petitioners
were bona fide mortgagors of an unclouded title bearing no annotation
of any lien and/or encumbrance. This fact, according to the trial court,
was confirmed by the bank when it accepted the mortgage
unconditionally on 25 November 1981. It found that petitioners were
complacent and unperturbed, believing that the title to their property,
while serving as security for a loan, was safely vaulted in the
impermeable confines of RBSP. To their surprise and prejudice, said
title was subdivided into two portions, leaving them a portion of 455
square meters from the original total area of 1,058 square meters, all
because of the fraudulent and negligent acts of respondents and RBSP.
The trial court ratiocinated that even assuming that a portion of the
subject lot was sold by Eduardo to Ricardo, petitioners were still not
privy to the transaction between the bank and the Cruzes which
eventually led to the subdivision of the OCT into TCTs No. T-9326-P(M)
and No. T-9327-P(M), clearly to the damage and prejudice of
petitioners. 27
Concerning the claims for damages, the trial court found the same to
be bereft of merit. It ruled that although the act of the Cruzes could be
deemed fraudulent, still it would not constitute intrinsic fraud. Salazar,
nonetheless, was clearly guilty of negligence in letting the Cruzes
borrow the owner's duplicate certificate of the OCT. Neither the bank
nor its manager had business entrusting to strangers titles mortgaged
to it by other persons for whatever reason. It was a clear violation of
the mortgage and banking laws, the trial court concluded.
The trial court also ruled that although Salazar was personally
responsible for allowing the title to be borrowed, the bank could not
escape liability for it was guilty of contributory negligence. The
evidence showed that RBSP's legal counsel was sought for advice
regarding respondents' request. This could only mean that RBSP
through its lawyer if not through its manager had known in advance of
the Cruzes' intention and still it did nothing to prevent the eventuality.
Salazar was not even summarily dismissed by the bank if he was indeed
the sole person to blame. Hence, the bank's claim for damages must
necessarily fail. 28
The trial court granted the prayer for the annulment of the TCTs as a
necessary consequence of its declaration that reconveyance was in
order. As to Flores, his work being ministerial as Deputy Register of the
Bulacan Registry of Deeds, the trial court absolved him of any liability
with a stern warning that he should deal with his future transactions
more carefully and in the strictest sense as a responsible government
official. 29
Aggrieved by the decision of the trial court, RBSP, Salazar and the
Cruzes appealed to the Court of Appeals. The appellate court, however,
reversed the decision of the RTC. The decretal text of the decision
reads:
THE FOREGOING CONSIDERED, the appealed decision is hereby
reversed and set aside, with costs against the appellees.
SO ORDERED. 30
The appellate court ruled that petitioners were not bona fide
mortgagors since as early as 1954 or before the 1981 mortgage,
Eduardo already sold to Ricardo a portion of the subject lot with an
area of 553 square meters. This fact, the Court of Appeals noted, is
even supported by a document of sale signed by Eduardo Jr. and
Engracia Aniceto, the surviving spouse of Eduardo, and registered with
the Register of Deeds of Bulacan. The appellate court also found that
on 18 March 1981, for the second time, Eduardo sold to Ricardo a
separate area containing 50 square meters, as a road right-of-way. 31
Clearly, the OCT was issued only after the first sale. It also noted that
the title was given to the Cruzes by RBSP voluntarily, with knowledge
even of the bank's counsel. 32 Hence, the imposition of damages
cannot be justified, the Cruzes themselves being the owners of the
property. Certainly, Eduardo misled the bank into accepting the entire
area as a collateral since the 603-square meter portion did not
anymore belong to him. The appellate court, however, concluded that
there was no conspiracy between the bank and Salazar. 33
Hence, this petition for review on certiorari. cISDHE
Petitioners ascribe errors to the appellate court by asking the following
questions, to wit: (a) can a mortgagor be compelled to receive from the
mortgagee a smaller portion of the originally encumbered title
partitioned during the subsistence of the mortgage, without the
knowledge of, or authority derived from, the registered owner; (b) can
the mortgagee question the veracity of the registered title of the
mortgagor, as noted in the owner's duplicate certificate, and thus,
deliver the certificate to such third persons, invoking an adverse, prior,
and unregistered claim against the registered title of the mortgagor; (c)
can an adverse prior claim against a registered title be noted,
registered and entered without a competent court order; and (d) can
belief of ownership justify the taking of property without due process
of law? 34
The kernel of the controversy boils down to the issue of whether the
cancellation of the OCT in the name of the petitioners' predecessor-in-
interest and its splitting into two separate titles, one for the petitioners
and the other for the Cruzes, may be accorded legal recognition given
the peculiar factual backdrop of the case. We rule in the affirmative.
Private respondents (Cruzes) own
the portion titled in their names
Consonant with law and justice, the ultimate denouement of the
property dispute lies in the determination of the respective bases of
the warring claims. Here, as in other legal disputes, what is written
generally deserves credence.
A careful perusal of the evidence on record reveals that the Cruzes
have sufficiently proven their claim of ownership over the portion of
Lot No. 2204 with an area of 553 square meters. The duly notarized
instrument of conveyance was executed in 1954 to which no less than
Eduardo was a signatory. The execution of the deed of sale was
rendered beyond doubt by Eduardo's admission in his Sinumpaang
Salaysay dated 24 April 1963. 35 These documents make the
affirmance of the right of the Cruzes ineluctable. The apparent
irregularity, however, in the obtention of the owner's duplicate
certificate from the bank, later to be presented to the Register of
Deeds to secure the issuance of two new TCTs in place of the OCT, is
another matter.
Petitioners argue that the 1954 deed of sale was not annotated on the
OCT which was issued in 1976 in favor of Eduardo; thus, the Cruzes'
claim of ownership based on the sale would not hold water. The Court
is not persuaded.
Registration is not a requirement for validity of the contract as
between the parties, for the effect of registration serves chiefly to bind
third persons. 36 The principal purpose of registration is merely to
notify other persons not parties to a contract that a transaction
involving the property had been entered into. Where the party has
knowledge of a prior existing interest which is unregistered at the time
he acquired a right to the same land, his knowledge of that prior
unregistered interest has the effect of registration as to him. 37
Further, the heirs of Eduardo cannot be considered third persons for
purposes of applying the rule. The conveyance shall not be valid against
any person unless registered, except (1) the grantor, (2) his heirs and
devisees, and (3) third persons having actual notice or knowledge
thereof. 38 Not only are petitioners the heirs of Eduardo, some of them
were actually parties to the Kasulatan executed in favor of Ricardo.
Thus, the annotation of the adverse claim of the Cruzes on the OCT is
no longer required to bind the heirs of Eduardo, petitioners herein.
Petitioners had no right to constitute
mortgage over disputed portion
The requirements of a valid mortgage are clearly laid down in Article
2085 of the New Civil Code, viz:
ART. 2085. The following requisites are essential to the contracts of
pledge and mortgage:
(1) That they be constituted to secure the fulfillment of a principal
obligation; aIcTCS
(2) That the pledgor or mortgagor be the absolute owner of the thing
pledged or mortgaged;
(3) That the persons constituting the pledge or mortgage have the free
disposal of their property, and in the absence thereof, that they be
legally authorized for the purpose.
Third persons who are not parties to the principal obligation may
secure the latter by pledging or mortgaging their own property.
(emphasis supplied)
For a person to validly constitute a valid mortgage on real estate, he
must be the absolute owner thereof as required by Article 2085 of the
New Civil Code. 39 The mortgagor must be the owner, otherwise the
mortgage is void. 40 In a contract of mortgage, the mortgagor remains
to be the owner of the property although the property is subjected to a
lien. 41 A mortgage is regarded as nothing more than a mere lien,
encumbrance, or security for a debt, and passes no title or estate to
the mortgagee and gives him no right or claim to the possession of the
property. 42 In this kind of contract, the property mortgaged is merely
delivered to the mortgagee to secure the fulfillment of the principal
obligation. 43 Such delivery does not empower the mortgagee to
convey any portion thereof in favor of another person as the right to
dispose is an attribute of ownership. 44 The right to dispose includes
the right to donate, to sell, to pledge or mortgage. Thus, the
mortgagee, not being the owner of the property, cannot dispose of the
whole or part thereof nor cause the impairment of the security in any
manner without violating the foregoing rule. 45 The mortgagee only
owns the mortgage credit, not the property itself. 46
Petitioners submit as an issue whether a mortgagor may be compelled
to receive from the mortgagee a smaller portion of the lot covered by
the originally encumbered title, which lot was partitioned during the
subsistence of the mortgage without the knowledge or authority of the
mortgagor as registered owner. This formulation is disingenuous,
baselessly assuming, as it does, as an admitted fact that the mortgagor
is the owner of the mortgaged property in its entirety. Indeed, it has
not become a salient issue in this case since the mortgagor was not the
owner of the entire mortgaged property in the first place.
Issuance of OCT No. P-153(M), improper
It is a glaring fact that OCT No. P-153(M) covering the property
mortgaged was in the name of Eduardo, without any annotation of any
prior disposition or encumbrance. However, the property was
sufficiently shown to be not entirely owned by Eduardo as evidenced
by the Kasulatan. Readily apparent upon perusal of the records is that
the OCT was issued in 1976, long after the Kasulatan was executed way
back in 1954. Thus, a portion of the property registered in Eduardo's
name arising from the grant of free patent did not actually belong to
him. The utilization of the Torrens system to perpetrate fraud cannot
be accorded judicial sanction.
Time and again, this Court has ruled that the principle of indefeasibility
of a Torrens title does not apply where fraud attended the issuance of
the title, as was conclusively established in this case. The Torrens title
does not furnish a shied for fraud. 47 Registration does not vest title. It
is not a mode of acquiring ownership but is merely evidence of such
title over a particular property. It does not give the holder any better
right than what he actually has, especially if the registration was done
in bad faith. The effect is that it is as if no registration was made at all.
48 In fact, this Court has ruled that a decree of registration cut off or
extinguished a right acquired by a person when such right refers to a
lien or encumbrance on the land — not to the right of ownership
thereof — which was not annotated on the certificate of title issued
thereon. 49
Issuance of TCT Nos. T-9326-P(M)
and T-9327-P(M), Valid
The validity of the issuance of two TCTs, one for the portion sold to the
predecessor-in-interest of the Cruzes and the other for the portion
retained by petitioners, is readily apparent from Section 53 of the
Presidential Decree (P.D.) No. 1529 or the Property Registration Decree.
It provides:
SEC 53. Presentation of owner's duplicate upon entry of new certificate.
— No voluntary instrument shall be registered by the Register of
Deeds, unless the owner's duplicate certificate is presented with such
instrument, except in cases expressly provided for in this Decree or
upon order of the court, for cause shown. IDCcEa
The production of the owner's duplicate certificate, whenever any
voluntary instrument is presented for registration, shall be conclusive
authority from the registered owner to the Register of Deeds to enter a
new certificate or to make a memorandum of registration in
accordance with such instrument, and the new certificate or
memorandum shall be binding upon the registered owner and upon all
persons claiming under him, in favor of every purchaser for value and
in good faith.
In all cases of registration procured by fraud, the owner may pursue all
his legal and equitable remedies against the parties to such fraud
without prejudice, however, to the rights of any innocent holder of the
decree of registration on the original petition or application, any
subsequent registration procured by the presentation of a forged
duplicate certificate of title, or a forged deed or instrument, shall be
null and void. (emphasis supplied)
Petitioners argue that the issuance of the TCTs violated the third
paragraph of Section 53 of P.D. No. 1529. The argument is baseless. It
must be noted that the provision speaks of forged duplicate certificate
of title and forged deed or instrument. Neither instance obtains in this
case. What the Cruzes presented before the Register of Deeds was the
very genuine owner's duplicate certificate earlier deposited by Banaag,
Eduardo's attorney-in-fact, with RBSP. Likewise, the instruments of
conveyance are authentic, not forged. Section 53 has never been
clearer on the point that as long as the owner's duplicate certificate is
presented to the Register of Deeds together with the instrument of
conveyance, such presentation serves as conclusive authority to the
Register of Deeds to issue a transfer certificate or make a
memorandum of registration in accordance with the instrument.
The records of the case show that despite the efforts made by the
Cruzes in persuading the heirs of Eduardo to allow them to secure a
separate TCT on the claimed portion, their ownership being amply
evidenced by the Kasulatan and Sinumpaang Salaysay where Eduardo
himself acknowledged the sales in favor of Ricardo, the heirs adamantly
rejected the notion of separate titling. This prompted the Cruzes to
approach the bank manager of RBSP for the purpose of protecting their
property right. They succeeded in persuading the latter to lend the
owner's duplicate certificate. Despite the apparent irregularity in
allowing the Cruzes to get hold of the owner's duplicate certificate, the
bank officers consented to the Cruzes' plan to register the deeds of sale
and secure two new separate titles, without notifying the heirs of
Eduardo about it.
Further, the law on the matter, specifically P.D. No. 1529, has no
explicit requirement as to the manner of acquiring the owner's
duplicate for purposes of issuing a TCT. This led the Register of Deeds
of Meycauayan as well as the Central Bank officer, in rendering an
opinion on the legal feasibility of the process resorted to by the Cruzes.
Section 53 of P.D. No. 1529 simply requires the production of the
owner's duplicate certificate, whenever any voluntary instrument is
presented for registration, and the same shall be conclusive authority
from the registered owner to the Register of Deeds to enter a new
certificate or to make a memorandum of registration in accordance
with such instrument, and the new certificate or memorandum shall be
binding upon the registered owner and upon all persons claiming under
him, in favor of every purchaser for value and in good faith.
Quite interesting, however, is the contention of the heirs of Eduardo
that the surreptitious lending of the owner's duplicate certificate
constitutes fraud within the ambit of the third paragraph of Section 53
which could nullify the eventual issuance of the TCTs. Yet we cannot
subscribe to their position.
Impelled by the inaction of the heirs of Eduardo as to their claim, the
Cruzes went to the bank where the property was mortgaged. Through
its manager and legal officer, they were assured of recovery of the
claimed parcel of land since they are the successors-in-interest of the
real owner thereof. Relying on the bank officers' opinion as to the
legality of the means sought to be employed by them and the
suggestion of the Central Bank officer that the matter could be best
settled between them and the bank, the Cruzes pursued the titling of
the claimed portion in the name of Ricardo. The Register of Deeds
eventually issued the disputed TCTs.
The Cruzes resorted to such means to protect their interest in the
property that rightfully belongs to them only because of the bank
officers' acquiescence thereto. The Cruzes could not have secured a
separate TCT in the name of Ricardo without the bank's approval.
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. 50 The highest
degree of diligence is expected, and high standards of integrity and
performance are even required of it. 51
Indeed, petitioners contend that the mortgagee cannot question the
veracity of the registered title of the mortgagor as noted in the owner's
duplicate certificate, and, thus, he cannot deliver the certificate to such
third persons invoking an adverse, prior, and unregistered claim against
the registered title of the mortgagor. The strength of this argument is
diluted by the peculiar factual milieu of the case. HcSaTI
A mortgagee can rely on what appears on the certificate of title
presented by the mortgagor and an innocent mortgagee is not
expected to conduct an exhaustive investigation on the history of the
mortgagor's title. This rule is strictly applied to banking institutions. A
mortgagee-bank must exercise due diligence before entering into said
contract. Judicial notice is taken of the standard practice for banks,
before approving a loan, to send representatives to the premises of the
land offered as collateral and to investigate who the real owners
thereof are. 52
Banks, indeed, should exercise more care and prudence in dealing even
with registered lands, than private individuals, as their business is one
affected with public interest. Banks keep in trust money belonging to
their depositors, which they should guard against loss by not
committing any act of negligence that amounts to lack of good faith.
Absent good faith, banks would be denied the protective mantle of the
land registration statute, Act 496, which extends only to purchasers for
value and good faith, as well as to mortgagees of the same character
and description. 53 Thus, this Court clarified that the rule that persons
dealing with registered lands can rely solely on the certificate of title
does not apply to banks. 54
Bank Liable for Nominal Damages
Of deep concern to this Court, however, is the fact that the bank lent
the owner's duplicate of the OCT to the Cruzes when the latter
presented the instruments of conveyance as basis of their claim of
ownership over a portion of land covered by the title. Simple
rationalization would dictate that a mortgagee-bank has no right to
deliver to any stranger any property entrusted to it other than to those
contractually and legally entitled to its possession. Although we cannot
dismiss the bank's acknowledgment of the Cruzes' claim as legitimized
by instruments of conveyance in their possession, we nonetheless
cannot sanction how the bank was inveigled to do the bidding of virtual
strangers. Undoubtedly, the bank's cooperative stance facilitated the
issuance of the TCTs. To make matters worse, the bank did not even
notify the heirs of Eduardo. The conduct of the bank is as dangerous as
it is unthinkably negligent. However, the aspect does not impair the
right of the Cruzes to be recognized as legitimate owners of their
portion of the property.
Undoubtedly, in the absence of the bank's participation, the Register of
Deeds could not have issued the disputed TCTs. We cannot find fault
on the part of the Register of Deeds in issuing the TCTs as his authority
to issue the same is clearly sanctioned by law. It is thus ministerial on
the part of the Register of Deeds to issue TCT if the deed of conveyance
and the original owner's duplicate are presented to him as there
appears on the face of the instruments no badge of irregularity or
nullity. 55 If there is someone to blame for the shortcut resorted to by
the Cruzes, it would be the bank itself whose manager and legal officer
helped the Cruzes to facilitate the issuance of the TCTs.
The bank should not have allowed complete strangers to take
possession of the owner's duplicate certificate even if the purpose is
merely for photocopying for a danger of losing the same is more than
imminent. They should be aware of the conclusive presumption in
Section 53. Such act constitutes manifest negligence on the part of the
bank which would necessarily hold it liable for damages under Article
1170 and other relevant provisions of the Civil Code. 56
In the absence of evidence, the damages that may be awarded may be
in the form of nominal damages. Nominal damages are adjudicated in
order that a right of the plaintiff, which has been violated or invaded by
the defendant, may be vindicated or recognized, and not for the
purpose of indemnifying the plaintiff for any loss suffered by him. 57
This award rests on the mortgagor's right to rely on the bank's
observance of the highest diligence in the conduct of its business. The
act of RBSP of entrusting to respondents the owner's duplicate
certificate entrusted to it by the mortgagor without even notifying the
mortgagor and absent any prior investigation on the veracity of
respondents' claim and character is a patent failure to foresee the risk
created by the act in view of the provisions of Section 53 of P.D. No.
1529. This act runs afoul of every bank's mandate to observe the
highest degree of diligence in dealing with its clients. Moreover, a
mortgagor has also the right to be afforded due process before
deprivation or diminution of his property is effected as the OCT was
still in the name of Eduardo. Notice and hearing are indispensable
elements of this right which the bank miserably ignored. IcESDA
Under the circumstances, the Court believes the award of P50,000.00
as nominal damages is appropriate.
Five-Year Prohibition against alienation
or encumbrance under the Public Land Act
One vital point. Apparently glossed over by the courts below and the
parties is an aspect which is essential, spread as it is all over the record
and intertwined with the crux of the controversy, relating as it does to
the validity of the dispositions of the subject property and the
mortgage thereon. Eduardo was issued a title in 1976 on the basis of
his free patent application. Such application implies the recognition of
the public dominion character of the land and, hence, the five (5)-year
prohibition imposed by the Public Land Act against alienation or
encumbrance of the land covered by a free patent or homestead 58
should have been considered. 2204, as depicted in the approved plan covering the lot, marked as
Exhibit "A", and to issue a new title covering the said portion in the
The deed of sale covering the fifty (50)-square meter right of way name of the petitioners at the expense of the petitioners. No costs.
executed by Eduardo on 18 March 1981 is obviously covered by the IcDCaS
proscription, the free patent having been issued on 8 October 1976.
However, petitioners may recover the portion sold since the SO ORDERED.
prohibition was imposed in favor of the free patent holder. In
Philippine National Bank v. De los Reyes, 59 this Court ruled squarely on ||| (Heirs of Manlapat v. Court of Appeals, G.R. No. 125585, [June 8,
the point, thus: 2005], 498 PHIL 453-478)
While the law bars recovery in a case where the object of the contract
is contrary to law and one or both parties acted in bad faith, we cannot
here apply the doctrine of in pari delicto which admits of an exception,
namely, that when the contract is merely prohibited by law, not illegal
per se, and the prohibition is designed for the protection of the party
seeking to recover, he is entitled to the relief prayed for whenever
public policy is enhanced thereby. Under the Public Land Act, the
prohibition to alienate is predicated on the fundamental policy of the
State to preserve and keep in the family of the homesteader that
portion of public land which the State has gratuitously given to him,
and recovery is allowed even where the land acquired under the Public
Land Act was sold and not merely encumbered, within the prohibited
period. 60
The sale of the 553 square meter portion is a different story. It was
executed in 1954, twenty-two (22) years before the issuance of the
patent in 1976. Apparently, Eduardo disposed of the portion even
before he thought of applying for a free patent. Where the sale or
transfer took place before the filing of the free patent application,
whether by the vendor or the vendee, the prohibition should not be
applied. In such situation, neither the prohibition nor the rationale
therefor which is to keep in the family of the patentee that portion of
the public land which the government has gratuitously given him, by
shielding him from the temptation to dispose of his landholding, could
be relevant. Precisely, he had disposed of his rights to the lot even
before the government could give the title to him.
The mortgage executed in favor of RBSP is also beyond the pale of the
prohibition, as it was forged in December 1981 a few months past the
period of prohibition.
WHEREFORE, the Decision of the Court of Appeals is AFFIRMED, subject
to the modifications herein. Respondent Rural Bank of San Pascual is
hereby ORDERED to PAY petitioners Fifty Thousand Pesos (P50,000.00)
by way of nominal damages. Respondents Consuelo Cruz and Rosalina
Cruz-Bautista are hereby DIVESTED of title to, and respondent Register
of Deeds of Meycauayan, Bulacan is accordingly ORDERED to
segregate, the portion of fifty (50) square meters of the subject Lot No.
Vagilidad vs. Vagalidad
G.R. No. 161136
Facts:
A parcel of land was bought by Gabino and later on without the
consent of the wife of Gabino was transferred to Wilfredo without any
payment in conformity that Wilfredo can use the lot to as a collateral
to obtain loan. And when the loan was paid and the mortgaged was
cancelled. Spouses GABINO and Ma. Dorothy Vagilidad (hereafter
DOROTHY), as plaintiffs, filed a Complaint for Annulment of Document,
Reconveyance and Damages. But Wilfredo claimed that they are the
owner the land because they already bought it to from the former
owner who sold the same to Gabino. Then Gabino claimed that
Wilfredo resort to fraud to obtain ownership of the said property.
Issue: Who is the rightful owner of the property?
Ruling:
The contract of sale between LORETO and GABINO, JR. on May 12,
1986 could be legally recognized. At the time of sale, LORETO had an
aliquot share of one-third of the 4,280-square meter property or some
1,426 square meters but sold some 1,604 square meters to GABINO, JR.
We have ruled that if a co-owner sells more than his aliquot share in
the property, the sale will affect only his share but not those of the
other co-owners who did not consent to the sale.Be that as it may, the
co-heirs of LORETO waived all their rights and interests over Lot No.
1253 in favor of LORETO in an Extrajudicial Settlement of Estate dated
January 20, 1987. They declared that they have previously received
their respective shares from the other estate of their parents ZOILO
and PURIFICACION. The rights of GABINO, JR. as owner over Lot No.
1253-B are thus preserved. These rights were not effectively
transferred by LORETO to WILFREDO in the Deed of Absolute Sale of
Portion of Land. Nor were these rights alienated from GABINO, JR.
upon the issuance of the title to the subject property in the name of
WILFREDO. Registration of property is not a means of acquiring
ownership. Its alleged incontrovertibility cannot be successfully
invoked by WILFREDO because certificates of title cannot be used to
protect a usurper from the true owner or be used as a shield for the
commission of fraud.
On the issue of prescription, petitioners contend that the appellate
court failed to apply the rule that an action for reconveyance based on
fraud prescribes after the lapse of four years. They cite Article 1391 of
the Civil Code and the case of Gerona v. De Guzman.
We disagree. This Court explained in Salvatierra v. Court of Appeals,
viz.:
An action for reconveyance based on an implied or constructive trust
must perforce prescribe in ten years and not otherwise. A long line of
decisions of this Court, and of very recent vintage at that, illustrates
this rule. Undoubtedly, it is now well-settled that an action for
reconveyance based on an implied or constructive trust prescribes in
ten years from the issuance of the Torrens title over the property. The
only discordant note, it seems, is Balbin v. Medalla, which states that
the prescriptive period for a reconveyance action is four years.
However, this variance can be explained by the erroneous reliance on
Gerona v. de Guzman. But in Gerona, the fraud was discovered on June
25, 1948, hence Section 43(3) of Act No. 190 was applied, the New Civil
Code not coming into effect until August 30, 1950 xxx. It must be
stressed, at this juncture, that Article 1144 and Article 1456 are new
provisions. They have no counterparts in the old Civil Code or in the old
Code of Civil Procedure, the latter being then resorted to as legal basis
of the four-year prescriptive period for an action for reconveyance of
title of real property acquired under false pretenses.
[Thus,] under the present Civil Code, xxx just as an implied or
constructive trust is an offspring of xxx Art. 1456, xxx so is the
corresponding obligation to reconvey the property and the title thereto
in favor of the true owner. In this context, and vis-á-vis prescription,
Article 1144 of the Civil Code is applicable[, viz.:]
Art. 1144. The following actions must be brought within ten
years from the time the right of action accrues:
1) Upon a written contract;
2) Upon an obligation created by law;
3) Upon a judgment.
National Grains Authority v. IAC
Facts:
On August 23, 1979, private respondent Leon Soriano offered to sell
palay grains to NFA through William Cabal, the provincial manager in
Tuguegarao. The documents submitted were processed, and he was
given a quota of 2,640 cavans, which is the maximum number of cavans
he may sell to NFA. On the same day and on the following day, Soriano
delivered 630 cavans, which were no rebagged, classified and weighed.
When he demanded payment, he was told that payment will be held in
abeyance since Mr. Cabal was still investigating on an information
received that Soriano was not a bona fide farmer. Instead of
withdrawing the palay, Soriano insisted that the palay grains be
delivered and paid. He filed a complaint for specific performance.
Petitioners contend that the delivery was merely made for the purpose
of offering it for sale because until the grains were rebagged, classified
and weighed, they are not considered sold.
Issue:
Whether there was a perfected sale
Held:
Soriano initially offered to sell palay grains produced in his farmland to
NFA. When the latter accepted the offer by noting in Soriano's Farmer's
Information Sheet a quota of 2,640 cavans, there was already a
meeting of the minds between the parties. The object of the contract,
being the palay grains produced in Soriano's farmland and the NFA was
to pay the same depending upon its quality. The fact that the exact
number of cavans of palay to be delivered has not been determined
does not affect the perfection of the contract. Article 1349 of the New
Civil Code provides: ". . .. The fact that the quantity is not determinate
shall not be an obstacle to the existence of the contract, provided it is
possible to determine the same, without the need of a new contract
between the parties." In this case, there was no need for NFA and
Soriano to enter into a new contract to determine the exact number of
cavans of palay to be sold. Soriano can deliver so much of his produce
as long as it does not exceed 2,640 cavans. From the moment the
contract of sale is perfected, it is incumbent upon the parties to comply
with their mutual obligations or "the parties may reciprocally demand
performance" thereof.
National Grains Authority v. IAC (1989)
Petitioners: Nat’l Grains Authority and William Cabal
Respondents: IAC and Leon Soriano
Ponente: Medialdea, J.
Doctrine: The fact that the exact number of objects to be delivered has
not been determined does not affect the perfection of the contract.
Short version: Seller offers to sell palay to buyer. Buyer gives seller a
quota of 2640 palays. Seller delivers 630 palays. Seller demands
payment. Buyer tells seller to withdraw the palay he delivered because
Seller was allegedly not a bonafide farmer. Also, since the palay were
not rebagged, as is the practice of palay procurement process which
signifies acceptance, there was no acceptance. SC says there was
acceptance and a perfected contract of sale. When buyer accepted the
offer by noting a quota of 2,640 cavans, there was already a meeting of
the minds.
The seller (Leon Soriano), offered to sell palay grains to the buyer (NGA
which is now the NFA) through William Cabal,
the provincial manager of the NFA.

Seller Soriano submitted the documents required by the buyer NFA for
pre-qualifying as a seller. His documents were processed and he was
given a quota of 2640 cavans of palay.
Seller Soriano then delivered 630 cavans of palay.
The palay were not rebagged, classified, and weighed.
When Seller Soriano demanded payment, he was informed that it will
be held in abeyance because:
o Cabal was still investigating an information he received that
Seller Soriano was not a bona fide farmer; and
o The palay delivered was not produced from Seller Soriano’s
farmland but was taken from a warehouse of a rice trader.
Buyer NFA then wrote Seller Soriano advising to withdraw the cavans
because it was found that Seller Soriano is not a bona fide farmer.
Instead of withdrawing the cavans, Seller Soriano insisted for the
payment.
Seller Soriano then filed a complaint for specific performance and/or
collection of money with damages.
Meanwhile, upon agreement, the cavans of palay were withdrawn
from the warehouse of Buyer NFA.
CFI and CA ruled in favor of Seller Soriano.
NFA contends:
o The cavans of palay delivered by Seller Soriano was made
for the purpose of having it offered for sale
o Under the procedure prevailing in matters of palay
procurement, rebagging is the initial operative act signifying
acceptance, and acceptance will be considered complete only
after the preparation of the Warehouse Stock Receipt.
Since the delivered cavans did not undergo such procedure, there was
not acceptance of the offer. There was, therefore, no consent.
Issue: Was there a contract of sale?
Held: Yes.
Ratio:
In this case, Seller Soriano initially offered to sell palay produced in his
farmland to NFA. When buyer NFA accepted the
offer by noting in Soriano's Farmer's Information Sheet a quota of
2,640 cavans, there was already a meeting of the minds
between the parties.
The object of the contract, the palay grains produced in Soriano's
farmland. The NFA was to pay, depending upon its
quality.
o The fact that the exact number of cavans of palay to be
delivered has not been determined does not affect the
perfection of the contract. NCC 1349 of the New Civil Code
provides: "The fact that the quantity is not determinate shall
not be an obstacle to the existence of the contract, provided
it is possible to determine the same, without the need of a
new contract between the parties."
o In this case, there was no need for NFA and Soriano to
enter into a new contract to determine the exact number of
cavans of palay to be sold. Soriano can deliver so much of his
produce as long as it does not exceed 2,640
cavans.
Re: Contention that there was no acceptance, therefore consent is
absent
Contention is incorrect. Sale is a consensual contract, there is
perfection when there is consent upon the subject matterand price,
even if neither is delivered. This is provided by NCC 1475.
The acceptance referred to by NCC 1475 which determines consent is
the acceptance of the one party by the other and not of the goods
delivered as contended by petitioners.
And, from the moment the contract of sale is perfected, it is incumbent
upon the parties to comply with their mutual
obligations or “the parties may reciprocally demand performance.” (2nd
par, NCC 1475)
The CFI and the CA also found that the seller was a bona fide farmer,
thus qualified to sell palay grains to NFA.
Decision affirmed.
TAÑEDO V. CA (January 22, 1996)

FACTS:
Lazaro Tañedo executed a deed of absolute sale in favor of Ricardo
Tañedo and Teresita Barrera in which he conveyed a parcel of land
which he will inherit. Upon the death of his father he executed an
affidavit of conformity to reaffirm the said sale. He also executed
another deed of sale in favor of the spouses covering the parcel of land
he already inherited. Ricardo registered the last deed of sale in the
registry of deeds in their favor.

Ricardo later learned that Lazaro sold the same property to his children
through a deed of sale.

ISSUE:
WON the Tañedo spouses have a better right over the property against
the children of Lazaro Tañedo.

HELD:
Since a future inheritance generally cannot be a subject of a contract,
the deed of sale and the affidavit of conformity made by Lazaro has no
effect. The subject of dispute therefore is the deed of sale made by him
in favor of spouses Tañedo and another to his children after he already
legally acquired the property.

Thus, although the deed of sale in favor of private respondents was

later than the one in favor of petitioners, ownership would vest in the
former because of the undisputed fact of registration. On the other
hand, petitioners have not registered the sale to them at all.

Petitioners contend that they were in possession of the property and

that private respondents never took possession thereof. As between
two purchasers, the one who registered the sale in his favor has a
preferred right over the other who has not registered his title, even if
the latter is in actual possession of the immovable property.
[ G.R. No. 131679, February 01, 2000 ]
CAVITE DEVELOPMENT BANK AND FAR EAST BANK AND TRUST
COMPANY, PETITIONERS, VS. SPOUSES CYRUS LIM AND LOLITA CHAN
LIM AND COURT OF APPEALS, RESPONDENTS.
Facts:
Rodolfo Guansing obtained a loan from Cavite Development
Bank(CDB) and offered as security his real estate property. For failing
to pay his loan the property was foreclosed and title was issued in the
name of CDB.
Now here comes Lolita Chan Lim, the respondent on this case who
offered to buy the property from CDB. Mrs. Lim paid P30,000.00 as
option money and was issued receipt by CDB. However , Mrs. Lim later
discovered that the title of the property is being disputed by Perfecto
Guansing, the father of the mortgagee Rodolfo Guansing. In fact, in a
separate case it was declared that Rodolfo fraudulently secured title to
the said mortgaged property and title to it was restored to Perfecto .
The decision has since become final and executory.
Aggrieved by what she considered a serious misrepresentation by CDB
and its mother company FEBTC, on their ability to sell the subject
property, filed an action for specific performance and damage against
petitioners.
Issues: Was the sale between CDB and Mrs. Lim perfected?
Is CDB liable for damges?
Is the sale valid?
Decision: Contracts are not defined by the parties thereto but by the
principles of law. In determining the nature of a contract, the courts
are not bound by the name or title given to it by the contracting
parties. In the case at bar, the sum of P30,000.00, although
denominated in the offer to purchase as “option money’ is actually in
the nature of “earnest money’ or down payment when considered
with the other terms of the offer.
It is because when Mrs. Lim offered to buy the property the 10% so
called “option money” forms part of the purchase price as
contemplated under Art. 1482 of the Civil Code. It is clear then that the
parties in this case actually entered into a contract of sale, partially
consummated as to the payment of the price.
CDB cannot invoke the defense that it is a mortgagee in good faith. It
only applies to private individuals and not to banking institutions. They
cannot be excused from the duty of exercising the due diligence
required of banking institutions. It is standard practice for banks,
before approving a loan, to investigate who are the real owners
thereof. Banking is affected with public interest that is why they are
expected to exercise more care and prudence than private individuals.
Considering CDB’s negligence it is therefore liable for damages.
As to its validity, the doctrine of “Nemo dat quod non habet” applies.
One cannot give what one does not have. The seller not being the
owner the sale is void.
[ G.R. NO. 167320, January 30, 2007 ]
HEIRS OF SALVADOR HERMOSILLA, NAMELY: ADELAIDA H. DOLLETON,
et al VS. SPOUSES JAIME REMOQUILLO AND LUZ REMOQUILLO
FACTS:
Subject of the issue is a portion of a lot located in Poblacion, San Pedro,
Laguna. The Republic of the Philippines acquired through purchase the
San Pedro Tunasan Homesite. Apolinario Hermosilla, who was
occupying a lot in the said homesite until his death in 1964, caused the
subdivision of this lot into two, Lot 12 and Lot 19. He transferred Lot 19
to his grandson Jaime Remoquillo and Lot 12 to his son Salvador
Hermosilla. In 1972, Jaime and Salvador made a Kasunduan whereby
Jaime transferred ownership of the 65 sq.m. in Lot 19 in favor of
Salvador. In 1986, the National Housing Authority awarded Lot 19 to
Jaime, for which he and his wife were issued a title.
The petitioners, heirs of Salvador, filed an action for annulment of the
title on the ground of fraud with damages against Jaime and his
spouse, alleging that by the virtue of the Kasunduan, the lot in
controversy was already conveyed to Salvador.
The trial court found the Kasunduan a perfected contract of sale,
declared the petitioners as co-owners of the subject property.
The CA, however, reversed the trial court’s decision, rendering the
Kasunduan void because at the time of its execution , the lot was still
owned by the Republic of the Philippines. No right was transferred to
both Jaime and Salvador. The CA held that the action had prescribed.
ISSUE:
Can the petitioners seek the reconveyance of the property based on
fraud?
HELD:
No. It is true that petitioners’ houses occupy property. Since there was
no actual need to reconvey the property as petitioners remained in
possession of the property, the action took the nature of a suit
for quieting of title, it having been filed to enforce an alleged implied
trust after Jaime refused to segregate title over Lot 19. One who is in
actual possession of a piece of land claiming to be the owner thereof
may wait until his possession is disturbed or his title is attacked before
taking steps to vindicate his right. From the body of the complaint, this
type of action denotes imprescriptibility. The lots can not be
transferred to both Jaime and Salvador since the Lots is owned by The
Republic of The Philippines. Nemo dat quod non habet. Nobody can
give what he does not possess. Jaime could not thus have transferred
anything to Salvador.
Moreover, since the property was previously a public land, petitioners
have no personality to impute fraud or misrepresentation against the
State or violation of the law.
Also, for an action for reconveyance based on fraud to prosper, the
petitioners must prove by clear and convincing evidence not only his
title to the property but also the fact of fraud. Fraud is never
presumed. Intentional acts to deceive and deprive another of his right,
or in some manner injure him must be specifically alleged and proved
by the petitioners by clear and convincing evidence. Petitioners failed
to discharge this burden.
HEIRS OF ARTURO REYES VS SOCCO-BELTRAN (G.R. No. 176474
November 27, 2008)
FACTS: The subject property in this case is a parcel of land originally
identified as Lot No. 6-B (with an area of 360 square meters).It was
originally part of a larger parcel of land, measuring 1,022 square
metersallocated to the Spouses Marcelo Laquian and ConstanciaSocco
(Spouses Laquian). Upon their death, they left the original parcel of
landto Constancia‘ssiblings(Filomena,Isabel, Miguel R. Socco, and Elena
Socco-Beltran). Pursuant to an unnotarized document entitled
―Extrajudicial Settlement of the Estate of the Deceased Constancia R.
Socco,‖ executed by Constancia‘s heirs sometime in 1965, the parcel of
land was partitioned into three lots—Lot No. 6-A, Lot No.6-B, and Lot
No. 6-C. The subject property, Lot No. 6-B, was adjudicated to
respondent Elena Socco-Beltran, but no title had been issued in her
name.
So respondent Socco-Beltran filed an application for the purchase of
Lot No. 6-B before the DAR, alleging that it was adjudicated in her favor
in the extra-judicial settlement of ConstanciaSocco‘s estate.
Now, petitioners, the heirs of the late Arturo Reyes, filed their protest
to respondent‘s petition before the DAR on the ground that the subject
property was sold by respondent‘s brother, Miguel R. Socco, in favor of
their father, Arturo Reyes, as evidenced by the Contract to Sell, dated 5
September 1954. Petitioners averred that they took physical possession
of the subject property in 1954 and had been uninterrupted in their
possession of the said property since then.
Investigation was conducted by the legal officer Pinlac, and in the end,
the legal officer recommended the approval of respondent‘s petition
for issuance of title over the subject property, ruling that respondent
was qualified to own the subject property pursuant to Article 1091 of
the New Civil Code. However, DAR Regional Director Mr. Acosta,
dismissed respondent‘s petition for issuance of title over the subject
property on the ground that respondent was not an actual tiller and
had abandoned the said property for 40 years. It went up to the
Department Secretary, then to the OP.
Aggrieved, the petitioners went the to the Court of Appeals but it
promulgated its decision, affirming the that of the Office of the
President. It held that petitioners could not have been actual occupants
of the subject property, since actual occupancy requires the positive
act of occupying and tilling the land, not just the introduction of an
unfinished skeletal structure thereon. The Contract to Sell on which
petitioners based their claim over the subject property was executed
by Miguel Socco, who was not the owner of the said property and,
therefore, had no right to transfer the same.
ISSUES: 1. WON title to the property was transferred to petitioners by
virtue of the Contract to Sell executed by Miguel Socco. (NO)
2. WON petitioners are in OCEAN possession of the property since 1954
(more than 30 years). (NO)
HELD:
Petitioner‘s claim over the subject property is anchored on the
Contract to Sell executed between Miguel Socco and Arturo Reyes.
Petitioners additionally allege that they and their predecessor-in-
interest, Arturo Reyes, have been in possession of the subject lot since
1954 for an uninterrupted period of more than 40 years.
Petitioners cannot derive title to the subject property by virtue of the
Contract to Sell. It was unmistakably stated in the Contract and made
clear to both parties thereto that the vendor, Miguel R. Socco, was not
yet the owner of the subject property and was merely expecting to
inherit the same as his share as a co-heir of Constancia‘s estate. It was
also declared in the Contract itself that Miguel R. Socco‘s conveyance
of the subject to the buyer, Arturo Reyes, was a conditional sale. It is,
therefore, apparent that the sale of the subject property in favor of
Arturo Reyes was conditioned upon the event that Miguel Socco would
actually inherit and become the owner of the said property. Absent
such occurrence, Miguel R. Socco never acquired ownership of the
subject property which he could validly transfer to Arturo Reyes.
Petitioners, nevertheless, insist that they physically occupied the
subject lot for more than 30 years and, thus, they gained ownership of
the property through acquisitive prescription.
In the case of San Miguel Corporation it was underscored that open,
continuous, exclusive, and notorious occupation of property for more
than 30 years must be no less than conclusive, such quantum of proof
being necessary to avoid the erroneous validation of actual fictitious
claims of possession over the property that is being claimed. In the
present case, the evidence presented by the petitioners falls short of
being conclusive. Apart from their self-serving statement that they took
possession of the subject property, the only proof offered to support
their claim was a general statement made Barangay Captain Carlos
Gapero, certifying that Arturo Reyes was the occupant of the subject
property ―since peace time and at present.
In contrast, respondent‘s claim over the subject property is backed by
sufficient evidence. Her predecessors-in-interest, the spouses Laquian,
have been identified as the original allocatees who have fully paid for
the subject property. The subject property was allocated to respondent
in the extrajudicial settlement by the heirs of Constancia‘s estate which
its authenticity or legality was never put into question. Moreover,
respondent has continuously paid for the realty tax due on the subject
property, a fact which, though not conclusive, served to strengthen her
claim over the property.

Under Article 1459 of the Civil Code on contracts of sale, ―The thing
must be licit and the vendor must have a right to transfer ownership
thereof at the time it is delivered.‖ The law specifically requires that
the vendor must have ownership of the property at the time it is
delivered.

Petitioners claim that the property was constructively delivered to

them in 1954 by virtue of the Contract to Sell. However, as already
pointed out by this Court, it was explicit in the Contract itself that, at
the time it was executed, Miguel R. Socco was not yet the owner of the
property and was only expecting to inherit it. Hence, there was no valid
sale from which ownership of the subject property could have
transferred from Miguel Socco to Arturo Reyes. Without acquiring
ownership of the subject property, Arturo Reyes also could not have
conveyed the same to his heirs, herein petitioners.