SECOND DIVISION

ENCARNACION L. CUIZON and

SALVADOR CUIZON,
Petitioners,
- versus -

G.R. No. 143027

Present:
PUNO, Chairman,
AUSTRIA-MARTINEZ,
CALLEJO, SR.,
TINGA, and
CHICO-NAZARIO, JJ.

MERCEDES C. REMOTO,
LEONIDA R. MEYNARD,
CELERINA R. ROSALES and
Promulgated:
REMEDIOS C. REMOTO,
Respondents.
October 11, 2005
x------------------------------------------------x
DECISION
AUSTRIA-MARTINEZ, J.:

The parties in this case are vying for ownership of a 4,300 square
meter-land located in Barangay Basilisa, Remedios T. Romualdez, Agusan
del Norte.
Petitioners-spouses Encarnacion L. Cuizon and Salvador Cuizon rely
on Transfer Certificate of Title (TCT) No. RT-3121 in the name of
Encarnacion L. Cuizon, married to Salvador Cuizon, issued by the Registry
of Deeds of Agusan del Norte on March 15, 1984, [1] pursuant to a notarized
Extra-Judicial Settlement with Sale dated August 3, 1983 (1983 ExtraJudicial Settlement with Sale) executed by the heirs of Placida Tabada-

Lambo (Placida), wherein they adjudicated unto themselves the one-fourth

share of Placida, and, at the same time, sold said portion to their co-heir,
Encarnacion L. Cuizon.[2] TCT No. RT-3121 is a transfer from TCT No. RT183 which originally covers 16 hectares in the name of Placida (married to
Gervacio Lambo), Eugenio Tabada, Raymunda Tabada and Patrecia
Tabada, each being one-fourth shareowner.[3]
On the other hand, respondents have in their favor a notarized Deed
of Sale of Real Property dated September 19, 1968, (1968 Deed of Sale)
involving a portion of the same property covered by TCT No. RT-183,
measuring 4,300 square meters, executed by Placida in favor of Angel
Remoto (Angel), husband of respondent Mercedes C. Remoto, and father
of the other respondents, Leonida R. Meynard, Celerina R. Rosales and
Remedios C. Remoto.[4]
In a Decision dated March 9, 1990 rendered by the Regional Trial
Court of Butuan City (Branch 3) in Civil Case No. 2846, which is an action
for reconveyance filed by respondents against petitioners on August 13,
1984, the trial court ruled in favor of respondents and ordered that the
property be reconveyed to them. The dispositive portion of the decision
reads:
Wherefore, judgment is rendered in favor of herein
plaintiffs Mercedes Remoto and children Celerino R. Rosales,
Leonida R. Meynard, Candelaria and Remedios both surnamed
Remoto, and against defendant-spouses Salvador and
Encarnacion Cuizon ordering the latter:
1) To immediately reconvey the lot in question to herein
plaintiffs;
2) To pay the sum of Two Thousand (P2,000.00) Pesos
as litigation expenses;

3) To pay the sum of Five Thousand (P5,000.00) Pesos

as attorneys fees; and
4) To pay the costs (sic) of suit.
Done in Chambers this 9th day of March, 1990, at Butuan
City, Philippines.[5]
In awarding the property to respondents, the trial court made the
following findings and conclusion, which the Court quotes with
approval, viz.:
. . . a careful examination of the evidence on record
shows that the evidence of the plaintiffs is strong, substantial
convincing and worthy of belief than that of the defendants. The
plaintiffs can legally claim possession and ownership of the lot
in dispute covered by the onepaged duly notarized but
unregistered Deed of Sale of Real Property (Exh. A, Rollo, p. 45
or 89). A perusal of this document discloses that it was duly
notarized and signed by vendor Placida Tabada, together with
[h]usband Gervacio Lambo, and vendee Angel Remoto.
Incidentally, the defendants-spouses utterly failed to prove any
defect and irregularity in the exec[u]tion of this Exh. A.
It is the posture of the defendants-spouses that this state
(sic) and unregistered deed of sale (Exh. A) has lost its due
execution and genuineness and the fact of its being a public
document; that it cannot defeat the duly registered Deed of
Extrajudicial Settlement with Absolute Sale (Exh. 1-B); and that
the issuance of TCT No. RT-3121 in favor of defendantsspouses (Exh. 3) conferred the latter a better right to the
litigated lot under the Torrens system.
This Court is not in accord to (sic) these posturings of
defendants-spouses. Exhibit A, which is duly notarized, is a
public document. Although it is not registered, it is still
enforceable and binding not only between the parties but also
their successors-in-interest.

It is likewise [the] stance of defendants-spouses that they

are purchasers in good faith and for value of the lot in question.
This fact is vividly rebutted by the straight forward and credible
testimonies of plaintiffs Mercedes O. Remoto and Candelaria
Remoto. Both testified that it was in September, 1982, not in
1983 as defendant Salvador Cuizon wants this court to believe,
when defendants-spouses went to the residence of the
Remotos and learned of the existence of Exhibit A; that it was
on this occasion that defendants-spouses were actually shown
the document, and that they read and examined the same
(Vide, tsn. December 28, 1984, 284-289; tsn. April 24, 1986, 32,
34-37).
Besides, defendants-spouses could not feign ignorance of
the unrebutted fact that the plaintiffs had enjoyed continuous,
open, adverse and public possession of the litigated lot in the
concept of an owner for a duration of fourteen years or more,
i.e., from September 19, 1968, the date of execution of Exhibit
A, to the present (tsn. December 28, 1984, 283-284) or until
September, 1982 when they became aware of the existence of
Exhibit A. Nor could the defendants-spouses deny the
unrebutted fact that they never had taken possession of the
litigated lot (tsn. id., 274-275).
Despite their knowledge of the existence of the Exhibit A
and of the continuous public and adverse possession for
fourteen years of the lot by the plaintiffs, defendants-spouses
had caused the execution of the Deed of Extrajudicial
Settlement with Sale on August 3, 1983 by the Heirs of Placida
Tabada-Lambo in their favor (Exh. 1-B), and the consequent
issuance of TCT RT-3121 in the name of defendant
Encarnacion-Cuizon (Exh. 3). Hence, defendants-spouses were
buyers in bad faith. They could not pretend a lack of knowledge
of plaintiffs claim and interest in the land. They also acted in
bad faith in the registration of the Deed of Extrajudicial
Settlement with Sale (Exh. 1-B) and in their acquisition of TCT
RT-3121 (Exh. 3).

Since defendants-spouses knew of the existence of the

first deed of sale, Exhibit A, this first unregistered deed of sale
prevails over the registered second deed of sale, Exhibit 1-B.
It is also stressed herein that the claim of defendantsspouses that they bought the disputed lot in 1964 on installment
basis from Placida Tabada and Gervacio Lambo cannot be
given credence. This claim of theirs is self-serving and an
afterthought in their last attempts to bolster their defense. In the
absence of a written document embodying the supposed deed
of sale, the latter is unenforceable contract. This conclusion is
in pursuance to sub-paragraph (e), paragraph 2 of Art. 1403 of
the Civil Code.
Furthermore, it is the submission of the defendantsspouses that Exhibit A is a simulated contract because the
questioned lot was intended for donation as a barrio site. This
submission of their (sic) cannot be sustained in the absence of
a written deed of donation.
In fine, this Court finds and so holds that the Deed of Sale
of Real Property of September 1968 (Exh. A) can be the legal
basis not only of the possession and ownership of the lot in
litigation, but also for the reconveyance of the same in favor of
the plaintiffs.[6]
On appeal by petitioners, docketed as CA-G.R. CV No. 31587, the
Court of Appeals (CA) affirmed the findings and conclusion of the trial court
in its Decision[7]dated December 16, 1999, the dispositive portion of which
reads:
WHEREFORE, foregoing premises considered, the
instant appeal being devoid of any merit in fact and in law, is
hereby ordered DISMISSED; and the decision appealed from
hereby AFFIRMED IN TOTO.
With cost to Defendants-appellants.
SO ORDERED.[8]

Petitioners filed a motion for reconsideration but the CA denied it per

Resolution dated March 31, 2000.[9]
In the present petition for review, petitioners insist that they are the
rightful owners of the property based on TCT No. RT-3121, and that the
1968 Deed of Sale is void, fictitious, unenforceable and has no legal effect.
Petitioners also argue that: (1) the property is covered by TCT No. RT-183
issued on June 21, 1930, and every person dealing with registered land
may safely rely on the correctness of the title; (2) at the time the 1968 Deed
of Sale was executed, no written notice was given to all possible coredemptioners, co-heirs, and co- owners, as provided for under Articles
1620 and 1623 of the Civil Code; (3) respondents possession is ineffectual
against a torrens title; and (4) respondents action is barred by prescription
and laches.[10]
The issue in this case is: who has a better right to the property in
dispute?
As a rule, the Court cannot review the factual findings of the trial court
and the CA in a petition for review on certiorari under Rule 45 of the Rules
of Court.[11] It should be stressed that a review by certiorari under Rule 45 is
a matter of discretion. Under this mode of review, the jurisdiction of the
Court is limited to reviewing only errors of law, not of fact. When
supported by substantial evidence, findings of fact of the trial court
as affirmed by the CA are conclusive and binding on the parties.
[12]
This Court will not review unless there are exceptional
circumstances, viz.: (a) where the conclusion is a finding grounded entirely
on speculation, surmise and conjectures; (b) where the information made is
manifestly mistaken; (c) where there is grave abuse of discretion; (d) where
the judgment is based on a misapplication of facts, and the findings of facts
of the trial court and the appellate court are contradicted by the evidence

on record; and (e) when certain material facts and circumstances had been
overlooked by the trial court which, if taken into account, would alter the
result of the case.[13] There exists no exceptional circumstance in this case
that would warrant a departure from the factual findings of both the trial
court and the CA.
As correctly ruled by both the trial court and the CA, the 1968 Deed of
Sale executed by Placida in favor of Angel should prevail over the 1983
Extra-Judicial Settlement with Sale made by the heirs of Placida in favor of
petitioners-spouses Cuizon. Prior tempore, potior jure. It simply means, He
who is first in time is preferred in right. The only essential requisite of this
rule is priority in time, and the only one who can invoke this is the first
vendee.[14] Records bear the fact that when Placida sold her one-fourth
portion of the property covered by TCT No. RT-183 in 1968, the 1983
Extra-Judicial Settlement with Sale was still inexistent, and more
importantly, said portion was yet to be transferred by succession to
Placidas heirs. The records also show that after Placida sold her portion to
Angel, the latter immediately took possession of the same. Applying the
principle of priority in time, it is clear that Angel, and consequently his heirs,
the respondents herein, have a superior right to the property.
It must be noted that the sale by Placida to Angel is evidenced by a
duly notarized deed of sale. Documents acknowledged before notaries
public are public documents and public documents are admissible in
evidence without necessity of preliminary proof as to their authenticity and
due execution. They have in their favor the presumption of regularity, and to
contradict the same, there must be evidence that is clear, convincing and
more than merely preponderant. [15] Petitioners failed to present any clear
and convincing evidence to prove that the deed of sale is void, fictitious,
unenforceable and has no legal effect.

Petitioners harp on the fact that the 1968 Deed of Sale dated
September 19, 1968, while notarized, was not registered or annotated on
TCT No. RT-183. Petitioners must be reminded that 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. [16] Petitioners are
not third persons within the contemplation of the registration 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. Petitioners are both related to the
original owner of the property, Placida. Petitioner Encarnacion LamboCuizon is an heir of Placida, while Salvador Cuizon is Encarnacions
husband. Hence, registration is not required to bind petitioners.
Furthermore, 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.[17] As was found by the trial court, before petitioners
bought the property in 1983, they went to the Remotos residence in 1982
and were shown a copy of the 1968 Deed of Sale. While petitioners dispute
the year, saying that it was in 1983 and not 1982 when they went to the
Remotos residence, the Court abides by the trial courts finding considering
that it was in the best position to assess the respective testimonies of the
contending claimants.[18]
Petitioners rely heavily on TCT No. RT-3121 issued in their names. In
the first place, the issuance of the title was made pursuant to the 1983
Extra-Judicial Settlement with Sale. At the time this document was entered
into by the heirs of Placida, the latter was no longer the owner of the
property, having earlier sold the same to Angel. No one can give what one

does not have -- nemo dat quod non habet. Accordingly, one can sell only
what one owns or is authorized to sell, and the buyer can acquire no more
than what the seller can transfer legally.[19] Such being the case, the heirs
of Placida did not acquire any right to adjudicate the property unto them
and sell it to Encarnacion.
Whats more, the defense of indefeasibility of the torrens title does not
extend to a transferee who takes the certificate of title with notice of a flaw
in his title. The principle of indefeasibility of title is unavailing where there
was fraud that attended the issuance of the free patents and titles. [20] As
previously noted, petitioners knew of the existence of the 1968 Deed of
Sale as the Remotos showed it to them in 1982, a year before the
execution of the 1983 Extra-Judicial Settlement with Sale. Thus, it cannot
be said that petitioners are transferees in good faith and therefore, the
defense of indefeasibility of the torrens title is not applicable to them.
Likewise, petitioners cannot complain that no written notice was given
to all possible redemptioners or heirs at the time of the execution of the
1968 Deed of Sale. Under the provisions of the Civil Code on Legal
Redemption, it is stated:
Article 1620. A co-owner of a thing may exercise the right
of redemption in case the shares of all the other co-owners or
of any of them, are sold to a third person. If the price of the
alienation is grossly excessive, the redemptioner shall pay only
a reasonable one.
Should two or more co-owners desire to exercise the right
of redemption, they may only do so in proportion to the share
they may respectively have in the thing owned in common.
Art. 1623. The right of legal pre-emption or redemption
shall not be exercised except within thirty days from the notice
in writing by the prospective vendor, or by the vendor, as the

case may be. The deed of sale shall not be recorded in the
Registry of Property, unless accompanied by an affidavit of the
vendor that he has given written notice thereof to all possible
redemptioners.
The right of redemption of co-owners excludes that of
adjoining owners.

Corollary to these, Article 1088 of the Civil Code, provides:

Art. 1088. Should any of the heirs sell his hereditary rights
to a stranger before the partition, any or all of the co-heirs may
be subrogated to the rights of the purchaser by reimbursing him
for the price of the sale, provided they do so within the period of
one month from the time they were notified in writing of the sale
by the vendor.
The right of legal redemption pertains to Placidas original co-owners,
namely, Eugenio Tabada, Raymunda Tabada and Patrecia Tabada, and
their respective heirs,[21] not to petitioners who are the heirs of Placida.
Also, the written notification should come from the vendor or prospective
vendor, Placida in this case, and not from any other person. [22] This is so
because the vendor is in the best position to know who are his co-owners
that under the law must be notified of the sale. Also, the notice by the
seller removes all doubts as to fact of the sale, its perfection; and its
validity, the notice being a reaffirmation thereof, so that the party notified
need not entertain doubt that the seller may still contest the alienation.
This assurance would not exist if the buyer should give the notice. [23]
Even if the property has not yet been formally subdivided, still,
records show that the particular portions belonging to the co-owners have
already been allocated and Placidas co-owners have already been
exercising proprietary rights over their respective allotments. Thus,

inscribed on TCT No. RT-183 are several deeds of mortgages executed by

Placidas co-owner Eugenio C. Tabada in favor of the Butuan City Rural
Bank with respect to his one-fourth share, and a Deed of Sale with Right of
Repurchase dated May 13, 1968 executed by the spouses Eugenio G.
Tabada and Trinidad Ontong in favor of one Hernando R. Sanchez, also
covering Eugenios one-fourth portion of the property.[24]
The Court notes, however, that the property originally co-owned by
Placida, Eugenio Tabada, Raymunda Tabada and Patrecia Tabada,
covered by TCT No. RT-183, measures 16 hectares, while the 1968 Deed
of Sale covers 4,300 square meters.
The right of Placida to sell her one-fourth portion of the property
covered by TCT No. RT-183 is sanctioned under Article 493 of the Civil
Code, to wit:
Art. 493. Each co-owner shall have the full ownership of
his part and the fruits and benefits pertaining thereto, and he
may therefore alienate, assign or mortgage it, and even
substitute another person in its enjoyment, except when
personal rights are involved. But the effect of the alienation or
the mortgage, with respect to the co-owners, shall be limited to
the portion which may be allotted to him in the division upon the
termination of the co-ownership.
The sale to Angel affects only Placidas pro indiviso share in the
property, and Angel gets only what corresponds to Placidas share in the
partition of the property owned in common. Since a co-owner is entitled to
sell his undivided share, a sale of the entire property by one co-owner
without the consent of the other co-owners is not null and void; only the
rights of the co-owner/seller are transferred, thereby making the buyer a
co-owner of the property.[25]

Given the foregoing, the portion sold by Placida and bought by

Angel under the 1968 Deed of Sale should only pertain to one-fourth
of Placidas share in the 16-hectare property, or 4,000 square meters.
Lastly, prescription and laches do not apply in this case. To begin
with, respondents have been in actual and continuous possession of the
property since Angel first bought it in 1968. If a person claiming to be the
owner thereof is in actual possession of the property, the right to seek
reconveyance, which in effect seeks to quiet title to the property, does not
prescribe. The reason for this is that 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,
the reason for the rule being, that his undisturbed possession gives him a
continuing right to seek the aid of a court of equity to ascertain and
determine the nature of the adverse claim of a third party and its effect on
his own title, which right can be claimed only by one who is in possession.
[26]

Neither can respondents be held guilty of laches. On the contrary, it

was respondents vigilance in protecting their right over the property that
gave rise to the present case. Their action for reconveyance was filed only
after one year and ten days from the execution of the 1983 Extra-Judicial
Settlement with Sale, one year and three days after its registration, and
four months and twenty-eight days after the issuance of TCT No. RT-3121.
Obviously, laches has not yet set in.
WHEREFORE, the petition is DISMISSED. The Court of Appeals
Decision dated December 16, 1999 together with its Resolution dated
March 31, 2000 in CA-G.R. CV No. 31587 is AFFIRMED.

SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-2397

August 9, 1950

TOMASA QUIMSON and MARCOS SANTOS, petitioners,

vs.
FRANCISCO ROSETE, respondent.
Marcelino Lontok for petitioners.
Ignacio Mangosing for respondent.
TUASON, J.:
This is an appeal by certiorari from a decision of the Court of Appeals
reversing the judgment of the Court of First Instance of Zambales. The
case involves s dispute over a parcel of land sold to two different persons.
The Facts as found by the Court of Appeals are these:
Esta finca pertenecia originalmente al hoy difunto Dionisio Quimson,
quien, en 7 de junio de 1932, otorgo la escritura Exhibit A de trespaso
de la misma a favor de su hija Tomasa Quimson, pero continuo en su
posesion y goce. La vendio a los esposos Magno Agustin y Paulina
Manzano en 3 de Mayo de 1935, con pacto de recomprar dentro del
plazo de seis aos; y dos aos escasos despues, en 5 de abril de
1937, la volvio a vender a Francisco Rosete, tambien con pacto de
retro por el termino de cinco aos, despues de haber verificado su
recompra de Agustin y Manzano, con dinero que le habla facilitado
Rosete, otorgandose a este facto la escritura de venta Exhibit 1.
Desde entoces Rosete es el que esta en su posesion y disfrute, de
una manera pacifica y quieta, aun despues de la muerte de Dionisio
Quimson, ocurrida en 6 de junio de 1939, hasta el enero de 1943, en
que Tomasa Quimson acudio al Juez de Paz de San Marcelino ,
Zambales, para que este interviniera en un arreglo con Rosete sobre
dicha finca, cuyo fracaso motivo una carrera hacia Iba, la capital de

Zambales, para ganar la prioridad del registro e inscripcion de las

escrituras de venta Exhibits A y 1 que Dionisio Quimson otorgara a
favor de Tomasa Quimson y Francisco Rosete, respectivamente,
carreraque aquella gano por haber llegado a la meta una hora antes,
a las 9:30 a.m. del 17 de febrero de 1943, en tanto que este la
alcanzo a las 10:30 a.m. de ese mismo dia.
Two questions are raised: (1) What were the effects of the registration of
plaintiff's document? and (2) Who was prior in possession? The Court of
Appeals' answer to the question is , None, and to the second, the
defendant or second purchaser.
We do not deem it necessary to pass upon the first issue in the light of the
view we take of the last, to which we will address ourselves presently.
Articles 1462 and 1473 of the Civil Code provide:
ART. 1462. The thing sold shall be deemed delivered, when it is
placed in the control and possession of the vendee.
When the sale is made by means of a public instrument, the
execution thereof shall be equivalent to the delivery of the thing which
is the object of the contract, if from the said instrument the contrary
does not appear or may not be clearly inferred.
ART. 1473. If the same thing should have been sold to different
vendees, the ownership shall be transferred to the person who may
have first taken possession thereof in good faith, if it should be
movable property.
Should it be immovable property, the ownership shall belong to the
person acquiring it who first recorded it in the registry.
Should there be no inscription, the ownership shall belong to the
person who in good faith was first in the possession; and, in the
absence of this, to the person who represents the oldest title,
provided there is good faith.
In the case of Buencamino vs. Viceo (13 Phil., 97), Mr. Justice Willard,
speaking for the court and citing article 1462 says: "Upon a sale of real

estate the execution of a notarial document of sale is a sufficient delivery of

the property sold.".
In the case of Florendo vs. Foz (20 Phil., 388), the court, through Mr. Chief
Justice Arellano, rules that "When the sale is made by menas of a public
instrument, the execution thereof is tantamount to conveyance of the
subject matter, unless the contrary clearly follows or be deduced from such
instrument itself, and in the absence of this condition such execution by the
vendor is per se a formal or symbolical conveyance of the property sold,
that is, the vedor in the instrument itself authorizes the purchaser to used
the title of ownership as proof that latter is thenceforth the owner of the
property."
More decisive of the case at the bar, being almost on all fours with it, is the
case of Sanchez vs. Ramon (40 Phil., 614). There. appeared that one
Fernandez sold a piece of land to Marcelino Gomez and Narcisa Sanchez
underpacto de retro in a public instrument. The purchasers neither
recorded the deed in the registry of property nor ever took materials
possession of the land. Later, Fernandez sold the same property by means
of a private document to Ramos who immediately entered upon the
possession of it. It was held that, according to article 1473 of the Civil
Code, Gomez and Sanchez were the first in possession and. consequently,
that the sale in their favor was superior. Says the court, through Mr. Justice
Avancea, later chief justice:
To what kind of possession is acquired by the materials occupancy of
the thing or right possessed, or by the fact that the latter is subjected
to the action of our will, or by the appropriate acts and legal
formalities established for acquiring possession (art. 438, Civil Code).
by a simple reasoning, it appears that, because the law does not
mention to which of these kinds of the possession the article refers, it
must be understood that it refers to all of these kinds. The proposition
that this article, according to its letter, refers to the materials
possession and excludes the symbolic does not seem to be founded
upon a solid ground. It is said that the law, in the first possession and
then the date of the date of the title and as a public instruments is a
title, it is claimed that the inference is that the law has deliberately
intented to place the symbolic possession, which the execution of the
public document implies, after the materials possession. This
argument, however, would only be forceful if the title, mentioned by

this article, includes public instruments, and this would only be true if
public instruments are not included in the idea of the possession
spoken of in said article. In other words the strength of the arguments
rests in that this possession is precisely the materials and does not
include the symbolic. Consequently, the argument is deficient for it is
begging the same question, because if this possession includes the
symbolic, which is acquired by the execution of a public instruments,
it should be understood that the title, mentioned by the law as the
next cause of preference, does not include instruments.
Furthermore, our interpretation of this article 1473 is more in
consonance with the principles of the justice. The execution of the
public instrument is equivalent to the delivery of the realty sold (art.
1462, Civil Code ) and its possession by the vedee (art. 438).Under
these conditions the sale is considered consummated and completely
transfers to the vendee all of the thing. the vendee by virtue of this
sale has acquired everything and nothing, absolutely nothing, is left to
the vendor. Form this moment the vendor is a stranger to the thing
sold like any other who has never been its owner. As the obligation of
even delivering it. If he continues taking materials possession of it, is
simply on account of the vendee's tolerance and, in this sense, his
possession is vendor's possession. And if the latter should have to
ask him for the delivery of this materials possession it would not be
by virtue of the sale, because this has been already consummated
and has produced all its effects, but by virtue of the vendee's
ownership, in the same were not the vendor. This means that after
the sale of the realty by means of a public instruments, the vendor,
who resells it to another, does not transmitted anything to this second
sale, takes materials possession of the thing, he does it as mere
detainer, and it would be unjust to protect this detention against the
rights to the thing lawfully acquired by the first vendee.
We are of the opinion that the possession mentioned in the article
1473 (for determining who has better right when the same piece of
land has been sold several times by the vendor ) includes not the
materials but also the symbolic possession, which is acquired by the
execution of a public instrument.

The Supreme Court of Spain and Mr. Manresa are of the same opinion. On
pp. 157 ,158 Vol. X, of his treatise on the Spanish Civil Code. Manresa
comments:
II. Observacion comun a la venta de muebles y a la de inmuebles.
Hemos interpretado el precepto de articulo 1.473, en sus parrafos 1.
y 3. en el sentido mas racional mas racional, aunque no tal vez en el
mas adecuado a las palabras que se emplean. Las palabras tomar
posesion, y primero en la posesion las hemos considerado como
equivalentes a la de la tradicion real o fingida a que se refieren los
articulos 1.462 al 1. 464 porque si la posesion materials del objeto
puede otorgar preferencia e cuestiones de possesion y asi lo reconoe el articulo 445. no debe darla nunca en cuestiones de
propiedad y de la propiedad habla expresamente el articulo 1.473.
Asi en nuestra opinion, robustecida por la doctrine que rectamente se
deriva de la sentencia de 24 de Novembre de 1894, vendida una
finca A. en escritura publica despues a B., aunque se incate
materialmente este del inmueble, la etrega de la cosa elvendedor
carecia ya de la facultad de disponer de ella .
The statement of Sr. Manresa which is said to sustain the theory of the
Court of Appeals, expresses, as we under stand that statement, the literal
meaning of article 1473, for the decision of November 24, 1894 reflects,
according to the learned author, the intention of the lawmaker and is in the
conformity with the principles of justice. now under both the a Spanish and
Philippine rules of interpretation, the spirit, the intent, the law prevails over
its letter.
Counsel for defendant denies that the land was sold to plaintiff's Tomasa
Quimson or that the Court of Appeals so founds. All that latter court
declared, he says, was that a deed of the land was executed by the original
owner on June 7, 1932.
The findings that a deed of conveyance was made by Dionisio Quimson in
favor of his daughter could have no other meaning, in the absence of any
qualifying statement , that the land was sold by the father to his daughter.
Furthermore, this was the trial court's explicit finding which was not
reversed by the Court of Appeals and stand as the fact of the case. Looking
into the documents itself Exhibits A states categorically that the vendor
received form the vendee the consideration of sale, P 250, acknowledge

before the notary public the notary public having executed the instruments
of his own free will.
The expression in the court's decision in the case of Cruzado vs.
Escaler (34 Phil., 17), cited by the Court of Appeals, Apparently to the effect
that physical possession by the purchaser is essential to the consummation
of a sale of real of estate, is at best obiter dictum; for the court distinctly
found that the sale to plaintiff's Cruzado's father was a sham, execution
with the sole purpose of enabling the senior Cruzado to mortgage the
property and becomeprocurador. And with reference to the failure of the
second vendee, Escaler, to register his purchase, the court disregarded the
omission as well as the entry of the first sale in the registry because that
entry was made by the plaintiff, son and heir of the first supposed vendee,
more than a score years after the alleged transaction, when the plaintiff
was no longer or had any right therein (in the land). Because it already
belonged to the defendant Escaler, its lawful owner." When Escaler, the
second purchase was sued he had become the owner of the land by
prescription. The defendant's possession in the present case fell far short
of having ripened into title by prescription when the plaintiff commenced her
action.
For the reasons above stated, we are constrained to set aside the decision
of the Court of Appeals. Because the Appellate Court found for the
defendant, it made no findings on damages for the latter's used of the
property in controversy. Not being authorized in this appeal to examine the
evidence we have to accept the trials court's appraisal of the damages.
Judge Llanes assessed the damages of P 180 for the occupation of the
agricultural years 143-44,1944-45 and 1945-46, and P 60 a year thereafter
until the possession of the property was restituted to the plaintiffs.
Let judgment be entered in accordance with the tenor of this decision, with
costs against the defendant.
SECOND DIVISION
SPOUSES NATALIO and G.R. No. 151333
FELICIDAD SALONGA,
Petitioners,
Present:

PUNO, J., Chairman,

AUSTRIA-MARTINEZ,
- versus - CALLEJO, SR.,
TINGA, and
CHICO-NAZARIO, JJ.
SPOUSES MANUEL and NENITA Promulgated:
CONCEPCION and FLORENCIA
REALTY CORPORATION,
Respondents. September 20, 2005
x----------------------------------------------------x
DECISION
CALLEJO, SR., J.:

The spouses Natalio Salonga and Felicidad Salonga were the owners
of eight (8) prime parcels of land located in Dagupan City covered by
Transfer Certificate of Title (TCT) Nos. 40886, 40887, 43547, 26506,
35156, 49460, 49459 and 53650. [1] They had a commercial building with
four floors which stood on their property located along A.B. Fernandez
Avenue, Dagupan City and covered by TCT No. 53650. The spouses
leased the building to traders and merchants, and lived in a house along
Arellano Street. The house stood on a lot which they also owned, covered
by TCT No. 26506.
To finance their business, the spouses secured a loan from the
Associated Bank. To secure the payment thereof, they executed a Real
Estate Mortgage in favor of the bank over the property covered
by TCT Nos. 40886, 40887, 43547, 35156 and 49459. [2] The spouses
likewise secured a loan from the Philippine National Bank (PNB), and also
executed a real estate mortgage over their property covered by TCT No.

26506.[3] A real estate mortgage over their property covered by TCT No.
53650 was also executed, including the commercial building thereon, as
security for their loan from the Development Bank of the Philippines (DBP).
[4]
Their loan from the Rural Bank of Malasiqui, Inc. (Pangasinan) was
secured by a real estate mortgage over their property covered by TCT No.
49460.[5]
The devastating earthquake of July 16, 1990 severely damaged the
spouses commercial building, adversely affecting their business.
[6]
Consequently, they defaulted in the payment of their loans. The creditor
banks foreclosed or threatened to foreclose their real estate mortgages. On
September 4, 1991, their property covered by TCT No. 49460 mortgaged to
the Rural Bank of Malasiqui, Inc. was sold at public auction with the said
bank as the highest bidder.[7] The DBP had the property covered
by TCT No.
53650 sold at public auction on November 21, 1991. [8] The Certificate of
Sale in favor of the bank as the winning bidder was filed with the Office of
the Register of Deeds on January 2, 1992. [9]
On October 1, 1992, the Associated Bank filed a petition with the Regional
Trial Court (RTC) of Dagupan City for the extrajudicial foreclosure of the
Real Estate Mortgage over the property of the spouses covered
by TCT Nos. 49459, 40886, 40887, 43547 and 35156, for the satisfaction
of the balance of their loans and the increments thereof
totaling P571,132.70 as of August 31, 1992. The sheriff set the sale at
public auction on December 10, 1992.[10]
Beleaguered, the spouses Salonga secured a loan, this time, from the
spouses Manuel and Nenita Concepcion, who were engaged in the
business of lending money, to repay their loan to the PNB. The spouses
Salonga borrowed P500,000.00 from the spouses Concepcion, which the
latter remitted to the PNB on November 6, 1992 in payment of the spouses

Salongas account. The latter were issued a receipt. [11] They also
paid P2,756.85 to the PNB for surcharges.[12] Thus, on November 11, 1992,
the PNB executed a Deed of Release of Real Estate Mortgage [13] which the
bank delivered to Manuel Concepcion; the receipt of the said payment and
the owners duplicate of TCT No. 26506 was likewise released to Manuel
Concepcion.
The spouses Concepcion also agreed to the spouses Salongas plea
for another loan to enable them to settle their obligations with the
Associated Bank. Concepcion remitted the amount of P200,000.00 to the
bank on December 8, 1992;[14] P200,000.00, on December 21, 1992;
[15]
and P186,520.50 on January 18, 1993 [16] for the account of the spouses
Salonga, for which the latter were issued receipts by the bank. [17] The bank
executed a Cancellation of the Real Estate Mortgage [18] on January 20,
1993 and delivered the amount together with the owners duplicate of the
titles over the five parcels of land, and the aforesaid receipt to spouses
Concepcion.
The spouses Salonga secured another loan from the spouses Concepcion
in the amount of P2,042,377.19, which the latter paid to the DBP for the
account of the spouses Salonga. The bank executed a Deed of
Redemption and Cancellation of Liens [19] on January 5, 1993. The spouses
Concepcion took delivery of the deed and the owners duplicate of TCT No.
53650 and the receipt issued by the DBP for said amount in the names of
the spouses Salonga.
The spouses Concepcion required the spouses Salonga to pay 3% of
the loans as monthly interest, on top of a 5% commission if the property
was sold to third-parties.
The spouses Salonga failed to pay the loans, interest and
commission despite the lapse of several months. In the meantime, they
continued residing in the same house. Much as they tried, the spouses

Salonga failed to sell their property to any interested buyer. Worse, the
spouses Concepcion pressed them to pay their loan accounts, plus the
interests thereon. Their property covered by TCT No. 49460 was sold at
public auction with the Rural Bank of Malasiqui, Inc. as the winning bidder.
The bank consolidated its title on August 20, 1993. [20] The Register of
Deeds cancelled TCT No. 49460 and issued TCT No. 60384 to the bank.[21]
On August 31, 1993, the spouses Salonga executed, in favor of the
spouses Concepcion, a Deed of Absolute Sale [22] over their property
previously mortgaged to the Associated Bank covered by TCT Nos. 43547,
40886, 40887, 35156 and 49459. It appears on the said deed that the
property was sold for the price of P575,000.00, and that the spouses
Salonga received the amount from the spouses Concepcion.
On September 20, 1993, the spouses Concepcion executed a Deed
of Absolute Sale over the property covered by TCT Nos. 40886, 40887, and
43547 in favor of the Florencia Realty Corporation for P600,000.00. On
September 21, 1993, the spouses Concepcion filed the said deed in the
Office of the Register of Deeds. The spouses Concepcion then filed the
cancellation of real estate mortgage executed by the Associated Bank, the
deed of absolute sale executed by the spouses Salonga, and the deed of
absolute sale in favor of the Florencia Realty Corporation in the Office of
the Register of Deeds, which issued TCT Nos. 60530, 60531 and 60532 in
the names of the Florencia Realty Corporation, and TCT Nos. 60533,
60534 and 60694 in the names of the spouses Concepcion on September
21, 1993.
On October 18, 1993, the Spouses Salonga executed a Deed of
Absolute Sale[23] over their properties previously mortgaged with
the PNB and DBP, covered byTCT Nos. 53650 and 26506 including the
improvements therein in favor of the spouses Concepcion. It appears that
the lots were sold for P1,500,000.00, receipt of which was acknowledged

by the spouses Salonga in the said deed. The spouses Concepcion filed
the deed of absolute sale on the same day with the Office of the Register of
Deeds, which issued TCT Nos. 60694 and 60695 in the names of the
spouses Concepcion following the payment of the capital gains taxes.
However, the spouses Salonga continued to reside in the same house.
Sometime in 1994, the daughter of the spouses Salonga arrived from
abroad. The spouses and their daughter offered to redeem the property
from the spouses Concepcion. However, the latter informed the spouses
Salonga and their daughter that the title to the property had already been
transferred to their names, and agreed to the redemption of the property
for P8,000,000.00 and the spouses Concepcion increased it
to P10,000,000.00.

On July 12, 1994, the spouses Salonga filed a complaint against the
spouses Concepcion and the Florencia Realty Corporation with the RTC of
Dagupan City for annulment of the August 31, 1993 and October 18, 1993
Deeds of Absolute Sale, as well as the reconveyance of the property
subject of said deeds with damages.
The spouses Salonga alleged that the two deeds of absolute sale
were simulated and did not reflect their true agreements, that is, that their
property would guarantee the payment of the total amount of remittances
the defendants had paid to the mortgagors-banks for the redemption of
their property, plus 3% a month of their loans as interests, and if the
property were sold to a third-party, a 5% commission of the purchase price
thereof. They also alleged that their agreement with the spouses
Concepcion that the latter would not register the said deeds in the Office of
the Register of Deeds and secure titles over the properties in their names;
the defendants, in evident bad faith, registered the said deeds and secured
titles in their names; the market price of the whole property amounted

to P10,000,000.00, but it appeared that the property was sold to the

spouses Concepcion for only P2,000,000.00, which was the amount the
spouses Concepcion remitted to the bank in their account; they offered to
repay their loans and their offers were rejected. The spouses Salonga
prayed that judgment be rendered in their favor, thus:
WHEREFORE, it is respectfully prayed that after due hearing,
judgment be rendered in accordance with the several causes of
action hereof;
1.

Declaring the Deed[s] of Absolute Sales, (sic),

(Annexes I and J) dated August 31, 1993 and
October 18, 1993, respectively as a simulated
contracts and thereforeVOID AB INITIO;
2.
Ordering the Register of Deeds of Dagupan
City to cancel TCT Nos. 60533, 60534, 60695,
60694, 60624 in the name of the defendants and
TCT Nos. 60530, 60531 and 60532 in the name
of Florencia Realty Corporation, Inc., and to
restore TCT Nos. 40886, 40887, 43547, 20506,
35156, 49460, 49459 and 53650 in the name of
the plaintiffs Spouses Natalio Salonga and
Felicidad Salonga;
3.

Ordering
defendants
spouses
Manuel
Concepcion and Nenita Viado to pay plaintiffs the
sum of P500,000.00 as damages authorized to
be awarded under Article 19 of the same code;

4.

Ordering
defendants
Spouses
Manuel
Concepcion and Nenita Viado to pay plaintiffs the
sum of P2,000,000.00 for moral damages; the
sum of P100,000.00 for exemplary damages;

5.

Ordering
defendants
Spouses
Manuel
Concepcion and Nenita Viado to pay plaintiffs the
sum of P100,000.00 as and for attorneys fees
plus the sum of P1,000.00 as per Court
appearance fee; the sum of P100,000.00 for
litigation expenses.

PLAINTIFFS further pray for such other reliefs just and

equitable in the premises.[24]

In their answer to the complaint, the spouses Concepcion admitted that

they gave loans to the spouses Salonga in the total amount
of P3,131,154.54 which they remitted to the DBP, the PNB and Associated
Bank for the plaintiffs account, with the assurance that they would sell the
property within three months; from the proceeds of the sale, their loans and
the interest thereof at 3% per month and a commission of 5% of the
purchase price of the property would be paid. They further alleged that
despite extensions granted to them, the plaintiffs failed to pay their loans,
and offered, instead, to sell their property for the price equivalent to the
spouses Concepcions remittances to the creditors-banks, plus an
additional amount; the lots covered by TCT Nos. 53650 and 26506 were
not part of the said sale; the spouses Salonga requested for more time to
sell the remaining two lots.
The spouses Concepcion further alleged that they agreed to spouses
Salongas offer, and the latter executed a deed of absolute sale on August
31, 1993 covering the lots described in TCT Nos. 43547, 40886, 40887,
35156 and 49459; when the plaintiffs failed to sell the lots covered by TCT
Nos. 53650 and 26506, they executed a deed of absolute sale over the
said lots on October 18, 1993 and received the additional purchase price
of P1,500.000.00 from the defendants; the plaintiffs promised to vacate
their house in April 1994, but refused to do so; worse, the plaintiffs filed a
complaint against them.
Subsequently, the spouses Concepcion as plaintiffs filed an action for
ejectment against the spouses Salonga on August 23, 1994 with the
Municipal Trial Court of Dagupan City, praying for their eviction from the

subject property.[25] The case was docketed as Civil Case No. CV-9500671-D.[26]
Felicidad Salonga testified that there was no period agreed upon to
repay their loans from the defendants, and while they executed the Deeds
of Absolute Sale dated August 31, 1993 and October 18, 1993 in favor of
the defendants, they did not receive the amounts stated therein. The
plaintiffs also adduced in evidence Olivia Arafiles valuation of the property,
pegged

at P10,270,600.00.[27] Julio A. Garcia testified that he was in the house of

the plaintiffs and affixed his signature on a document signed by the
defendant Manuel Concepcion, quoted, infra:
I Manuel Concepcion of legal aged (sic), married to Nenita
Viado and resident of Bautista Pangasinan have agreed (sic) to
Mr. And Mrs. Natalio Salonga a resident of Dagupan city to sign
a Deed of Sale and I will not registered (sic) as long as the
spouses Salonga will pay the principal cash involved plus the
interest of 3% per month.[28]
Felicidad further testified that she and her husband continued residing in
their house even after the spouses Concepcion had paid their loans to the
creditor banks. However, upon the latters suggestion, they had the
commercial building repainted and leased to a tenant, with the agreement
that the rentals would be credited to their (spouses Salonga's) account. The
latter paid interests on their account, but the spouses Concepcion refused
to issue receipts therefor. Felicidad further declared that on March 10,
1993, Manuel Concepcion arrived in their house and suggested that a deed
of sale over the property be executed in their favor while looking for
prospective buyers. The spouses Salonga agreed, provided that said deed
would not be registered in the Office of the Register of Deeds. Felicidad

wrote an undertaking on a piece of paper, in which the spouses

Concepcion promised not to register the said deed of sale in the Office of
the Register of Deeds. Manuel Concepcion signed the note in the presence
of Julio Garcia.[29]
Felicidad likewise testified that when she and her husband failed to sell
their property and pay their account with the spouses Concepcion, she and
her husband executed on August 31, 1993 a deed of sale over five (5)
parcels of land previously mortgaged with the Associated Bank, for the
latter to assume the right of the creditor banks to collect their loan account
and interests; the property will only serve as security for the payment of
their account. She further testified that she and her husband did not receive
from the defendant the P575,000.00 and P1,500,000.00 stated in the said
deeds as the purchase price of the subject properties.
Felicidad further narrated that when her daughter arrived in the Philippines
in 1994, they sought to redeem the property from the spouses Concepcion,
but the latter informed them that the titles to the property had already been
transferred in their names and that the property could be redeemed
for P10,000,000.00. In April 1996, they were finally evicted from the
property by a sheriff and soldiers.
Manuel Concepcion testified that he and his wife agreed to grant loans to
the plaintiffs to enable them to pay their loan account with their creditor
banks, with their assurance that they will be able to sell their property within
60 days and pay their accounts plus interests and 5% commission. Despite
several extensions granted to the spouses Salonga, they failed to sell their
properties. Sometime in April 1993, the spouses Salonga offered to sell
their properties previously mortgaged with the Associated Bank in payment
for the P586,520.50 advanced by them to the Associated Bank,
plus P575,000.00 on top of said amount. The spouses Salonga agreed.

The
latters lawyers then prepared a Deed of Absolute Sale dated August 31,
1993, which they signed following their receipt of P575,000.00. The
spouses Salonga pleaded that they be given a period of one month to
execute a deed of absolute sale over the two parcels of land previously
mortgaged to the PNB and DBP and to a third-party, to which the spouses
Concepcion also agreed. However, the spouses Salonga failed to sell the
properties.
On October 18, 1993, the spouses Salonga executed a Deed of Absolute
Sale[30] over the parcels of land covered by TCT Nos. 53650 and 26506 as
payment of their loan account, plus P1,500,000.00. Manuel Concepcion
further narrated that they spent P1,200,000.00 for the renovation of the
commercial building[31] and had it leased to tenants. They also paid for the
realty taxes due for the building. [32] He denied having known Julio Garcia
and having signed the note[33] on March 10, 1993.
In the meantime, the MTC rendered judgment ordering the spouses
Salonga to vacate the property. They appealed to the RTC of Dagupan
City, docketed as Civil Case No. 94-00249-D. On December 4, 1995, the
spouses Salonga filed a motion to stay the execution of the appealed
decision, which the RTC denied. The spouses Salonga were ejected by a
sheriff sometime in April 1996.
On December 10, 1996, the court a quo rendered judgment in favor of the
spouses Concepcion ordering the dismissal of the complaint. The fallo of
the decision reads:
WHEREFORE, the Complaint is DISMISSED. In this
connection, the plaintiffs are ordered to pay defendants the sum
of P500,000.00 as moral damages and the sum of P200,000.00
as exemplary damages.

The plaintiffs are also ordered to pay defendants the sum

of P50,000.00 as and by way of attorneys fee plus P10,000.00
as litigation expenses aside from the costs of suit.
Furnish copies of this Decision to Atty. Mariano Mel Ramos and
Atty. Rodolfo Palma.
SO ORDERED.[34]
The RTC ruled that the August 31 and October 18, 1993 Deeds of Absolute
Sale were valid in fact and in law.
The spouses Salonga appealed the decision to the Court of Appeals
(CA) wherein they alleged that:
1.

THE TRIAL COURT GRAVELY ERRED IN DISMISSING

THE COMPLAINT OF PLAINTIFFS-APPELLANTS AND IN
NOT HOLDING THAT THE DEEDS OF SALE SIGNED BY
PLAINTIFFS-APPELLANTS
CONVEYING
THE
PROPERTIES IN QUESTION TO DEFENDANTSAPPELLEES ARE ACTUALLY EQUITABLE MORTGAGE;

2.

THE TRIAL COURT GRAVELY ERRED IN HOLDING

PLAINTIFFS-APPELLANTS LIABLE FOR MORAL AND
EXEMPLARY DAMAGES AS WELL AS ATTORNEYS FEES
AND LITIGATION EXPENSES.[35]

They averred that, as admitted by Manuel Concepcion, the parties

had agreed that the former would return their advance/s for their account,
with
3% interest a month, and that no sale was agreed upon by the parties.
They even granted extensions to the spouses Salonga to repay their loans.
The spouses Salonga assert that their transactions with the spouses
Concepcion relative to their property were in the nature of equitable

mortgages as shown, inter alia, by the fact that the prices of the property as
appearing in the deeds of absolute sale were a little more
than P2,000,000.00, grossly inadequate as compared to their market value
of P10,000,000.00;[36] the parties had agreed that the deeds of sale would
not be registered in the Office of the Register of Deeds, but that the
spouses Concepcion registered the said deeds in gross and evident bad
faith; despite the existence of the deeds of absolute sale, the spouses
Salonga remained in possession of the property.
On December 21, 2001, the CA rendered judgment dismissing the
appeal and affirming the appealed decision with modification. [37] The CA
ruled that the spouses Salonga had sold their property to the spouses
Concepcion with a right to repurchase, and that the said spouses failed to
repurchase the same. The appellate court also declared that the spouses
Salonga failed to prove that the said transactions were in the nature of
equitable mortgages. They took possession of the house for a limited
period of time, while the spouses Concepcion took possession of the estate
of the property after the execution of the deed of absolute sale.
The spouses Salonga, now the petitioners, filed the present petition
for review on certiorari with this Court, assailing the decision and resolution
of the CA. They contend that:
THE COURT OF APPEALS ERRED IN THAT ITS
CONCLUSIONS
ARE
CONTRARY
TO
LAW
AND
JURISPRUDENCE, AS
I
THE DEEDS OF SALE IN FAVOR OF
RESPONDENTS CONCEPCIONS ARE NULL AND
VOID AS THEY ARE ABSOLUTELY SIMULATED
AND THEIR CAUSES WERE INEXISTENT AT THE
TIME OF THE TRANSACTION, AND IF UPHELD
THEIR PURPOSE IS CONTRARY TO LAW AND
PUBLIC POLICY, THUS VOID.

THE PETITIONERS
CONSENT TO A SALE.

II
DID

NOT

GIVE

THEIR

III
ASSUMING EX GRATIA ARGUMENTI THAT THE
DEEDS WERE NOT VOID AB INITIO, THEY ARE
VOIDABLE OR AT LEAST THE PETITIONERS
ARE ENTITLED TO REFORMATION OF THE
DEEDS AS THEY DID NOT EXPRESS THE TRUE
INTENT OF THE PARTIES AS THEY ARE
EQUITABLE MORTGAGES AT BEST.[38]

The issues in this case are factual. Under Rule 45 of the Rules of Court,
only questions of law may be raised in a petition for review on certiorari, the
reason being that the Court is not a trier of facts; hence, is not to reexamine and re-evaluate the evidence on record. Furthermore, the
conclusions of the CA on appeal are binding and conclusive on the Court,
unless there is a convincing showing that the appellate court ignored,
misapplied or misconstrued cogent facts and circumstances which, if
considered, would warrant the modification or reversal of the outcome of
the case.[39]
The Court is not proscribed, however, from delving into and resolving
factual issues, if the findings and conclusions of the trial court are
inconsistent with those of the appellate court; or where the findings of the
trial court and the CA are contrary to the evidence on record or were
arrived at arbitrarily.[40]
The petition is impressed with merit.

Article 1602 of the New Civil Code of the Philippines provides that a
contract shall be presumed to be an equitable mortgage, in any of the
following cases:
(1) When the price of a sale with right to repurchase is
unusually inadequate;
(2) When the vendor remains in possession as lessee or
otherwise;
(3) When upon or after the expiration of the right to
repurchase another instrument extending the period of
redemption or granting a new period is executed;
(4) When the purchaser retains for himself a part of the
purchase price;
(5) When the vendor binds himself to pay the taxes on
the thing sold;
(6) In any other case where it may be fairly inferred that
the real intention of the parties is that the transaction
shall secure the payment of a debt or the performance
of any other obligation.
In any of the foregoing case, any money, fruits, or other
benefit to be received by the vendee as rent or otherwise shall
be considered as interest which shall be subject to the usury
laws.

The provision shall apply to a contract purporting to be an absolute sale.

[41]
In case of doubt, a contract purporting to be a sale with right to
repurchase shall be considered as an equitable mortgage. [42] In a contract
of mortgage, the mortgagor merely subjects the property to a lien, but the
ownership and possession thereof are retained by him. [43]

For the presumption in Article 1602 of the New Civil Code to arise,
two requirements must concur: (a) that the parties entered into a contract
denominated as a contract of sale; and (b) that their intention was to secure
an existing debt by way of a mortgage. The existence of any of the
circumstances defined in Article 1602 of the New Civil Code, not the
concurrence nor an overwhelming number of such circumstances is
sufficient for a contract of sale to be presumed an equitable mortgage. [44]
If the terms of a contract are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of its stipulations
shall control.[45]However, if the records appear to be contrary to the evident
intention of the contracting parties, the latter shall prevail.
The nomenclature given by the parties to the contract is not
conclusive of the nature and legal effects thereof. [46] Even if a document
appears on its face to be a sale, the owner of the property may prove that
the contract is really a loan with mortgage, and that the document does not
express the true intent of the parties.[47]
There is no conclusive test to determine whether a deed absolute on
its face is really a simple loan accommodation secured by a mortgage. The
decisive factor in evaluating such deed is the intention of the parties as
shown by all the surrounding circumstances, such as the relative situation
of the parties at that time, the attitude, acts, conduct, and declarations of
the parties before, during and after the execution of said deed, and
generally all pertinent facts having a tendency to determine the real nature
of their design and understanding. [48] As such, documentary and parol
evidence may be adduced by the parties. When in doubt, courts are
generally inclined to construe a transaction purporting to be a sale as an
equitable mortgage, which involves a lesser transmission of rights and
interests over the property in controversy.[49]

Articles 1602, 1603 and 1604 of the New Civil Code were designed to
prevent the circumvention of the use of usury[50] and the prohibition against
the creditor appropriating the mortgaged properties. Besides, in times of
grave financial distress which render persons hard-pressed to answer an
emergency, such persons would have no choice but to sign a deed of
absolute sale of property if only to obtain a much-needed loan from
unscrupulous money lenders.[51]
The notarization of the document does not guarantee its validity
because it is not the function of the notary public to validate an instrument
that was never intended by the parties to have any binding legal effect on
him. Neither is the notarization of a document conclusive of the nature of
the transaction conferred by the said document, nor is it conclusive of the
true agreement of the parties thereto.
After a thorough examination of the records, we find and so hold that
the August 31 and October 18, 1993 Deeds of Absolute Sale are mere
equitable mortgages and not bona fide absolute sale of the parcels of land
therein described.
FIRST. The petitioners were hard-pressed to pay their account to the
respondents in the total principal amount of P3,198,886.47; the said
amount paid by the respondents for the account of the petitioners to the
PNB, the Associated Bank and the DBP, excluding the amount of 36%
interest a month or 36% interest per annum. The petitioners tried to sell the
property to third-persons, but failed. The respondents refused to give the
petitioners any further extensions of time to sell the property, unless they
execute the deeds of absolute sale in favor of the respondents and insure
the payment of their account. The specter of the petitioners being evicted
from their residence loomed large in the horizon. To give themselves more

time to sell their property and avert eviction from their house, the petitioners
opted to execute the deeds of absolute sale.
SECOND. It was made to appear under the August 31, 1993 Deed of
Absolute Sale that the petitioners had sold their five parcels of land to the
respondents for the principal amount of P575,000.00, and that the
petitioners received the said amount from the respondents. However, at the
time of the execution of said deed, the petitioners were indebted to the
respondents for the principal amount of P586,520.50, which the
respondents had remitted to the Associated Bank for the account of the
petitioners. It is incredible that the petitioners would sell the said parcels of
land to the respondents, and that the latter would remit the purchase price
of P575,000.00 to the petitioners, and retain the said amount to be applied
as payment to the petitioners account of P586,520.50.
It was also made to appear under the October 18, 1993 Deed of
Absolute 0Sale that the petitioners sold two parcels of land to the
respondents (on which their commercial building and their house were
constructed) for P1,500,000.00, and that the petitioners received the said
amount from the respondents following the execution of the deed.
However, the evidence on record shows that the petitioners had an
outstanding account of P2,042,377.19 as of October 18, 1993 to the
respondents. It is incredible that, instead of applying the aforesaid amount
of P1,500,000.00 in partial payment of the petitioners outstanding account,
the respondents would choose to remit the same upon the execution of the
October 18, 1993 deed of absolute sale. In fine, the petitioners account to
the respondents, in the total amount of P3,198,886.47, remained
outstanding despite the sale of the petitioners seven parcels of land in favor
of the respondents.
We reject the respondents contention that the petitioners sold their seven
parcels of land, not only for P2,078,000.00 but also for the outstanding

account ofP3,198,886.47, for the total price of P5,876,886.47. The

respondents were burdened to prove that the petitioners agreed to sell their
property partly in payment of the said account; the respondents failed to do
so.
A plain reading of the two (2) deeds of absolute sale shows that the seven
lots were sold to the respondents for only P2,078,000.00. There is no
provision in said deeds stating that the petitioners sold their property in
partial payment of their outstanding account to the respondents
(P3,198,886.47), and partly for an additionalP2,078,000.00 If it is true, as
claimed by the respondents, that the petitioners sold the seven parcels of
land to them not only for P2,078,000.00 as appearing in said deeds, but
also for the outstanding account of P3,198,886.47, the same should have
been specifically and positively stated in the said deeds. No such provision
appears in the two deeds. There is likewise no provision in the said deeds
that, by the execution thereof, the petitioners outstanding account to the
respondents in the amount ofP3,198,886.47 was extinguished and paid.
The absence of any provision in the two deeds of absolute sale that the
seven parcels of land were sold by the petitioners to the respondents in
partial payment of their outstanding account, and partly for P2,078,000.00,
and any declaration therein that the said outstanding account was thereby
extinguished negates the respondents contention.
THIRD. Respondent Manuel Concepcion had earlier signed on March 10,
1993 an undertaking that he would not register the deed of
absolute sale as long as the petitioners will pay their outstanding account
plus interests thereon at the rate of 3% per month:
I Manuel Concepcion, of legal aged (sic), married to
Nenita Viado and resident of Bautista, Pangasinan have agreed
to Mr. & Mrs. Natalio Salonga, a resident of Dagupan City to
sign a Deed of Sale and I will not registered (sic) as long as the
spouses Salonga will pay the principal cash involved plus the
interest of 3% per month.

8 Titles
Witness: Sgd. ILLEGIBLE
ILLEGIBLE MANUEL D. CONCEPCION[52]
Respondent Manuel Concepcions undertaking not to register the
deed of sale with the Office of the Register of Deeds fortifies the petitioners
contention that the subject transaction under the two deeds of absolute
sale was an equitable mortgage, and not bona fide conveyances of the said
lots. Indeed, the respondents did not present the August 31, 1993 Deed of
Absolute Sale to the Office of the Register of Deeds; the said deeds were
only presented on September 21, 1993 when the respondents sold the five
(5) parcels of land to Florencia Realty Corporation.
The respondents likewise failed to adduce clear and convincing
evidence that respondent Manuel Concepcions signature on the
undertaking is a forgery. The bare claim that the signature on the note
purporting to be that of the respondent is a forgery is not sufficient. It bears
stressing that forgery is not presumed. Forgery must be proved with clear
and convincing evidence.[53] The fact that respondent Manuel Concepcion
signed
the
note
on
March 10, 1993, before the petitioners executed the said deeds of absolute
sale in August and October 1993, does not militate against the probative
weight thereof. The petitioners had only 60 days from January 1993 within
which to repay the respondents from the proceeds of the sale; however, the
petitioners failed to sell their property and repay the respondents. When the
respondents pressed the petitioners for the payment of their account, the
latter agreed to execute deeds of absolute sale by the petitioners over the
property, with the agreement not to present the said deed to the Office of
the Register of Deeds for registration. However, despite their written
undertaking to the contrary, the respondents filed the August 31 and

October 18, 1993 Deeds of Sale in the Office of the Register of Deeds and
registered the same.
THIRD. When the petitioners daughter arrived in the Philippines from
abroad, they had offered to redeem the parcels of land from the
respondents, only to discover that the two deeds of absolute sale had
already been registered in the Office of the Register of Deeds; that the
respondents had acquired titles over the said parcels of land; and that the
said lots had been sold to Florencia Realty Corporation. Worse, the
respondents demanded the amount of P8,000,000.00, later increased
to P10,000,000.00, for the redemption of the property.
WITNESS:
A When my daughter arrived from abroad, were trying to pay
same, there is no one year yet from that time when my
daughter is trying to redeem the property.
Q And you claim that Mr. Concepcion refuse to accept the
payment?
A He wanted that it may pay in accordance with the price which
he is going to peg, and my daughter said, could it be
possible that it be paid in the amount in respect to the
principal and plus the interest.
Q When was that?
A 1994, Sir.
Q How much did Mr. Concepcion allegedly inform your
daughter that you pay to him?
A First he said 10 million and then earlier he said 8 million.
Q Now, after your daughter went to his house Mr. Concepcion,
allegedly to pay your indebtedness, and which was
refuse[d] by Mr. Concepcion, what did you do, Madam
Witness?

A We went to the register of deeds, and we found out that it was

already in the name of Mr. Concepcion, that (sic) why we
already sought the help of a lawyer.
Q Did you pay any interest in connection with this agreement?
A Yes, Sir.
Q Do you have any evidence to show that you really pay the
interest?
A He refused to issue as (sic) receipts.
Q In other words, you dont have document or piece of paper to
show that indeed you pay (sic) the interest?
A None, Sir, because actually if we are going to ask for a
receipt for the payment of the interest, he will say why, are
you going to pay the entire amount of your indebtedness.
Q Despite the fact, Madam Witness, that you claimed that there
was an agreement that you have to pay also the interest
of the principal and you claim, that he refused to accept
payments of that agreed upon you?
ATTY. PALMA:
That is misleading, Your Honor, the testimony of this witness
Mr. Concepcion refused to issue a receipt, not to refuse to
accept the payments.
ATTY. PALMA:
That is in respect to the daughter.
COURT:
Answer.
WITNESS:
He received the interest but he refused to received (sic) the
payment made by my daughter.
ATTY. RAMOS:

Q You claim Madam Witness, that Mr. Concepcion already sold

the 3 parcels which is adjacent to the Lyceum University
when did you learn that?
A 1994, Sir.
Q After learning that Mr. Concepcion sold that (sic) parcels of
land, what did you do?
A That was the time we sought a help from a lawyer.

Q Who is now in possession of that (sic) 3 parcels of land?

A Lyceum, Sir.[54]

FOURTH. The petitioners remained in possession of the residential house

even after October 18, 1993 without paying any rentals therefor. It was only
on August 23, 1994, after the petitioners filed their complaint against the
respondents in the trial court, that the respondents filed their complaint for
ejectment against the petitioners.
FIFTH. The parcels of land covered by TCT Nos. 43547, 40886, 40887,
35156 and 49459 and TCT Nos. 53650 and 26506 had a total market value
of P10,270,600.00.[55] However, under the two deeds of absolute sale, the
seven parcels of land, including the petitioners house, were sold to the
respondents for only P2,078,000.00, an amount grossly disproportionate to
the market value of the property. The respondents failed to adduce any
evidence to controvert the petitioners evidence relative to the market value
of the seven parcels of land.
On the issue of whether respondent Florencia Realty Corporation is a
purchaser in good faith or not, case law has it that he who alleges that he is
a purchaser of registered land is burdened to prove such statement. Such
burden is not discharged by involving the ordinary presumption of good
faith.[56] The defense of having purchased the property in good faith may be

availed of only where registered land is involved and the buyer had relied in
good faith on the clean title of the registered owner.[57] In this case, it
appears
that the respondent purchased the parcels of land on September 20, 1993.
At that time, the petitioners were still the registered owners of the property.
The respondent did not allege in its answer to the complaint that it was a
purchaser in good faith of the property; neither did it adduce a morsel of
evidence to prove that it purchased the property in good faith.
IN LIGHT OF ALL THE FOREGOING, the Petition is GRANTED. The
decisions of the Regional Trial Court and the Court of Appeals
are REVERSED and SET ASIDE. Judgment is hereby rendered in favor of
the petitioners, as follows:
(1) The August 31 and October 18, 1993 Deeds of Absolute Sale
executed by the petitioners in favor of the respondents
are NULLIFIED. The transactions covered by said deeds are
declared equitable mortgages, not bona fide sales of the lots
therein covered; and
(2) The petitioners claims for damages and attorneys fees, and the
respondents counterclaims for damages and attorneys fees
are DISMISSED. No costs.
SO ORDERED.
SECOND DIVISION

JUSTINA COSIPE SIGAYA,

ROMEO, FELY, TOMAS,
BERNARDO, LEDA,
ANASTACIO, ERLINDA,
ROSA,TERESITA,
EDWIN and HELEN,
all surnamed SIGAYA,

G.R. No. 143254

Present:
PUNO, Chairman,
AUSTRIA-MARTINEZ,

Petitioners,
- versus -

CALLEJO, SR.,
TINGA, and
CHICO-NAZARIO, JJ.

DIOMER MAYUGA,
JOSE VIVA and ROSELA
Promulgated:
VIVA, HONORATO DE LOS
SANTOS and
RENATO
DISTOR,
Respondents.
August 18, 2005
x------------------------------------------------x

DECISION
AUSTRIA-MARTINEZ, J.:

The question of whether or not a person is a purchaser in good faith

is a factual matter that will generally be not delved into by this Court
especially when the findings of the trial court on the matter were affirmed
by the Court of Appeals (CA). Settled as this rule may be, petitioners now
come before this Court seeking an exception to the general rule.
The facts are as follows:
Dionisia Alorsabes owned a three hectare land in Dao, Capiz,
denominated as Lot 3603. In 1934, she sold a portion of the lot to Juanito
Fuentes while the remainder was inherited by her children Paz Dela Cruz,
Rosela Dela Cruz, and Consorcia Arroja (an adopted child), and a
grandson, Francisco Abas, in representation of his deceased mother
Margarita Dela Cruz. These four heirs executed an Extra-Judicial

Settlement with Sale dated February 4, 1964 wherein Consorcia sold her
share with an area of 6,694 square meters to spouses Balleriano Mayuga.
On April 1, 1977, Paz also sold her share to Honorato de los Santos. Later,
another document entitled Extra-Judicial Partition with Deed of Sale
dated November 2, 1972 was uncovered wherein the heirs of Dionisia
purportedly adjudicated Lot 3603 among themselves and sold their shares
to Francisco. On January 9, 1978, Francisco executed a Deed of Sale
over Lot 3603 in favor of Teodulfo Sigaya. Thus, the title over Lot 3603 was
cancelled and a new one was issued in the name of Teodulfo, predecessorin-interest of the petitioners herein.[1]
On October 14, 1986, the petitioners, who are the widow and children
of Teodulfo, filed Civil Case Nos. V-5325, V-5326, V-5327 and V-5328 for
recovery of possession and damages against Diomer Mayuga, Honorato
de los Santos, Sps. Jose Viva and Rosela Dela Cruz-Viva, and Renato
Distor,[2] respectively, before the Regional Trial Court (RTC) of Roxas City,
Branch 16, praying that respondents be ordered to vacate Lot 3603, and
turn over the same to petitioners; that petitioners right of ownership and
possession over the property be confirmed and that respondents be
ordered to pay damages in the form of unrealized income starting 1980,
plus attorneys fees and costs.[3]
Respondents in their answers with counterclaim averred that: the
Deed of Sale executed by Francisco in favor of Teodulfo and the title
thereon are null and void for being based on a fictitious Extra-Judicial
Settlement with Sale; Rosela Dela Cruz-Viva and Paz Dela Cruz, who are
illiterates, were fraudulently made to sign as vendees in the Extra-Judicial

Settlement with Sale dated 1972, when Francisco represented that they
were merely signing as witnesses to the sale of Francisco of his share to
Teodulfo. As counterclaim, they asked for attorneys fees and damages. [4]
Respondent Mayuga further asserted that he possesses his portion of
the property by virtue of the sale by Consorcia Arroja of her share to his
parents, Sps. Balleriano Mayuga. Respondent de los Santos meanwhile
averred that Paz Dela Cruz sold her share to him in 1957. Respondents
Rosela Dela Cruz-Viva and her husband Jose Viva claimed that the portion
of land occupied by them pertains to Roselas share which she inherited
from Dionisia, while respondent Renato Distor claimed that his wife
inherited said property from her father Juanito Fuentes, who in turn bought
the same from Dionisia during her lifetime.[5]
The four cases were consolidated and on February 14, 1992, the trial
court rendered its decision, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered as follows:
1. Declaring the defendants Geomer (sic) Mayuga as the
real and absolute owner of the portion of land, containing an
area of Six Thousand Six Hundred Ninety Four (6,694) square
meters, more [or] less, portion of Lot No. 3603, Dao Cadastre
and subject matter in Civil Case No. 5325 indicated in the
Commissioners Report (Exh.4) as Exh. 4-B;
2. Declaring the defendant Honorato de los Santos as the
absolute owner of the portion of land containing an area of Six
Thousand Six Hundred Ninety Five (6,695) square meters more
or less, portion of lot No. 3603 Dao Cadastre, and subject
matter in Civil Case No. 5326 indicated in the Commissioners
Report (Exh. 4) as Exh. 4-D;

3. Declaring the defendants spouses Jose Viva and

Rosela dela Cruz as the absolute owners of the portion of land
containing an area of Six Thousand Six Hundred Ninety Four
(6,694) square meters, more or less, portion of Lot No. 3603,
Dao Cadastre, and subject matter in Civil Case No. 5327
indicated in the Commissioners Report (Exh. 4) as Exh. 4-C;
4. Declaring the defendant, Renato Distor, as the absolute
owner of the portion of land containing an area of Six Thousand
Three Hundred Forty Four (6,344) square meters, more or less,
portion of Lot No. 3603, Dao Cadastre, and subject matter in
Civil Case No. 5328 indicated in the Commissioners Report
(Exh. 4) as Exh. 4-E;
5. Declaring the plaintiffs as the absolute owners of the
portion of land containing an area of Seven Thousand Forty-Six
(7,046) square meters, more or less, portion of Lot No. 3603,
Dao Cadastre, indicated in the Commissioners Report (Exh. 4)
as Exh. 4-F;
6. Declaring Transfer Certificate of Title No. T-15630 of
the Register of Deeds of Capiz as null and void and should be
cancelled;
7. Declaring that Deed of Sale, Exh. C as null and void
except as affecting the portion with an area of Seven Thousand
Forty Six (7,046) square [meters] of Lot 3603 which portion had
been sold by Francisco Abas to the spouses Teodulfo Sigaya
and Justina Cosipe;
8. Declaring that Extra-Judicial Partition with Deed of Sale
as having been procured through fraud and therefore not valid
in so far as the sale of the shares of Paz de la Cruz and
Priscilla de la Cruz were concerned;
9. Condemning the plaintiffs to severally and jointly pay
the following:

a)
Unto Diomar Mayuga, defendant in Civil
Case No. V-5325, P10,000.00 as attorneys fees and
litigation expenses;
b)
Unto Honorato de los [Santos],
defendant, in Civil Case No. V-5326, P10,000.00 as
[attoneys] fees and litigation expenses;
c)
Unto the (sic) Jose Viva and Rosela de
la Cruz, defendants in Civil Case No. V5327, P10,000.00 as [attorneys] fees and litigation
expenses; and
d)
Unto Renato Distor, defendant in Civil
Case No. V-5328, P10,000.00 as [attorneys] fees
and litigation expenses; and
e)
Dismissing Civil Case Nos. V-5325, V5326, V-5327 and V-5328 with costs in each case
against the plaintiffs.
SO ORDERED.[6]
The trial court explained that:
There is no question that the deed of sale of the portion
bought by Jacinto Fuentes from Dionisia Alorsabes and now
possessed by defendants Renato Distor was a public
instrument executed in 1934; and the portion occupied by
defendant Diomer Mayuga is the portion bought by spouses
Florentina Viva and Balleriano Mayuga from Consorcia Mayuga
as her share in lot 3603; defendant Honorato de los Santos is in
possession of the portion which he bought from Paz de la Cruz,
in 1977, although he had been possessing this portion since
May 15, 1957 by virtue of a private document of mortgage.
(citations omitted)

In these cases, the court believes and so holds that the

evidence of actual occupation and possession of the
defendants of the portions of Lot 3603, to each of them
appertaining had been satisfactorily proven. The defendants
were not able to file any opposition to the reconstitution of title
solely because they were not notified actually. They could not
also be considered to have constructive notice because there
was no publication of the Notice of Hearing of the petition.
From the evidence taken together by its totality of
evidence tilts more in favor of the defendants and against the
plaintiffs.[7]
Not satisfied with the decision, petitioners went to the CA which
affirmed, in its Decision promulgated on April 19, 2000, the ruling of the
RTC except as to the award of attorneys fees and expenses of litigation. [8] It
then disposed of the appeal as follows:
WHEREFORE, premises considered, the decision of the
court a quo is hereby AFFIRMED, with the modification that the
awards of attorneys fees and expenses of litigation to the
defendants-appellants are hereby eliminated.
SO ORDERED.[9]
The CA found:
Looking at the evidence presented, the trial court
considered the defendants-appellees as having proven the
actual possession and validity of the possession of the lots in
question. Against that, the plaintiffs- appellants put forward the
TCT held by Teodulfo Sigaya, whose validity rests upon the
ability of Francisco Abas to sell Lot 3603, which the TCT now
covers, and that the sale to Teodulfo Sigaya was registered.
Prior registration would protect an innocent purchaser in good
faith and for value. But the plaintiffs-appellants cannot now

claim the (sic) Teodulfo Sigaya was an innocent purchaser for

value. The trial court gave more credence to the testimony of
defendants-appellees and their witnesses that they had been in
possession for a longer period of time, even before the sale to
Teodulfo Sigaya in 1978. This issue of credibility requires a
determination that is concededly best left to the trial court with
its unique position of having been enabled to observe that
elusive and incommunicable evidence of the deportment of
witnesses on the stand. Findings of the trial court, following that
assessment, must be given the highest degree of respect
absent compelling reasons to conclude otherwise. Teodolfo
(sic) Sigaya examined the land in question, and did so as a
reasonably prudent man buying real property should. As the
defendants-appellees were in possession before him, he should
have questioned such and delved deeper into the title and right
of Francisco Abas to sell the lot. Not having done so, he is not
an innocent purchaser in good faith, and not entitled to
protection under the Torrens system.
It is clear that the title of Francisco Abas was obtained
through fraud, thus further damaging the case of the plaintiffsappellants, whose predecessor-in-interest should have probed
beyond the title after examining the lot to be sold him. As held
by the Supreme Court:
xxx Having bought the land registered under
the Torrens system from their vendors who procured
title thereto by means of fraud, petitioners cannot
invoke the indefeasibility of a certificate of title
against the private respondent to the extent of her
interest. The Torrens system of land registration
should not be used as a means to perpetuate fraud
against the rightful owner of real property.
Registration to be effective, must be made in good
faith. (Palanca vs. Registry of Lands, 43 Phil. 149
[1922]). Thus, it is a settled rule that the defense of
indefeasibility of a certificate of title does not extend
to a transferee who takes it with notice of the flaws
in his transferors title. If at all, the petitioners only

acquire the right which their vendors then had.

(Ramos et al. vs. Direno, et al., 50 Phil. 786 [1927]).
The plaintiffs-appellants contentions as to their ownership
of the lot in question must then fail in the face of the principles
laid down in jurisprudence.[10]
Petitioners now come before this Court on a petition for review under
Rule 45 of the Rules of Court, raising the sole issue of: WHETHER A
PERSON DEALING WITH A REGISTERED LAND CAN SAFELY RELY ON
THE CORRECTNESS OF THE CERTIFICATE OF TITLE ISSUED
THEREFOR.[11]
Petitioners

argue

that:

Teodulfo,

their

predecessor-in-interest,

purchased the subject property from Francisco, who was in possession of

the Original Certificate of Title (OCT) No. RO-5841 (17205), a reconstituted
copy of the original, in the name of Dionisia and of the Extra-Judicial
Partition with Deed of Sale, dated November 2, 1972; relying on these
instruments and after inspecting the land and seeing that nobody occupied
the same, Teodulfo bought the land and had the title subsequently issued in
his name; the fact that Teodulfo examined the lot does not give rise to the
conclusion that he is not an innocent purchaser in good faith as adverted to
by the CA; if indeed Abas committed fraud in acquiring said lot, Teodulfo is
also a victim of misrepresentation; there was no evidence that Teodulfo and
Francisco connived to defraud respondents; Teodulfo did not have actual
knowledge of facts and circumstances that would impel him to make further
inquiry; and as purchaser in good faith, Teodulfo enjoys the protection of
the Torrens system.[12]

Respondents in their Comment meanwhile contend that: the petition

failed to comply with the requirements of Rule 45 of the Rules of Court as
respondents were not served a copy of the motion for extension of time; the
issue in the present petition does not involve a question of law but entails
only a review of the facts which cannot be done by this Court; in any case,
Teodulfo relied on a title that is not in the name of his transferor, Francisco,
but on its registered owner, Dionisia, who was already deceased at the time
of the supposed sale to Teodulfo; since the right of the supposed transferor
was not shown in the title but merely on a Deed of Extra-Judicial
Settlement with Sale, which turned out irregular, it was incumbent upon
Teodulfo to examine further the extent of the right of the supposed
transferor and why there were a lot of occupants in the land in dispute; his
failure to do so operates against his favor and those of his successors-ininterest.[13]
The parties filed their respective memoranda.
Petitioners, in their Memorandum, further aver that: Teodulfo is a
purchaser in good faith having relied on OCT No. RO-5841 (17205) in the
name of Dionisia and the Extra-Judicial Partition with Deed of Sale dated
November 2, 1972 which shows that Francisco is the absolute owner of the
lot; four years had elapsed from the date that the OCT was reconstituted
and the time Teodulfo bought the property from Francisco and yet none of
the respondents had registered their right in the property; the Extra-Judicial
Settlement of Lot 3603 of the Cadastral Survey of Dao, Capiz with Sale
dated February 4, 1964, on which respondents base their claims, was
never registered with the Registry of Deeds; not having been registered,

this will not affect the right of third persons who had no knowledge thereof;
there was no circumstance that would put Teodulfo on his guard and in
cases of double sales of real property, the ownership shall be awarded to
the vendee who first registers the sale in good faith; Teodulfo is a resident
of Zarraga, Capiz which is more than 50 kilometers from Dao, Capiz, thus
Teodulfo could not have actual knowledge of facts and circumstances that
would impel him to make further inquiry; the land was merely pointed to him
by Francisco and from what he had seen, there was nothing that would
arouse his suspicion.[14]
Meanwhile, respondents, in their Memorandum, contend that they
were in possession of the property before Teodulfo; that Teodulfo should
have probed deeper into the right of Francisco to sell said lot, and not
having done so, he cannot be considered as a purchaser in good faith; and
that the issue of credibility requires a determination that is best left to the
trial court with its unique position of being able to observe the elusive and
incommunicable evidence of the deportment of witnesses on the stand. [15]
Petitioners claim that they are raising before this Court the legal issue
of: Whether a person dealing with a registered land can safely rely on the
correctness of the Certificate of Title issued therefor.[16]
Contrary to what petitioners would like this Court to believe, the
resolution of the present petition hinges principally on the determination of
a question of fact and not one of law.

Both parties concede that a purchaser in good faith can safely rely on
the four corners of a Torrens Title. The disagreement lies, however, as to
whether or not Teodulfo should be considered as a purchaser in good faith
and thus enjoy the protection of the Torrens system. Indeed, this question
is one of fact and not one of law. There is a question of fact when the doubt
or difference arises as to the truth or the falsity of the statement of facts
while a question of law exists when there is doubt or controversy as to what
the law is on a certain state of facts.[17]
The determination of whether Teodulfo is a buyer in good faith is a
factual issue which is generally outside the province of this Court to
determine in a petition for review.[18] If for this matter alone, the petition
should be dismissed because the remedy of appeal by certiorari under
Rule 45 of the Rules of Court contemplates only questions of law.
[19]

Indeed, this Court is not a trier of facts, [20] and the factual findings of the

CA are binding and conclusive upon this Court, unless:

(1) the conclusion is a finding grounded entirely on
speculation, surmise and conjecture; (2) the inference made is
manifestly mistaken; (3) there is grave abuse of discretion; (4)
the judgment is based on a misapprehension of facts; (5) the
findings of fact are conflicting; (6) the Court of Appeals went
beyond the issues of the case and its findings are contrary to
the admissions of both appellant and appellees; (7) the findings
of fact of the Court of Appeals are contrary to those of the trial
court; (8) said findings of fact are conclusions without citation of
specific evidence on which they are based; (9) the facts set
forth in the petition as well as in the petitioner's main and reply
briefs are not disputed by the respondents; and (10) the
findings of fact of the Court of Appeals are premised on the
supposed absence of evidence and contradicted by the
evidence on record.[21]

The binding effect of the CAs factual findings on this Court applies
with greater force when both the trial court and the CA are in complete
agreement on their factual findings. [22] It is also settled that absent any
circumstance requiring the overturning of the factual conclusion made by
the trial court, particularly if affirmed by the CA, the Court necessarily
upholds such findings of fact.[23]
In this case, petitioners failed to show that they fall under any of the
exceptional circumstances.
In reaching its conclusion, the trial court gave weight to the
testimonies

of

Engineer

Jesus

Pimentel,

geodetic

engineer

commissioned by the court to conduct a survey of the land, who found that
respondents acquired their respective lots through sale or inheritance; [24] of
Rolly Daniel, a barangay official who lived 50 meters from said lot, who said
that respondents had been in possession of their respective lots even
before 1960 and that Teodulfo and Francisco asked him to accompany
them sometime between 1976 to 1978 as they went to the different houses
of respondents because Teodulfo was going to buy Franciscos share; [25] of
Ursula Abas, wife of Francisco, who said that Francisco committed suicide
after it was discovered that he fraudulently sold the portion belonging to his
aunts to Teodulfo by making them sign a prepared document on the pretext
that they were only signing as witnesses to the sale of his share, when in
fact said document also sold their aunts shares; [26] as well as the
testimonies of Prudencio Fuentes, son of Jacinto and brother-in-law of
respondent Renato Distor; Lourdes Distor, wife of Renato; Florentina

Mayuga, mother of Diomer; and respondents Renato Distor, Honorato de

los Santos, Rosela Dela Cruz-Viva who asserted that they have been in
possession of said lots before the purported sale to Teodulfo. [27]
Petitioners, meanwhile, could only present Fely Sigaya and Cesar de
los Santos. Fely testified that: the land was acquired by her father from
Francisco by virtue of a Deed of Sale dated January 9, 1978 and that
Francisco became the owner of the property by virtue of an Extra-Judicial
Partition with Deed of Sale; when her father bought the property, he
showed the documents to a lawyer who said that the same were in order;
when her father visited the property, he found no occupants thereat; her
father also filed a petition in 1974 for reconstitution of title of Lot 3603 thus
a reconstituted title was issued in the name of Dionisia Alorsabes. [28] Cesar,
petitioners caretaker meanwhile, merely corroborated Felys testimony.[29]
This Court has held that the burden of proving the status of a
purchaser in good faith lies upon one who asserts that status and this onus
probandi cannot be discharged my mere invocation of the legal
presumption
of good faith.[30]
In this case, the Court finds that petitioners have failed to discharge
such burden.
A purchaser in good faith is one who buys property without notice that
some other person has a right to or interest in such property and pays its
fair price before he has notice of the adverse claims and interest of another
person in the same property. The honesty of intention which constitutes

good faith implies a freedom from knowledge of circumstances which ought

to put a person on inquiry.[31] As enunciated in Lim vs. Chuatoco[32]
good faith consists in the possessor's belief that the
person from whom he received the thing was the owner of the
same and could convey his title. Good faith, while it is always
to be presumed in the absence of proof to the contrary,
requires a well founded belief that the person from whom title
was received was himself the owner of the land, with the right
to convey it. There is good faith where there is an honest
intention to abstain from taking any unconscientious advantage
from another. Otherwise stated, good faith is the opposite of
fraud and it refers to the state of mind which is manifested by
the acts of the individual concerned.[33]
Indeed, it is a well-settled rule that every person dealing with
registered land may safely rely on the correctness of the certificate of title
issued therefor and the law will in no way oblige him to go beyond the
certificate to determine the condition of the property. Where there is nothing
in the certificate of title to indicate any cloud or vice in the ownership of the
property, or any encumbrance thereon, the purchaser is not required to
explore further than what the Torrens Title upon its face indicates in quest
for any hidden defects or inchoate right that may subsequently defeat his
right thereto.[34]
However, this rule shall not apply when the party has actual
knowledge of facts and circumstances that would impel a reasonably
cautious man to make such inquiry or when the purchaser has knowledge
of a defect or the lack of title in his vendor or of sufficient facts to induce a

reasonably prudent man to inquire into the status of the title of the property
in litigation.[35]
In this case, preponderance of evidence shows that respondents had
been in actual possession of their respective portions even prior to 1960.
Rolly Daniel, which the trial court considered as a credible witness, testified
that not only were respondents in actual possession of their respective
portions prior to 1960, he even accompanied Francisco and Teodulfo to the
different houses of respondents sometime between 1976 to 1978 as
Teodulfo was going to buy the portion of Francisco. [36]This Court cannot
give credence therefore to the claim of petitioners that Teodulfo found no
occupants in the property.
There being occupants of the property, the Court cannot ascribe good
faith to Teodulfo who has not shown any diligence in protecting his rights.
As the Court has stated:
A purchaser cannot simply close his eyes to facts which
should put a reasonable man on his guard and then claim that
he acted in good faith under the belief that there was no defect
in the title of his vendor. His mere refusal to believe that such
defect exists or his willful closing of his eyes to the
possibility of the existence of a defect in his vendors title
will not make him an innocent purchaser for value if it later
develops that the title was in fact defective, and it appears
that he would have notice of the defect had he acted with
that measure of precaution which may reasonably be
required of a prudent man in a similar situation.
[37]
(Emphasis supplied)

Petitioners also argue that the rule on double sale of real property
should apply in this case, and since they are the first to register the sale in
good faith, they are entitled to be awarded ownership thereof.
The Court disagrees. Apart from the fact that Teodulfo is not a
purchaser in good faith, the law on double sales as provided in Art. 1544 of
the Civil Code[38]contemplates a situation where a single vendor sold one
and the same immovable property to two or more buyers. For the rule to
apply, it is necessary that the conveyance must have been made by a party
who has an existing right in the thing and the power to dispose it. The rule
cannot be invoked where the two different contracts of sale are made by
two different persons, one of them not being the owner of the property sold.
[39]

In this case, respondents derive their right over their respective portions

either through inheritance or sale from Dionisia while petitioners invoke

their right from the sale of the land from Francisco. Clearly, the law on
double sales does not apply here.
WHEREFORE, the petition is DENIED for lack of merit and the
decision of the Court of Appeals is AFFIRMED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-34655

March 5, 1932

SIY CONG BIENG & CO., INC., plaintiff-appellee,

vs.
HONGKONG & SHANGHAI BANKING CORPORATION, defendantappellant.
DeWitt, Perkins & Brandy for appellant.
Feria & La O for appellee.
OSTRAND, J.:
This action was brought in the Court of First Instance of Manila to recover
the sum of P31,645, the value of 464 bales of hemp deposited in certain
bonded warehouses as evidenced by the quedans (warehouse receipts)
described in the complaint, said quedans having been delivered as pledge
by one Otto Ranft to the herein defendant, the Hongkong and Shanghai
Banking Corporation, for the guarantee of a preexisting debt of the former
to the latter. The record shows that both parties, through their respective
counsel, subscriber and submitted to the court below the following
agreement of facts:
STIPULATION OF FACTS
(Translated into English)
Come now the parties, both the plaintiff and the defendant
Hongkong & Shanghai Banking Corporation, through their
respective counsel in the above entitled case, and respectfully
submit to the court the following agreed statements of facts:
1. That both the plaintiff and the defendant Hongkong &
Shanghai Banking Corporation are corporations domicile in the
City of Manila and duly authorized to transact business in
accordance with the laws of the Philippine Islands.
2. That the plaintiff is a corporation engaged in business
generally, and that the defendant Hongkong & Shanghai
Banking Corporation is a foreign bank authorized to engage in
the banking business in the Philippines.
3. That on June 25, 1926, certain negotiable warehouse
receipts described below were pledge by Otto Ranft to the

defendant Hongkong & Shanghai Banking Corporation to

secure the payment of his preexisting debts to the latter:
No.

Warehouseman

1707 Public Warehouse Co

Depositor
Siy Cong Bieng & Co.,
Inc.

Bale
s
27

133 W.F. Stevenson Co

do

67

1722 Public Warehouse Co

do

60

1723

do

do

99

1634

do
The Philippine Warehouse
Company

1918 Public Warehouse Co

2 Siy Cong Bieng & Co., Inc
1702

The Philippine Warehouse

Company

O. Ranft

166
do

Siy Cong Bieng & Co.,

Inc.

2
39

And that the baled hemp covered by these warehouse receipts was
worth P31,635; receipts number 1707,133,1722, 1723, 1634, and
1702 being endorsed in blank by the plaintiff and Otto Ranft, and
numbers 1918 and 2, by Otto Ranft alone.
4. That in the night of June 25, 1926, said Otto Ranft died
suddenly at his house in the City of Manila.
5. That both parties submit this agreed statement of facts, but
reserve their right to have in evidence upon other points not
included herein, and upon which they cannot come to an
agreement.
Manila, August 7, 1929.

The evidence shows that on June 25, 1926, Ranft called at the office of the
herein plaintiff to purchase hemp (abaca), and he was offered the bales of
hemp as described in the quedans above mentioned. The parties agreed to
the aforesaid price, and on the same date the quedans, together with the
covering invoice, were sent to Ranft by the plaintiff, without having been
paid for the hemp, but the plaintiff's understanding was that the payment
would be made against the same quedans, and it appear that in previous
transaction of the same kind between the bank and the plaintiff, quedans
were paid one or two days after their delivery to them.
In the evening of the day upon which the quedans in question were
delivered to the herein defendant, Ranft died, and when the plaintiff found
that such was the case, it immediately demanded the return of the
quedans, or the payment of the value, but was told that the quedans had
been sent to the herein defendant as soon as they were received by Ranft.
Shortly thereafter the plaintiff filed a claim for the aforesaid sum of P31,645
in the intestate proceedings of the estate of the deceased Otto Ranft, which
on an appeal form the decision of the committee on claims, was allowed by
the Court of First Instance in case No. 31372 (City of Manila). In the
meantime, demand had been made by the plaintiff on the defendant bank
for the return of the quedans, or their value, which demand was refused by
the bank on the ground that it was a holder of the quedans in due course.
Thereupon the plaintiff filed its first complaint against the defendant,
wherein it alleged that it has "sold" the quedans in question to the
deceased O. Ranft for cash, but that the said O. Ranft had not fulfilled the
conditions of the sale. Later on, plaintiff filed an amended complaint,
wherein they changed the word "sold" referred to in the first complaint to
the words "attempted to sell".
Upon trial the judge of the court below rendered judgment in favor of the
plaintiff principally on the ground that in the opinion of the court the
defendant bank "could not have acted in good faith for the reason that
according to the statements of its own witness, Thiele, the quedans were
delivered to the bank in order to secure the debts of Ranft for the payment
of their value and from which it might be deduced that the said bank knew
that the value of the said quedans was not as yet paid when the same were
endorsed to it, and its alleged belief that Ranft was the owner of the said
quedans was not in accordance with the facts proved at the time"; and that,
moreover, the circumstances were such that "the bank knew, or should

have known, that Ranft had not yet acquired the ownership of the said
quedans and that it therefore could not invoke the presumption that it was
acting in good faith and without negligence on its part".
In our opinion the judgment of the court below is not tenable. It may be
noted, first, that the quedans in question were negotiable in form; second,
that they were pledge by Otto Ranft to the defendant bank to secure the
payment of his preexisting debts to said bank (paragraph 3 of the
Stipulation of Facts); third, that such of the quedans as were issued in the
name of the plaintiff were duly endorsed in blank by the plaintiff and by Otto
Ranft; and fourth, that the two remaining quedans which were duly
endorsed in blank by him.
When these quedans were thus negotiated, Otto Ranft was indebted to the
Hongkong & Shanghai Banking Corporation in the sum of P622,753.22,
which indebtedness was partly covered by quedans. He was also being
pressed to deposit additional payments as a further security to the bank,
and there is no doubt that the quedanshere in question were received by
the bank to secure the payment of Ranft's preexisting debts; it is so stated
in paragraph 3 of the stipulation of the facts agreed on by the parties and
hereinbefore quoted.
It further appears that it has been the practice of the bank in its transactions
with Ranft that the value of the quedanshas been entered in the current
accounts between Ranft and the bank, but there is no evidence to the
effect that the bank was at any time bound to pay back to Ranft the amount
of any of the quedans, and there is nothing in the record to show that the
bank has promised to pay the values of the quedans neither to Ranft nor to
the herein plaintiff; on the contrary, as stated in the stipulation of facts, the
"negotiable warehouse receipts were pledged by Otto Ranft to the
defendant Hongkong & Shanghai Banking Corporation secure the payment
of his preexisting debts to the latter", and taking into consideration that
the quedans were negotiable in form and duly endorsed in blank by the
plaintiff and by Otto Ranft, it follows that on the delivery of the qeudans to
the bank they were no longer the property of the indorser unless he
liquidated his debt with the bank.
In his brief the plaintiff insists that the defendant, before the delivery of
the quedans, should have ascertained whether Ranft had any authority to
negotiate the quedans.

We are unable to find anything in the record which in any manner would
have compelled the bank to investigate the indorser. The bank had a
perfect right to act as it did, and its action is in accordance with sections 47,
38, and 40 of the Warehouse Receipts Act (Act No. 2137), which read as
follows:
SEC. 47. When negotiation not impaired by fraud, mistake, or duress.
The validity of the negotiation of a receipt is not impaired by the
fact that such negotiation was a breach of duty on the part of the
person making the negotiation, or by the fact that the owner of the
receipt was induced by fraud, mistake, or duress to intrust the
possession or custody of the receipt was negotiated, or a person to
whom the receipt was subsequent negotiated, paid value therefor,
without notice of the breach of duty, or fraud, mistake, or duress.
SEC. 38. Negotiation of negotiable receipts by indorsement. A
negotiable receipt may be negotiated by the indorsement of the
person to whose order the goods are, by the terms of the receipt,
deliverable. Such indorsement may be in blank, to bearer or to a
specified person. . . . Subsequent negotiation may be made in like
manner.
SEC. 40. Who may negotiate a receipt. A negotiable receipt may
be negotiated:
(a) By the owner thereof, or
(b) By any person to whom the possession or custody of the receipt
has been entrusted by the owner, if, by the terms of the receipt, the
warehouseman undertakes to deliver the goods to the order of the
person to whom the possession or custody of the receipt has been
entrusted, or if at the time of such entrusting the receipt is in such
form that it may be negotiated by delivery.
The question as to the rights the defendant bank acquired over the
aforesaid quedans after indorsement and delivery to it by Ranft, we find in
section 41 of the Warehouse Receipts Act (Act No. 2137):
SEC. 41. Rights of person to whom a receipt has been negotiated.
A person to whom a negotiable receipt has been duly negotiated
acquires thereby:

(a) Such title to the goods as the person negotiating the receipt to him
had or had ability to convey to a purchaser in good faith for
value, and also such title to the goods as the depositor of person to
whose order the goods were to be delivered by the terms of the
receipt had or had ability to convey to a purchaser in good faith for
value, and. . . .
In the case of the Commercial National Bank of New Orleans vs. CanalLouisiana Bank & Trust Co. (239 U.S., 520), Chief Justice Hughes said in
regard to negotiation of receipts:
It will be observed that "one who takes by trespass or a finder is not
included within the description of those who may negotiate." (Report
of Commissioner on Uniform States Laws, January 1, 1910, p. 204.)
Aside from this, the intention is plain to facilitate the use of
warehouse receipts as documents of title. Under sec. 40, the person
who may negotiate the receipt is either the "owner thereof", or a
"person to whom the possession or custody of the receipt has been
intrusted by the owner" if the receipt is in the form described. The
warehouse receipt represents the goods, but the intrustion of the
receipt, as stated, is more than the mere delivery of the goods; it is a
representation that the one to whom the possession of the receipt
has been so intrusted has the title to the goods. By sec. 47, the
negotiation of the receipt to a purchaser for value without notice is not
impaired by the fact that it is a breach of duty, or that the owner of the
receipt was induced "by fraud, mistake, or duree" to intrust the receipt
to the person who negotiated it. And, under sec. 41, one to whom the
negotiable receipt has been duly negotiated acquires such title to the
goods as the person negotiating the receipt to him, or the depositor or
person whose order the goods were delivered by the terms of the
receipt, either had or "had ability to convey to a purchaser in good
faith for value." The clear import of these provisions is that if the
owner of the goods permit another to have the possession or custody
of negotiable warehouse receipts running to the order of the latter, or
to bearer, it is a representation of title upon which bona
fidepurchasers for value are entitled to rely, despite breaches of trust
or violations of agreement on the part of the apparent owner.
In its second assignment of error, the defendant-appellant maintains that
the plaintiff-appellee is estopped to deny that the bank had a valid title to

the quedans for the reason that the plaintiff had voluntarily clothed Ranft
with all the attributes of ownership and upon which the defendant bank
relied. In our opinion, the appellant's view is correct. In the National Safe
Deposit vs. Hibbs (229 U.S., 391), certain certificates of stock were
pledged as collateral by the defendant in error to the plaintiff bank, which
certificates were converted by one of the trusted employees of the bank to
his own use and sold by him. The stock certificates were unqualified
endorsed in blank by the defendant when delivered to the bank. The
Supreme Court of the United States through Justice Day applied the
familiar rule of equitable estoppel that where one of two innocent persons
must suffer a loss he who by his conduct made the loss possible must bear
it, using the following language:
We think this case correctly states the principle, and, applied to the
case in hand, is decisive of it. Here one of two innocent person must
suffer and the question at last is, Where shall the loss fall? It is
undeniable that the broker obtained the stock certificates, containing
all the indicia of ownership and possible of ready transfer, from one
who had possession with the bank's consent, and who brought the
certificates to him, apparently clothed with the full ownership thereof
by all the tests usually applied by business men to gain knowledge
upon the subject before making a purchase of such property. On the
other hand, the bank, for a legitimate purpose, with confidence in one
of its own employees, instrusted the certificates to him, with every
evidence of title and transferability upon them. The bank's trusted
agent, in gross breach of his duty, whether with technical criminality
or not is unimportant, took such certificates, thus authenticated with
evidence of title, to one who, in the ordinary course of business, sold
them to parties who paid full value for them. In such case we think the
principles which underlie equitable estoppel place the loss upon him
whose misplaced confidence has made the wrong possible. . . .
We regret that the plaintiff in this case has suffered the loss of the quedans,
but as far as we can see, there is now no remedy available to the plaintiff.
The bank is not responsible for the loss; the negotiable quedans were duly
negotiated to the bank and as far as the record shows, there has been no
fraud on the part of the defendant.
The appealed judgment is reversed and the appellant is absolved from the
plaintiff's complaint. Without costs. So ordered.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-10027

November 13, 1915

ROSENDO HERNAEZ y ESPINOSA, plaintiff-appellant,

vs.
MATEO HERNAEZ y ESPINOSA, ET AL., defendants-appellants.
Ruperto Montinola for plaintiff.
Enrique C. Locsin for defendants.

TRENT, J.:
The spouses, Pedro Hernaez and Juana Espinosa, died, leaving several
legitimate descendants. Neither of their estates had been divided up to the
date of the institution of this action, but were both under administration.
Their son, Domingo Hernaez y Espinosa, sold all his interest in both his
father's and mother's estate to his son, Vicente Hernaez y Tuason, on
November 6, 1901. Notwithstanding the fact that Domingo Hernaez y
Espinosa had thus parted with all his interest in the estates of his two
parents, he executed a document of sale in favor of Alejandro Montelibano
y Ramos on February 27, 1907, in which he purported to convey all his
undivided interest in his mother's estate. On the same date he executed
another document of sale in which he purported to convey to Jose
Montelibano Uy-Cana four-eighteenths of his interest in his mother's estate.
Both of these sales were made with the connivance of his son, Vicente
Hernaez y Tuason. Hence, although Vicente Hernaez y Tuason had
actually purchased all of his father's interests in the estates of Pedro
Hernaez and Juana Espinosa as early as November 6, 1901, and was, on
February 27, 1907, the undoubted owner thereof, he is effectually estopped
from asserting his title as against either of the vendees mentioned in the
documents of sale dated February 27, 1907, to which we have just
referred. (Code Civ. Pro., sec. 333, No. 1.) Bigelow on Estoppel (p. 607)
says:

. . . it is now a well-established principle that where the true owner of

property, for however short a time, holds out another, or, with
knowledge of his own right, allows another to appear as the owner of
or as having full power of disposition over the property, the same
being in the latter's actual possession, and innocent third parties are
thus led into dealing with such apparent owner, they will be protected.
On August 19, 1912, Jose Montelibano Uy-Cana sold his interest in the
estate to Alejandro Montelibano y Ramos. By this transfer, the latter stood
owner of all the interest of Domingo Hernaez y Espinosa in the estate of
Pedro Hernaez, and five-eighteenths of his interest in the estate of Juana
Espinosa as against Vicente Hernaez y Espinosa.
It is admitted that Rosendo Hernaez y Espinosa, another son of the
deceased spouses administrator of the estates, was notified of
Montelibano's purchases on January 8, 1913, when he received notice of
Montelibano's motion, entered in the administration proceedings, asking
that he (Montelibano) be substituted as assignee of the interests of various
heirs of the estate which he had acquired by purchase. Notwithstanding
this knowledge, Rosendo Hernaez y Espinosa entered into a contract of
sale with Vicente Hernaez y Tuason, whereby the latter purported to
convey all the interest, which he had acquired from his father, in the estate
of the deceased spouses, Pedro Hernaez and Juana Espinosa. It will be
remembered that he purchased his father's share of the estate on
November 6, 1901; that he is estopped from asserting title to any interest in
his grandfather's estate and in five-eighteenths of his grandmother's estate.
Rosendo Hernandez y Espinosa purchased with full knowledge of these
facts. He, therefore, acquired thirteen-eighteenths of the interest of
Domingo Hernaez y Espinosa in the estate of the latter's mother nothing
more. lawph!l.net
That rule is that the holder [Alejandro Montelibano y Ramos] of a prior
equitable right has priority over the purchaser [Rosendo Hernandez y
Espinosa] of a subsequent estate (whether legal or equitable) without
value, or with notice of the equitable right, but not as against a
subsequent purchaser for value and without notice. (Ewart on
Estoppel, p. 199.)
Alejandro Montelibano y Ramos has acquired in his interest in the estate of
the deceased spouses for a valuable consideration and in good faith, and

there remains to the plaintiff, Rosendo Hernaez y Espinosa, only the right
of subrogation allowed him by article 1067 of the Civil Code, which reads
as follows:
If any of the heirs should sell his hereditary rights to a stranger before
the division, all or any of the co-heirs may subrogate himself in the
place of the purchaser, reimbursing him for the value of the purchase,
provided they do so within the period of a month, to be counted from
the time they were informed thereof.
On January 24, 1913, the plaintiff instituted this action seeking to subrogate
himself in the rights acquired by Montelibano in the estate. Unless the
plaintiff can be charged with actual notice of the conveyance by which
Montelibano acquired these interests, prior to January 8, 1913, it is clear
that he has opportunely asserted his right of subrogation. This is purely a
question of fact. As to the sales whereby Domingo Hernaez y Espinosa
parted with that portion of his interest in the estate which is now held by
Alejandro Montelibano, as well as to those sales made by other heirs to
Montelibano, the trial court found that the plaintiff, Rosendo Hernaez y
Espinosa, was not chargeable with notice prior to January 8, 1913. After a
careful examination of the record we see no reason for disturbing this
finding of fact. As a consequence, the plaintiff, Rosendo Hernaez y
Espinosa, is entitled to exercise his right of subrogation in accordance with
article 1067, above quoted. lawph!1.net
The interest which Jose Montelibano Uy-Cana purchased from Domingo
Hernaez y Espinosa on February 27, 1907, for the sum of P4,500, he
afterwards transferred to Alejandro Montelibano y Ramos for the sum of
P10,000. In rendering judgment, the trial court decreed that the plaintiff,
Rosendo Hernaez y Espinosa, should pay the latter sum for the privilege of
exercising the right of subrogation. This was error. Article 1067 of the Civil
Code provides that the co-heir may exercise this right of subrogation upon
the payment to the purchaser of another heir's interest, "el precio de la
compra" (the purchase price). Obviously, if the interest had not been resold,
the plaintiff, Rosendo Hernaez y Espinosa, would have had to pay only the
price for which Uy-Cana acquired it. The purpose of the article cannot be
evaded by a reconveyance of the interest to a third person at a higher
price. Subsequent purchasers of the interest acquire it burdened with the
right of subrogation of co-heirs at the price for which the heir who sold it
parted with it.

It is urged that the prices in some of the deeds of sale by which Alejandro
Montelibano y Ramos purchased the interest of various heirs in the estates
are fictitious. This is a question of fact upon which both parties adduced
evidence, and we concur in the opinion of the trial court that there is no
basis to the charge. For the foregoing reasons, the judgment of the court is
modified by substituting, as the price of subrogation of the interest originally
purchased by Jose Montelibano Uy-Cana, the sum of P4,500, as set out in
Exhibit 7, for the sum of P10,000, the consideration expressed in Exhibit
10. As modified, the judgment appealed from is affirmed, without costs. So
ordered.
FIRST DIVISION
[G.R. No. 10599. December 24, 1915. ]
VICENTA JALBUENA, Plaintiff-Appellant, v. SALVADOR LIZARRAGA
Et. Al., Defendants-Appellees.
Jose Evangelista for Appellant.
No appearance for appellee Lizarraga.
Quintin Salas for the other appellees.
SYLLABUS
1. ESTOPPEL; JUDICIAL SALE; SILENCE OF OWNER. The owner of
property who knowingly permits his property to be sold at a judicial sale as
the property of the judgment debtor without asserting his title or right or
making known to the bidders , cannot afterwards set up his claim.
2. ID.; ID.; ID.; PRESENCE NOT NECESSARY. Actual presence of the
owner at the sale is not necessary in order that he may be estopped from
afterwards setting up his title to the property. It is only necessary that the
owner be chargeable with knowledge of the impending sale under
circumstances that render it his duty to assert his title.
DECISION

TRENT, J. :
On May 22,1903, Salvador Lizarraga, as judgment creditor, caused the
sheriff of the Province of Iloilo to levy upon an old sugar-mill as the property
of Ildefonso Doronila, the judgment debtor and husband of the plaintiff. At
the time of the levy Doronila stated to the sheriff that the mill belonged to
him. The sale took place about the last of July, 1913. The purchaser at this
public sale sold the mill to Lopez. The present action was instituted on
November 26, 1913, by the plaintiff for the purpose of recovering the mill or
its value upon the ground that the same was her exclusive property and
that her husband had no interest therein. From a judgment dismissing the
cause after a hearing on the merits, the plaintiff appealed.
The plaintiff knew that the old sugar-mill had been levied upon at the levy
was made and also knew that it would be sold as the property of her
husband. Notwithstanding these facts, she stood by and permitted the sale
to go forward without making the slightest protest or claim until the property
had passed into the hands of Lopez. Upon these facts the trial court held
that the plaintiff was estopped from asserting her claim of ownership
against the defendants, or either of them. this holding is assigned as an
error, and in support of this alleged error the plaintiff cites and relies upon
the doctrine enunciated by this court in the cases of Waite v. Peterson (8
Phil. Rep., 449) Lopez v. Alvarez (9 Phil. Rep., 28); Uy Piaoco v. Osmea
(9 Phil. Rep., 299); Ariston v. Cea (Phil. Rep., 109) and Bonzon v. Standard
Oil Co. and Osorio (27 Phil. Rep., 141).
An examination of the above cited cases will show that they do not support
the plaintiffs contention. In the first case the interested party made a
demand upon the sheriff for the return of the property levied upon. The
second case had do not with the question of preferred creditors. In the third
case there was also a claim made upon the sheriff for the return of the
property soon after it was attached. In the fourth case there was likewise a
claim made upon the sheriff for the release of the property before it was
sold under execution. In the last case the court used the following
language: "In this jurisdiction, under the general principle that one person
may not enrich himself at the expense of another, a judgment creditor
would not be permitted to retain the purchase price of the land sold as the

property of a judgment debtor after it has been made to appear that the
judgment debtor had no title to the land and that the purchaser had failed to
secure title thereto, and we find no difficulty, therefore, in accepting a liberal
construction of the statute which arrives at the same equitable result." This
is a correct statement of the law; but it has nothing to do with the question
of estoppel.
An execution is an order to the sheriff to attach and sell the property of the
judgment debtor. If he sells the property of another person, he exceeds his
authority and the true owner may issue in trespass for damages or for the
recovery of the property, provide he has not lost his right to do so by his
own conduct. Upon this point, the rule is stated in 16 Cyc., thus: "When a
person having title to or an interest in property knowingly stands by and
suffers it to be sold under a judgment or decree, without asserting his title
or right or making it known to the bidders, he cannot afterward set up his
claim." (Citing a long array of cases from Florida, Georgia, Illinois,
Kentucky, South Carolina, New York, North Carolina, Pennsylvania, and
Conklin v. Wehrman, 38 Fed., 874.)"
Bigelow on Estoppel says: ". . . it is now a well established principle that
where the true owner of property, for however short a time , holds out
another ,or, with knowledge of his own right, allows another to appear, as
the owner of or as having full power of disposition over the property, the
same being in the latters actual possession, and innocent third parties are
thus led into dealing with some [such] apparent owner, they will be
protected." (Quoted with approval in the case of Hernaez v. Hernaez, 32
Phil. Rep., 214.)
The foregoing quotations from Cyc. and Bigelow are in harmony with No. 1
of section 333 of the Code of Civil Procedure, wherein it is provided that "
Whenever a party has, by his own declaration, act, or omission,
intentionally and deliberately led another to believe a particular thing true,
and to act upon such belief, he can not, in any litigation arising out of such
declaration, act, or omission, be permitted t falsify it."cralaw virtua1aw
library
The phrase "stood by" does not an actual presence, but implies knowledge
under such circumstances as to render in the duty of the prossessor to
communicate it. The herein plaintiff had, as we have indicated, full
knowledge of the fact that the property was gong to be sold to pay the

debts of her husband. She did not communicate her claim to the purchaser,
and it is now too late to assert such a claim.
For the foregoing reasons, the judgment appealed from is affirmed, with
costs against the Appellant. So ordered.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 80298

April 26, 1990

EDCA PUBLISHING & DISTRIBUTING CORP., petitioner,

vs.
THE SPOUSES LEONOR and GERARDO SANTOS, doing business
under the name and style of "SANTOS BOOKSTORE," and THE
COURT OF APPEALS, respondents.
Emiliano S. Samson, R. Balderrama-Samson, Mary Anne B. Samson for
petitioner.
Cendana Santos, Delmundo & Cendana for private respondents.

CRUZ, J.:
The case before us calls for the interpretation of Article 559 of the Civil
Code and raises the particular question of when a person may be deemed
to have been "unlawfully deprived" of movable property in the hands of
another. The article runs in full as follows:
Art. 559. The possession of movable property acquired in good faith
is equivalent to a title. Nevertheless, one who has lost any movable
or has been unlawfully deprived thereof, may recover it from the
person in possession of the same.
If the possessor of a movable lost or of which the owner has been
unlawfully deprived has acquired it in good faith at a public sale, the

owner cannot obtain its return without reimbursing the price paid
therefor.
The movable property in this case consists of books, which were bought
from the petitioner by an impostor who sold it to the private respondents.
Ownership of the books was recognized in the private respondents by the
Municipal Trial Court, 1 which was sustained by the Regional Trial
Court, 2 which was in turn sustained by the Court of Appeals. 3 The
petitioner asks us to declare that all these courts have erred and should be
reversed.
This case arose when on October 5, 1981, a person identifying himself as
Professor Jose Cruz placed an order by telephone with the petitioner
company for 406 books, payable on delivery. 4 EDCA prepared the
corresponding invoice and delivered the books as ordered, for which Cruz
issued a personal check covering the purchase price of P8,995.65. 5 On
October 7, 1981, Cruz sold 120 of the books to private respondent Leonor
Santos who, after verifying the seller's ownership from the invoice he
showed her, paid him P1,700.00. 6
Meanwhile, EDCA having become suspicious over a second order placed
by Cruz even before clearing of his first check, made inquiries with the De
la Salle College where he had claimed to be a dean and was informed that
there was no such person in its employ. Further verification revealed that
Cruz had no more account or deposit with the Philippine Amanah Bank,
against which he had drawn the payment check. 7 EDCA then went to the
police, which set a trap and arrested Cruz on October 7, 1981.
Investigation disclosed his real name as Tomas de la Pea and his sale of
120 of the books he had ordered from EDCA to the private respondents. 8
On the night of the same date, EDCA sought the assistance of the police in
Precinct 5 at the UN Avenue, which forced their way into the store of the
private respondents and threatened Leonor Santos with prosecution for
buying stolen property. They seized the 120 books without warrant, loading
them in a van belonging to EDCA, and thereafter turned them over to the
petitioner. 9
Protesting this high-handed action, the private respondents sued for
recovery of the books after demand for their return was rejected by EDCA.
A writ of preliminary attachment was issued and the petitioner, after initial

refusal, finally surrendered the books to the private respondents. 10 As

previously stated, the petitioner was successively rebuffed in the three
courts below and now hopes to secure relief from us.
To begin with, the Court expresses its disapproval of the arbitrary action of
the petitioner in taking the law into its own hands and forcibly recovering
the disputed books from the private respondents. The circumstance that it
did so with the assistance of the police, which should have been the first to
uphold legal and peaceful processes, has compounded the wrong even
more deplorably. Questions like the one at bar are decided not by
policemen but by judges and with the use not of brute force but of lawful
writs.
Now to the merits
It is the contention of the petitioner that the private respondents have not
established their ownership of the disputed books because they have not
even produced a receipt to prove they had bought the stock. This is
unacceptable. Precisely, the first sentence of Article 559 provides that "the
possession of movable property acquired in good faith is equivalent to a
title," thus dispensing with further proof.
The argument that the private respondents did not acquire the books in
good faith has been dismissed by the lower courts, and we agree. Leonor
Santos first ascertained the ownership of the books from the EDCA invoice
showing that they had been sold to Cruz, who said he was selling them for
a discount because he was in financial need. Private respondents are in
the business of buying and selling books and often deal with hard-up
sellers who urgently have to part with their books at reduced prices. To
Leonor Santos, Cruz must have been only one of the many such sellers
she was accustomed to dealing with. It is hardly bad faith for any one in the
business of buying and selling books to buy them at a discount and resell
them for a profit.
But the real issue here is whether the petitioner has been unlawfully
deprived of the books because the check issued by the impostor in
payment therefor was dishonored.
In its extended memorandum, EDCA cites numerous cases holding that the
owner who has been unlawfully deprived of personal property is entitled to
its recovery except only where the property was purchased at a public sale,

in which event its return is subject to reimbursement of the purchase price.

The petitioner is begging the question. It is putting the cart before the
horse. Unlike in the cases invoked, it has yet to be established in the case
at bar that EDCA has been unlawfully deprived of the books.
The petitioner argues that it was, because the impostor acquired no title to
the books that he could have validly transferred to the private respondents.
Its reason is that as the payment check bounced for lack of funds, there
was a failure of consideration that nullified the contract of sale between it
and Cruz.
The contract of sale is consensual and is perfected once agreement is
reached between the parties on the subject matter and the consideration.
According to the Civil Code:
Art. 1475. 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.
xxx

xxx

xxx

Art. 1477. The ownership of the thing sold shall be transferred to the
vendee upon the actual or constructive delivery thereof.
Art. 1478. The parties may stipulate that ownership in the thing shall
not pass to the purchaser until he has fully paid the price.
It is clear from the above provisions, particularly the last one quoted, that
ownership in the thing sold shall not pass to the buyer until full payment of
the purchase only if there is a stipulation to that effect. Otherwise, the rule
is that such ownership shall pass from the vendor to the vendee upon the
actual or constructive delivery of the thing soldeven if the purchase price
has not yet been paid.
Non-payment only creates a right to demand payment or to rescind the
contract, or to criminal prosecution in the case of bouncing checks. But

absent the stipulation above noted, delivery of the thing sold will effectively
transfer ownership to the buyer who can in turn transfer it to another.
In Asiatic Commercial Corporation v. Ang,11 the plaintiff sold some
cosmetics to Francisco Ang, who in turn sold them to Tan Sit Bin. Asiatic
not having been paid by Ang, it sued for the recovery of the articles from
Tan, who claimed he had validly bought them from Ang, paying for the
same in cash. Finding that there was no conspiracy between Tan and Ang
to deceive Asiatic the Court of Appeals declared:
Yet the defendant invoked Article 464 12 of the Civil Code providing,
among other things that "one who has been unlawfully deprived of
personal property may recover it from any person possessing it." We
do not believe that the plaintiff has been unlawfully deprived of the
cartons of Gloco Tonic within the scope of this legal provision. It has
voluntarily parted with them pursuant to a contract of purchase and
sale. The circumstance that the price was not subsequently paid did
not render illegal a transaction which was valid and legal at the
beginning.
In Tagatac v. Jimenez,13 the plaintiff sold her car to Feist, who sold it to
Sanchez, who sold it to Jimenez. When the payment check issued to
Tagatac by Feist was dishonored, the plaintiff sued to recover the vehicle
from Jimenez on the ground that she had been unlawfully deprived of it by
reason of Feist's deception. In ruling for Jimenez, the Court of Appeals
held:
The point of inquiry is whether plaintiff-appellant Trinidad C. Tagatac
has been unlawfully deprived of her car. At first blush, it would seem
that she was unlawfully deprived thereof, considering that she was
induced to part with it by reason of the chicanery practiced on her by
Warner L. Feist. Certainly, swindling, like robbery, is an illegal method
of deprivation of property. In a manner of speaking, plaintiff-appellant
was "illegally deprived" of her car, for the way by which Warner L.
Feist induced her to part with it is illegal and is punished by law. But
does this "unlawful deprivation" come within the scope of Article 559
of the New Civil Code?
xxx

xxx

xxx

. . . The fraud and deceit practiced by Warner L. Feist earmarks this

sale as a voidable contract (Article 1390 N.C.C.). Being a voidable
contract, it is susceptible of either ratification or annulment. If the
contract is ratified, the action to annul it is extinguished (Article 1392,
N.C.C.) and the contract is cleansed from all its defects (Article 1396,
N.C.C.); if the contract is annulled, the contracting parties are
restored to their respective situations before the contract and mutual
restitution follows as a consequence (Article 1398, N.C.C.).
However, as long as no action is taken by the party entitled, either
that of annulment or of ratification, the contract of sale remains valid
and binding. When plaintiff-appellant Trinidad C. Tagatac delivered
the car to Feist by virtue of said voidable contract of sale, the title to
the car passed to Feist. Of course, the title that Feist acquired was
defective and voidable. Nevertheless, at the time he sold the car to
Felix Sanchez, his title thereto had not been avoided and he therefore
conferred a good title on the latter, provided he bought the car in
good faith, for value and without notice of the defect in Feist's title
(Article 1506, N.C.C.). There being no proof on record that Felix
Sanchez acted in bad faith, it is safe to assume that he acted in good
faith.
The above rulings are sound doctrine and reflect our own interpretation of
Article 559 as applied to the case before us.
Actual delivery of the books having been made, Cruz acquired ownership
over the books which he could then validly transfer to the private
respondents. The fact that he had not yet paid for them to EDCA was a
matter between him and EDCA and did not impair the title acquired by the
private respondents to the books.
One may well imagine the adverse consequences if the phrase "unlawfully
deprived" were to be interpreted in the manner suggested by the petitioner.
A person relying on the seller's title who buys a movable property from him
would have to surrender it to another person claiming to be the original
owner who had not yet been paid the purchase price therefor. The buyer in
the second sale would be left holding the bag, so to speak, and would be
compelled to return the thing bought by him in good faith without even the
right to reimbursement of the amount he had paid for it.

It bears repeating that in the case before us, Leonor Santos took care to
ascertain first that the books belonged to Cruz before she agreed to
purchase them. The EDCA invoice Cruz showed her assured her that the
books had been paid for on delivery. By contrast, EDCA was less than
cautious in fact, too trusting in dealing with the impostor. Although it had
never transacted with him before, it readily delivered the books he had
ordered (by telephone) and as readily accepted his personal check in
payment. It did not verify his identity although it was easy enough to do
this. It did not wait to clear the check of this unknown drawer. Worse, it
indicated in the sales invoice issued to him, by the printed terms thereon,
that the books had been paid for on delivery, thereby vesting ownership in
the buyer.
Surely, the private respondent did not have to go beyond that invoice to
satisfy herself that the books being offered for sale by Cruz belonged to
him; yet she did. Although the title of Cruz was presumed under Article 559
by his mere possession of the books, these being movable property,
Leonor Santos nevertheless demanded more proof before deciding to buy
them.
It would certainly be unfair now to make the private respondents bear the
prejudice sustained by EDCA as a result of its own negligence.1wphi1 We
cannot see the justice in transferring EDCA's loss to the Santoses who had
acted in good faith, and with proper care, when they bought the books from
Cruz.
While we sympathize with the petitioner for its plight, it is clear that its
remedy is not against the private respondents but against Tomas de la
Pea, who has apparently caused all this trouble. The private respondents
have themselves been unduly inconvenienced, and for merely transacting a
customary deal not really unusual in their kind of business. It is they and
not EDCA who have a right to complain.
WHEREFORE, the challenged decision is AFFIRMED and the petition is
DENIED, with costs against the petitioner.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC

G.R. No. L-20264 January 30, 1971

CONSUELO S. DE GARCIA and ANASTACIO GARCIA, petitioners,
vs.
HON. COURT OF APPEALS, ANGELINA D. GUEVARA and JUAN B.
GUEVARA, respondents.
Deogracias T. Reyes and Jose M. Luison for petitioners.
Tolentino and Garcia and D.R. Cruz for private respondents.

FERNANDO, J.:
This petition for certiorari to review a decision of respondent Court of
Appeals was given due course because it was therein vigorously asserted
that legal questions of gravity and of moment, there being allegations of an
unwarranted departure from and a patent misreading of applicable and
controlling decisions, called for determination by this Tribunal. The brief for
petitioners-spouses, however, failed to substantiate such imputed failings of
respondent Court. The performance did not live up to the promise. On the
basis of the facts as duly found by respondent Court, which we are not at
liberty to disregard, and the governing legal provisions, there is no basis for
reversal. We affirm.
The nature of the case presented before the lower court by private
respondent Angelina D. Guevara, assisted by her spouse, Juan B.
Guevara, as plaintiffs, was noted in the decision of respondent Court of
Appeals thus: "Plaintiff seeks recovery of `one (1) lady's diamond ring 18
cts. white gold mounting, with one (1) 2.05 cts. diamond-solitaire, and four
(4) brills 0.10 cts. total weight' which she bought on October 27, 1947 from
R. Rebullida, Inc."1 Then came a summary of now respondent Guevara of
her evidence: "Plaintiff's evidence tends to show that around October 11,
1953 plaintiff while talking to Consuelo S. de Garcia, owner of La Bulakea
restaurant recognized her ring in the finger of Mrs. Garcia and inquired
where she bought it, which the defendant answered from her comadre.
Plaintiff explained that that ring was stolen from her house in February,
1952. Defendant handed the ring to plaintiff and it fitted her finger. Two or

three days later, at the request of plaintiff, plaintiff, her husband Lt. Col.
Juan Guevara, Lt. Cementina of Pasay PD, defendant and her attorney
proceeded to the store of Mr. Rebullida to whom they showed the ring in
question. Mr. Rebullida a examined the ring with the aid of high power lens
and after consulting the stock card thereon, concluded that it was the very
ring that plaintiff bought from him in 1947. The ring was returned to
defendant who despite a written request therefor failed to deliver the ring to
plaintiff. Hence, this case. Later on when the sheriff tried to serve the writ of
seizure (replevin), defendant refused to deliver the ring which had been
examined by Mr. Rebullida, claiming it was lost."2
How the defendant, Consuelo S. de Garcia, the present petitioner before
us, along with her husband Anastacio Garcia, sought to meet plaintiff's
claim was narrated thus: "On the other hand, defendant denied having
made any admission before plaintiff or Mr. Rebullida or the sheriff. Her
evidence tends to show that the ring (Exhibit 1) was purchased by her from
Mrs. Miranda who got it from Miss Angelita Hinahon who in turn got it from
the owner, Aling Petring, who was boarding in her house; that the ring she
bought could be similar to, but not the same ring plaintiff purchased from
Mr. Rebullida which was stolen; that according to a pawn-shop owner the
big diamond on Exhibit 1 was before the trial never dismantled. When
dismantled, defendant's diamond was found to weigh 2.57 cts." 3
Plaintiff lost in the lower court. She elevated the matter to respondent Court
of Appeals with the judgment of the lower court being reversed. It is this
decision now under review.
These are the facts as found by respondent Court of Appeals: "That the
ring brought by the parties for examination by Rafael Rebullida on
December 14, 1953 was the same ring purchased by plaintiff from R.
Rebullida, Inc. on October 27, 1947 and stolen in February, 1952 has been
abundantly established by plaintiff's evidence. Before plaintiff lost the ring,
she had been wearing it for six years and became familiar with it. Thus,
when she saw the missing ring in the finger of defendant, she readily and
definitely identified it. Her identification was confirmed by Mr. Rafael
Rebullida, whose candid testimony is entitled to great weight, with his 30
years experience behind him in the jewelry business and being a
disinterested witness since both parties are his customers. Indeed,
defendant made no comment when in her presence Rebullida after
examining the ring and stock card told plaintiff that that was her ring, nor

did she answer plaintiff's letter of demand, ... asserting ownership. Further
confirmation may be found in the extra-judicial admissions, contained in
defendant's original and first amended answers ..." 4
These further facts likewise appeal therein: "The foregoing proof is not
counter-balanced by the denial on the part of defendant or the presentation
of the ring, Exhibit I, which has a diamond-solitaire 2.57 cts., or much
heavier than the lost diamond weighing 2.05 cts. only. It is noteworthy that
defendant gave a rather dubious source of her ring. Aling Petring from
whom the ring supposedly came turned out to be a mysterious and
ephemeral figure. Miss Hinahon did not even know her true and full name,
nor her forwarding address. She appeared from nowhere, boarded three
months in the house of Miss Hinahon long enough to sell her diamond ring,
disappearing from the scene a week thereafter. Indeed, the case was
terminated without any hearing on the third-party and fourth-party
complaints, which would have shown up the falsity of defendant's theory.
Moreover, Mrs. Baldomera Miranda, third-party defendant, who tried to
corroborate defendant on the latter's alleged attempt to exchange the ring
defendant bought through her, is [belied] by her judicial admission in her
Answer that appellee `suggested that she would make alterations to the
mounting and structural design of the ring to hide the true identity and
appearance of the original one' (Cunanan vs. Amparo, 45 O.G. 3796).
Finally, defendant is refuted by her own extra-judicial admissions ...
although made by defendant's counsel. For an attorney who acts as
counsel of record and is permitted to act such, has the authority to manage
the cause, and this includes the authority to make admission for the
purpose of the litigation... Her proffered explanation that her counsel
misunderstood her is puerile because the liability to error as to the identity
of the vendor and the exchange of the ring with another ring of the same
value, was rather remote."5
It is in the light of the above facts as well as the finding that the discrepancy
as to the weight between the diamond-solitaire in Exhibit I and the lost
diamond was due to defendant having "substituted a diamond-solitaire of
plaintiff with a heavier stone" that the decision was rendered, respondent
Court reversing the lower court and ordering defendant, now petitioner
Consuelo S. de Garcia, to return plaintiff's ring or fact value of P1,000.00
and costs, as well as to pay plaintiff P1,000.00 as attorney's fee and
P1,000.00 as exemplary damages. Hence this appeal.

To repeat, there is no occasion to reverse respondent Court. It correctly

applied the law to the facts as found.
1. The controlling provision is Article 559 of the Civil Code. It reads thus:
"The possession of movable property acquired in good faith is equivalent to
a title. Nevertheless, one who has lost any movable or has been unlawfully
deprived thereof may recover it from the person in possession of the same.
If the possessor of a movable lost of which the owner has been unlawfully
deprived, has acquired it in good faith at a public sale, the owner cannot
obtain its return without reimbursing the price paid therefor." Respondent
Angelina D. Guevara, having been unlawfully deprived of the diamond ring
in question, was entitled to recover it from petitioner Consuelo S. de Garcia
who was found in possession of the same. The only exception the law
allows is when there is acquisition in good faith of the possessor at a public
sale, in which case the owner cannot obtain its return without reimbursing
the price. As authoritative interpreted in Cruz v. Pahati, 6 the right of the
owner cannot be defeated even by proof that there was good faith by the
acquisition by the possessor. There is a reiteration of this principle in Aznar
v. Yapdiangco.7 Thus: "Suffice it to say in this regard that the right of the
owner to recover personal property acquired in good faith by another, is
based on his being dispossessed without his consent. The common law
principle that where one of two innocent persons must suffer by a fraud
perpetrated by the another, the law imposes the loss upon the party who,
by his misplaced confidence, has enabled the fraud to be committed,
cannot be applied in a case which is covered by an express provision of the
new Civil Code, specifically Article 559. Between a common law principle
and statutory provision, the latter must prevail in this jurisdiction." 8
2. It is thus immediately apparent that there is no merit to the contention
raised in the first assigned error that her possession in good faith,
equivalent to title, sufficed to defeat respondent Guevara's claim. As the
above cases demonstrate, even on that assumption the owner can recover
the same once she can show illegal deprivation. Respondent Court of
Appeals was so convinced from the evidence submitted that the owner of
the ring in litigation is such respondent. That is a factual determination to
which we must pay heed. Instead of proving any alleged departure from
legal norms by respondent Court, petitioner would stress Article 541 of the
Civil Code, which provides: 'A possessor in the concept of owner has in his
favor the legal presumption that he possesses with a just title and he
cannot be obliged to show or prove it." She would accord to it a greater

legal significance than that to which under the controlling doctrines it is

entitled.lwph1.t The brief for respondents did clearly point out why
petitioner's assertion is lacking in support not only from the cases but even
from commentators. Thus: "Actually, even under the first clause,
possession in good faith does not really amount to title, for the reason that
Art. 1132 of the Code provides for a period of acquisitive prescription for
movables through `uninterrupted possession for four years in good faith'
(Art. 1955 of the old Spanish Code, which provided a period of three
years), so that many Spanish writers, including Manresa, Sanchez Roman,
Scaevola, De Buen, and Ramos, assert that under Art. 464 of the Spanish
Code (Art. 559 of the New Civil Code), the title of the possessor is not that
of ownership, but is merely a presumptive title sufficient to serve as a basis
of acquisitive prescription (II Tolentino, Civil Code of the Phil. p. 258: IV
Manresa, Derecho Civil Espaol, 6th Ed., p. 380). And it is for the very
reason that the title established by the first clause of Art. 559 is only a
presumptive title sufficient to serve as a basis for acquisitive prescription,
that the clause immediately following provides that `one who has lost any
movable or has been unlawfully deprived thereof, may recover it from the
person in possession of the same.' As stated by the Honorable Justice Jose
B. L. Reyes of this Court in Sotto vs. Enage (C.A.), 43 Off. Gaz. 5075, Dec.
1947: `Article 559 in fact assumes that possessor is as yet not the owner;
for it is obvious that where the possessor has come to acquire indefeasible
title by, let us say, adverse possession for the necessary period, no proof of
loss or illegal deprivation could avail the former owner of the chattel. He
would no longer be entitled to recover it under any condition.' " 9
The second assigned error is centered on the alleged failure to prove the
identity of the diamond ring. Clearly the question raised is one of the fact.
What the Court of Appeals found is conclusive. Again, petitioner could not
demonstrate that in reaching such a conclusion the Court of Appeals acted
in an arbitrary manner. As made mention of in the brief for respondents two
disinterested witnesses, Mr. Rafael Rebullida as well as Lt. Col. Reynaldo
Cementina of the Pasay City Police Department, both of whom could not
be accused of being biased in favor of respondent Angelina D. Guevara,
did testify as to the identity of the ring.
The third assigned error of petitioners would find fault with respondent
Court relying "on the weakness of the title or evidence" of petitioner
Consuelo S. de Garcia. It is true, in the decision under review, mention was
made of petitioner Consuelo S. de Garcia making no comment when in her

presence Rebullida, after examining the ring the stock card, told
respondent Angelina L. Guevara that that was her ring, nor did petitioner
answer a letter of the latter asserting ownership. It was likewise stated in
such decision that there were extra-judicial admissions in the original and
first amended answers of petitioner. In the appraisal of her testimony,
respondent Court likewise spoke of her giving a rather dubious source of
her ring, the person from whom she allegedly bought it turning out "to be a
mysterious and ephemeral figure." As a matter of fact, as set forth a few
pages back, respondent Court did enumerate the flaws in the version given
by petitioner. From the weakness of the testimony offered which, as thus
made clear, petitioner, did not even seek to refute, she would raise the legal
question that respondent Court relied on the "weakness of [her] title or
evidence" rather than on the proof justifying respondent Angelina D.
Guevara's claim of ownership. Petitioner here would ignore the finding of
fact of respondent Court that such ownership on her part "has been
abundantly established" by her evidence. Again here, in essence, the
question raised is one of fact, and there is no justification for us to reverse
respondent Court.
The legal question raised in the fourth assignment of error is that the matter
of the substitution of the diamond on the ring was a question raised for the
first time on appeal as it was never put in issue by the pleadings nor the
subject of reception of evidence by both parties and not touched upon in
the decision of the lower court. Why no such question could be raised in
the pleadings of respondent Angelina D. Guevara was clarified by the fact
that the substitution came after it was brought for examination to Mr.
Rebullida. After the knowledge of such substitution was gained, however,
the issue was raised at the trial according to the said respondent resulting
in that portion of the decision where the lower court reached a negative
conclusion. As a result, in the motion for reconsideration, one of the points
raised as to such decision being contrary to the evidence is the finding that
there was no substitution. It is not necessary to state that respondent
Court, exercising its appellate power reversed the lower court. What was
held by it is controlling. What is clear is that there is no factual basis for the
legal arguments on which the fourth assigned error is predicated.
What is said takes care of the fifth assigned error that respondent Court
was mistaken in its finding that there was such a substitution. Again
petitioner would have us pass on a question of credibility which is left to
respondent Court of Appeals. The sixth assigned error would complain

against the reversal of the lower court judgment as well as petitioner

Consuelo S. de Garcia being made to pay respondent Angelina D. Guevara
exemplary damages, attorney's fees and costs. The reversal is called for in
the light of the appraisal of the evidence of record as meticulously weighed
by respondent Court. As to the attorney's fees and exemplary damages,
this is what respondent Court said in the decision under review: "Likewise,
plaintiff is entitled to recover reasonable attorney's fees in the sum of
P1,000, it being just and equitable under the circumstances, and another
P1,000 as exemplary damages for the public good to discourage litigants
from resorting to fraudulent devices to frustrate the ends of justice, as
defendant herein tried to substitute the ring, Exhibit 1, for plaintiff's
ring." 10 Considering the circumstances, the cursory discussion of the sixth
assigned error on the matter by petitioner fails to demonstrate that
respondent Court's actuation is blemished by legal defects.
WHEREFORE, the decision of respondent Court of Appeals of August 6,
1962 is hereby affirmed. With costs.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-18536

March 31, 1965

JOSE B. AZNAR, plaintiff-appellant,

vs.
RAFAEL YAPDIANGCO, defendant-appellee;
TEODORO SANTOS, intervenor-appellee.
Florentino M. Guanlao for plaintiff-appellant.
Rafael Yapdiangco in his own behalf as defendant-appellee.
Lorenzo Sumulong, R. B. Hilao and B. S. Felipe for intervenor-appellee.
REGALA, J.:
This is an appeal, on purely legal questions, from a decision of the Court of
First Instance of Quezon City, Branch IV, declaring the intervenor-appellee,
Teodoro Santos, entitled to the possession of the car in dispute.

The records before this Court disclose that sometime in May, 1959,
Teodoro Santos advertised in two metropolitan papers the sale of his
FORD FAIRLANE 500. In the afternoon of May 28, 1959, a certain L. De
Dios, claiming to be a nephew of Vicente Marella, went to the Santos
residence to answer the ad. However, Teodoro Santos was out during this
call and only the latter's son, Irineo Santos, received and talked with De
Dios. The latter told the young Santos that he had come in behalf of his
uncle, Vicente Marella, who was interested to buy the advertised car.
On being informed of the above, Teodoro Santos instructed his son to see
the said Vicente Marella the following day at his given address: 1642
Crisostomo Street, Sampaloc, Manila. And so, in the morning of May 29,
1959, Irineo Santos went to the above address. At this meeting, Marella
agreed to buy the car for P14,700.00 on the understanding that the price
would be paid only after the car had been registered in his name.
Irineo Santos then fetched his father who, together with L. De Dios, went to
the office of a certain Atty. Jose Padolina where the deed of the sale for the
car was executed in Marella's favor. The parties to the contract thereafter
proceeded to the Motor Vehicles Office in Quezon City where the
registration of the car in Marella's name was effected. Up to this stage of
the transaction, the purchased price had not been paid.
From the Motor Vehicles Office, Teodoro Santos returned to his house. He
gave the registration papers and a copy of the deed of sale to his son,
Irineo, and instructed him not to part with them until Marella shall have
given the full payment for the car. Irineo Santos and L. De Dios then
proceeded to 1642 Crisostomo Street, Sampaloc, Manila where the former
demanded the payment from Vicente Marella. Marella said that the amount
he had on hand then was short by some P2,000.00 and begged off to be
allowed to secure the shortage from a sister supposedly living somewhere
on Azcarraga Street, also in Manila. Thereafter, he ordered L. De Dios to
go to the said sister and suggested that Irineo Santos go with him. At the
same time, he requested the registration papers and the deed of sale from
Irineo Santos on the pretext that he would like to show them to his lawyer.
Trusting the good faith of Marella, Irineo handed over the same to the latter
and thereupon, in the company of L. De Dios and another unidentified
person, proceeded to the alleged house of Marella's sister.

At a place on Azcarraga, Irineo Santos and L. De Dios alighted from the car
and entered a house while their unidentified companion remained in the
car. Once inside, L. De Dios asked Irineo Santos to wait at the sala while
he went inside a room. That was the last that Irineo saw of him. For, after a
considerable length of time waiting in vain for De Dios to return, Irineo went
down to discover that neither the car nor their unidentified companion was
there anymore. Going back to the house, he inquired from a woman he saw
for L. De Dios and he was told that no such name lived or was even known
therein. Whereupon, Irineo Santos rushed to 1642 Crisostomo to see
Marella. He found the house closed and Marella gone. Finally, he reported
the matter to his father who promptly advised the police authorities.
That very same day, or on the afternoon of May 29, 1959 Vicente Marella
was able to sell the car in question to the plaintiff-appellant herein, Jose B.
Aznar, for P15,000.00. Insofar as the above incidents are concerned, we
are bound by the factual finding of the trial court that Jose B. Aznar
acquired the said car from Vicente Marella in good faith, for a valuable
consideration and without notice of the defect appertaining to the vendor's
title.
While the car in question was thus in the possession of Jose B. Aznar and
while he was attending to its registration in his name, agents of the
Philippine Constabulary seized and confiscated the same in consequence
of the report to them by Teodoro Santos that the said car was unlawfully
taken from him.
In due time, Jose B. Aznar filed a complaint for replevin against Captain
Rafael Yapdiangco, the head of the Philippine Constabulary unit which
seized the car in question Claiming ownership of the vehicle, he prayed for
its delivery to him. In the course of the litigation, however, Teodoro Santos
moved and was allowed to intervene by the lower court.
At the end of the trial, the lower court rendered a decision awarding the
disputed motor vehicle to the intervenor-appellee, Teodoro Santos. In brief,
it ruled that Teodoro Santos had been unlawfully deprived of his personal
property by Vicente Marella, from whom the plaintiff-appellant traced his
right. Consequently, although the plaintiff-appellant acquired the car in good
faith and for a valuable consideration from Vicente Marella, the said
decision concluded, still the intervenor-appellee was entitled to its recovery
on the mandate of Article 559 of the New Civil Code which provides:

ART. 559. The possession of movable property acquired in good faith

is equivalent to title. Nevertheless, one who lost any movable or has
been unlawfully deprived thereof, may recover it from the person in
possession of the same.
If the possessor of a movable lost or of which the owner has been
unlawfully deprived, has acquired it in good faith at a public sale, the
owner cannot obtain its return without reimbursing the price paid
therefor.
From this decision, Jose B. Aznar appeals.
The issue at bar is one and simple, to wit: Between Teodoro Santos and
the plaintiff-appellant, Jose B. Aznar, who has a better right to the
possession of the disputed automobile?
We find for the intervenor-appellee, Teodoro Santos.
The plaintiff-appellant accepts that the car in question originally belonged to
and was owned by the intervenor-appellee, Teodoro Santos, and that the
latter was unlawfully deprived of the same by Vicente Marella. However,
the appellant contends that upon the facts of this case, the applicable
provision of the Civil Code is Article 1506 and not Article 559 as was held
by the decision under review. Article 1506 provides:
ART. 1506. Where the seller of goods has a voidable title thereto, but
his, title has not been voided at the time of the sale, the buyer
acquires a good title to the goods, provided he buys them in good
faith, for value, and without notice of the seller's defect of title.
The contention is clearly unmeritorious. Under the aforequoted provision, it
is essential that the seller should have a voidable title at least. It is very
clearly inapplicable where, as in this case, the seller had no title at all.
Vicente Marella did not have any title to the property under litigation
because the same was never delivered to him. He sought ownership or
acquisition of it by virtue of the contract. Vicente Marella could have
acquired ownership or title to the subject matter thereof only by the delivery
or tradition of the car to him.

Under Article 712 of the Civil Code, "ownership and other real rights over
property are acquired and transmitted by law, by donation, by testate and
intestate succession, and in consequence of certain contracts, by tradition."
As interpreted by this Court in a host of cases, by this provision, ownership
is not transferred by contract merely but by tradition or delivery. Contracts
only constitute titles or rights to the transfer or acquisition of ownership,
while delivery or tradition is the mode of accomplishing the same (Gonzales
v. Rojas, 16 Phil. 51; Ocejo, Perez and Co. v. International Bank, 37 Phil.
631, Fidelity and Deposit Co. v. Wilson, 8 Phil. 51; Kuenzle & Streiff v.
Wacke & Chandler, 14 Phil. 610; Easton v. Diaz Co., 32 Phil. 180).
For the legal acquisition and transfer of ownership and other property
rights, the thing transferred must be delivered, inasmuch as,
according to settled jurisprudence, the tradition of the thing is a
necessary and indispensable requisite in the acquisition of said
ownership by virtue of contract. (Walter Laston v. E. Diaz & Co. & the
Provincial Sheriff of Albay, supra.)
So long as property is not delivered, the ownership over it is not
transferred by contract merely but by delivery. Contracts only
constitute titles or rights to the transfer or acquisition of ownership,
while delivery or tradition is the method of accomplishing the same,
the title and the method of acquiring it being different in our law.
(Gonzales v. Roxas, 16 Phil. 51)
In the case on hand, the car in question was never delivered to the vendee
by the vendor as to complete or consummate the transfer of ownership by
virtue of the contract. It should be recalled that while there was indeed a
contract of sale between Vicente Marella and Teodoro Santos, the former,
as vendee, took possession of the subject matter thereof by stealing the
same while it was in the custody of the latter's son.
There is no adequate evidence on record as to whether Irineo Santos
voluntarily delivered the key to the car to the unidentified person who went
with him and L. De Dios to the place on Azcarraga where a sister of Marella
allegedly lived. But even if Irineo Santos did, it was not the delivery
contemplated by Article 712 of the Civil Code. For then, it would be
indisputable that he turned it over to the unidentified companion only so
that he may drive Irineo Santos and De Dios to the said place on Azcarraga
and not to vest the title to the said vehicle to him as agent of Vicente

Marella. Article 712 above contemplates that the act be coupled with the
intent of delivering the thing. (10 Manresa 132)
The lower court was correct in applying Article 559 of the Civil Code to the
case at bar, for under it, the rule is to the effect that if the owner has lost a
thing, or if he has been unlawfully deprived of it, he has a right to recover it,
not only from the finder, thief or robber, but also from third persons who
may have acquired it in good faith from such finder, thief or robber. The
said article establishes two exceptions to the general rule of
irrevindicability, to wit, when the owner (1) has lost the thing, or (2) has
been unlawfully deprived thereof. In these cases, the possessor cannot
retain the thing as against the owner, who may recover it without paying
any indemnity, except when the possessor acquired it in a public sale. (Del
Rosario v. Lucena, 8 Phil. 535; Varela v. Finnick, 9 Phil. 482; Varela v.
Matute, 9 Phil. 479; Arenas v. Raymundo, 19 Phil. 46. Tolentino, id., Vol. II,
p. 261.)
In the case of Cruz v. Pahati, et al., 52 O.G. 3053 this Court has already
ruled
that
Under Article 559 of the new Civil Code, a person illegally deprived of
any movable may recover it from the person in possession of the
same and the only defense the latter may have is if he has acquired it
in good faith at a public sale, in which case, the owner cannot obtain
its return without reimbursing the price paid therefor. In the present
case, plaintiff has been illegally deprived of his car through the
ingenious scheme of defendant B to enable the latter to dispose of it
as if he were the owner thereof. Plaintiff, therefore, can still recover
possession of the car even if it is in the possession of a third party
who had acquired it in good faith from defendant B. The maxim that
"no man can transfer to another a better title than he had himself"
obtains in the civil as well as in the common law. (U.S. v. Sotelo, 28
Phil. 147)
Finally, the plaintiff-appellant here contends that inasmuch as it was the
intervenor-appellee who had caused the fraud to be perpetrated by his
misplaced confidence on Vicente Marella, he, the intervenor-appellee,
should be made to suffer the consequences arising therefrom, following the
equitable principle to that effect. Suffice it to say in this regard that the right

of the owner to recover personal property acquired in good faith by another,

is based on his being dispossessed without his consent. The common law
principle that where one of two innocent persons must suffer by a fraud
perpetrated by another, the law imposes the loss upon the party who, by
his misplaced confidence, has enabled the fraud to be committed, cannot
be applied in a case which is covered by an express provision of the new
Civil Code, specifically Article 559. Between a common law principle and a
statutory provision, the latter must prevail in this jurisdiction. (Cruz v.
Pahati, supra)
UPON ALL THE FOREGOING, the instant appeal is hereby dismissed and
the decision of the lower court affirmed in full. Costs against the appellant.