sales p2

G.R. No. 156973. June 4, 2004.*
SPOUSES TOMAS OCCEÑA and SILVINA OCCEÑA, petitioners, vs. LYDIA MORALES OBSIANA ESPONILLA,
ELSA MORALES OBSIANA SALAZAR and DARFROSA OBSIANA SALAZAR ESPONILLA, respondents.
Civil Law; Property; Double Sale; To whom ownership shall belong in case of sale of an immovable
property to different vendees.—Article 1544 of the New Civil Code provides that in case an immovable
property is sold to different vendees, the ownership shall belong: (1) to the person acquiring it who in
good faith first recorded it in the Registry of Property; (2) should there be no inscription, the ownership
shall pertain to the person who in good faith was first in possession; and, (3) in the absence thereof, to
the person who presents the oldest title, provided there is good faith.
Same; Same; Same; The defense of indefeasibility of a Torrens title does not extend to a transferee who
takes the certificate of title in bad faith with notice of a flaw.—In all cases, good faith is essential. It is
the basic premise of the preferential rights granted to the one claiming ownership
_______________

* SECOND DIVISION.
117

VOL. 431, JUNE 4, 2004
117
Occeña vs. Esponilla
over an immovable. What is material is whether the second buyer first registers the second sale in good
faith, i.e., without knowledge of any defect in the title of the property sold. The defense of
indefeasibility of a Torrens title does not extend to a transferee who takes the certificate of title in bad
faith, with notice of a flaw.
Same; Same; Same; When is a person deemed a purchaser in good faith and for value; A buyer of real
property in the possession of persons other than the seller must be wary and should investigate the
rights of those in possession otherwise he can hardly be regarded as a buyer in good faith and cannot
have any right over the property.—In the case at bar, we find that petitioner-spouses failed to prove
good faith in their purchase and registration of the land. A purchaser in good faith and for value 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. So it is that the “honesty of intention” which constitutes good faith implies a freedom from
knowledge of circumstances which ought to put a person on inquiry. At the trial, Tomas Occeña
admitted that he found houses built on the land during its ocular inspection prior to his purchase. He
relied on the representation of vendor Arnold that these houses were owned by squatters and that he
was merely tolerating their presence on the land. Tomas should have verified from the occupants of the
land the nature and authority of their possession instead of merely relying on the representation of the
vendor that they were squatters, having seen for himself that the land was occupied by persons other
than the vendor who was not in possession of the land at that time. The settled rule is that a buyer of
real property in the possession of persons other than the seller must be wary and should investigate the
rights of those in possession. Without such inquiry, the buyer can hardly be regarded as a buyer in good
faith and cannot have any right over the property. 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 vendor’s 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.
Same; Same; Same; Torrens Title; Principle that one who deals with property registered under the
Torrens title need not go beyond the same does 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
118

118
SUPREME COURT REPORTS ANNOTATED
Occeña vs. Esponilla
vendor or of sufficient facts to induce a reasonably prudent man to inquire into the status of the title of
the property in litigation.—Indeed, the general rule is that one who deals with property registered
under the Torrens system need not go beyond the same, but only has to rely on the title. He is charged
with notice only of such burdens and claims as are annotated on the title. However, this principle does
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. One who falls within the exception can neither be
denominated an innocent purchaser for value nor a purchaser in good faith.
Same; Same; Same; Land Titles; Laches; Prescription; Laches cannot be used to defeat justice or
perpetuate fraud and injustice; Neither should its application be used to prevent the rightful owners of a
property from recovering what has been fraudulently registered in the name of another; Prescription
does not apply when the person seeking annulment of title or reconveyance is in possession of the lot
because the action partakes of a suit to quiet title which is imprescriptible.—On the third issue, we hold
that the action to annul title filed by respondents-heirs is not barred by laches and prescription. Firstly,
laches is a creation of equity and its application is controlled by equitable considerations. Laches cannot
be used to defeat justice or perpetuate fraud and injustice. Neither should its application be used to
prevent the rightful owners of a property from recovering what has been fraudulently registered in the
name of another. Secondly, prescription does not apply when the person seeking annulment of title or
reconveyance is in possession of the lot because the action partakes of a suit to quiet title which is
imprescriptible. In this case, Morales had actual possession of the land when she had a house built
thereon and had appointed a caretaker to oversee her property. Her undisturbed possession of the land
for a period of fifty (50) long years gave her and her heirs a continuing right to seek the aid of a court of
equity to determine the nature of the claim of ownership of petitioner-spouses.
PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.
Alfredo M. Banares for petitioners.
Perpetuo A. Lotilla for private respondents.
119

VOL. 431, JUNE 4, 2004
119
Occeña vs. Esponilla
PUNO,** J.:

The case at bar involves a portion of the 1,198-square meter residential lot (lot no. 265) situated in
Sibalom, Antique, originally owned by spouses Nicolas and Irene Tordesillas under OCT No. 1130. The
Tordesillas spouses had three (3) children, namely: Harod, Angela and Rosario, the latter having been
survived by her two (2) children, Arnold and Lilia de la Flor.
After the death of the Tordesillas spouses, the lot was inherited by their children Harod and Angela, and
grandchildren Arnold and Lilia. In 1951, the heirs executed a Deed of Pacto de Retro Sale1 in favor of
Alberta Morales covering the southwestern portion of the lot with an area of 748 square meters.
Three (3) years later, in 1954, Arnold and Lilia executed a Deed of Definite Sale of Shares, Rights,
Interests and Participations2 over the same 748 sq. m. lot in favor of Alberta Morales. The notarized
deed also attested that the lot sold by vendors Arnold and. Lilia to Alberta were their share in the estate
of their deceased parents.
Alberta possessed the lot as owner, constructed a house on it and appointed a caretaker to oversee her
property. Thereafter, in July 1956, vendor Arnold de la Flor borrowed the OCT from Alberta covering the
lot. He executed an Affidavit3 acknowledging receipt of the OCT in trust and undertook to return said
title free from changes, modifications or cancellations.
In 1966, Arnold and Angela, nephew and daughter respectively of the Tordesillas spouses, without the
knowledge of Alberta, executed a Deed of Extrajudicial Settlement4 declaring the two of them as the
only co-owners of the undivided 1,198 sq. m. lot no. 265, without acknowledging their previous sale of
748 sq. m. thereof to Alberta. A number of times, thereafter, Alberta and her nieces asked Arnold for
the OCT of the land but Arnold just kept on promising to return it.
_______________

** Chairman.
1 Original Records, pp. 19-20.
2 Id., pp. 21-24.
3 Id., p. 26.
4 Id., pp. 27-28.
120

120
SUPREME COURT REPORTS ANNOTATED
Occeña vs. Esponilla
In 1983, Arnold executed an Affidavit of Settlement of the Estate5 of Angela who died in 1978 without
issue, declaring himself as the sole heir of Angela and thus consolidating the title of the entire lot in his
name.
In 1985, vendee Alberta Morales died. Her nieces-heirs, Lydia, Elsa and Dafrosa, succeeded in the
ownership of the lot. Months later, as the heirs were about to leave for the United States, they asked
Arnold to deliver to them the title to the land so they can register it in their name. Arnold repeatedly
promised to do so but failed to deliver the title to them.
On December 4, 1986, after Alberta’s heirs left for the States, Arnold used the OCT he borrowed from
the deceased vendee Alberta Morales, subdivided the entire lot No. 265 into three sublots, and
registered them all under his name, viz.: lot No. 265-A (with TCT No. 16895), lot No. 265-B (with TCT No.
16896) and lot No. 265-C (with TCT No. 16897). He then paid the real estate taxes on the property.
On August 13, 1990, Arnold sold lot Nos. 265-B & C to spouses Tomas and Sylvina Occeña, which
included the 748 sq. m. portion previously sold to Alberta Morales. A Deed of Absolute Sale6 over said
lots was executed to the Occeña spouses and titles were transferred to their names.
In 1993, after the death of Arnold, the three (3) nieces-heirs of Alberta Morales learned about the
second sale of their lot to the Occeña spouses when they were notified by caretaker Abas that they
were being ejected from the land. In 1994, the heirs filed a case7 for annulment of sale and cancellation
of titles, with damages, against the second vendees Occeña spouses. In their complaint, they alleged
that the Occeñas purchased the land in bad faith as they were aware that the lots sold to them had
already been sold to Alberta Morales in 1954. They averred that before the sale, when Tomas Occeña
conducted an ocular inspection of the lots, Morito Abas, the caretaker appointed by Alberta Morales to
oversee her property, warned them not to push through with the sale as the land was no longer owned
by vendor Arnold as the lat-
_______________

5 Id., pp. 29-30.
6 Id., pp. 33-34.
7 Docketed as Civil Case No. 2715.
121

VOL. 431, JUNE 4, 2004
121
Occeña vs. Esponilla
ter had previously sold the lot to Alberta Morales who had a house constructed thereon.
For their part, the Occeña spouses claimed that the OCT in the name of the original owners of the lots,
the Tordesillas spouses, was cancelled after it was subdivided between Angela and Arnold in 1969; that
new TCTs had been issued in the latter’s names; that they were unaware that the subject lots were
already previously sold to Morales as they denied that Tomas had a talk with caretaker Abas on the
matter; that as of December 4, 1987, the TCTs covering the lots were in the name of Arnold and his wife,
without any adverse claim annotated thereon; that vendor Arnold represented to them that the
occupants they saw on the land were squatters and that he merely tolerated their presence; that they
did not personally investigate the alleged squatters on the land and merely relied on the representation
of vendor Arnold; that sometime in 1966-1967, Arnold and his co-heir Angela caused the survey of the
original lot and subdivided it into 3 lots, without opposition from Morales or her heirs. Thus, three (3)
TCTs were issued in 1969 to Arnold and Angela and, two of the lots were then sold to the Occeña
spouses, again without objection from Alberta Morales.
The Occeña spouses alleged that they were buyers in good faith as the titles to the subject lots were
free from liens or encumbrances when they purchased them. They claimed that in 1989, Arnold offered
to sell the subject lots to them. On August 13, 1990, after they verified with the Antique Registry of
Deeds that Arnold’s TCTs were clean and unencumbered, Arnold signed the instrument of sale over the
subject lots in favor of the Occeñas for P100,000.00 and new titles were issued in their names.
The Occeñas likewise set up the defenses of laches and prescription. They argue that Alberta and
plaintiffs-heirs were barred from prosecuting their action as they failed to assert their right for forty (40)
years. Firstly, they point out that vendor Arnold and Angela subdivided the entire lot in 1966 and
declared themselves as the only co-owners thereof in the deed of extrajudicial settlement. Alberta
Morales failed to oppose the inclusion of her 748 sq. m. lot in the deed. Thus, the title to the entire lot
No. 256 was transferred to the names of Arnold and Angela. Secondly, preparatory to the division of the
lots, vendor Arnold had the land surveyed but Alberta again failed to oppose the same. Finally, Alberta
and her heirs who are claiming adverse rights over the land based on the
122

122
SUPREME COURT REPORTS ANNOTATED
Occeña vs. Esponilla
1951 Deed of Pacto de Retro Sale and the 1954 Deed of Definite Sale of Shares failed for 40 years to
annotate their adverse claims on the new titles issued to Arnold and Angela, enabling the latter to
possess a clean title and transfer them to the Occeña spouses.
After trial, the lower court rendered a decision declaring the Occeña spouses as buyers in good faith and
ruled that the action of the heirs was time-barred.
On appeal by Alberta’s heirs, the Court of Appeals reversed the decision of the trial court. It found that
the Occeñas purchased the land in bad faith and that the action filed by Alberta’s heirs was not barred
by prescription or laches. The dispositive portion reads:
“WHEREFORE, the instant appeal is hereby GRANTED. Accordingly, the assailed decision is hereby
REVERSED and SET ASIDE and a new one is rendered declaring the Deed of Absolute Sale dated August
13, 1990 executed between Arnold de la Flor in favor of defendants-appellees null and void and ordering
the cancellation of Transfer Certificate of Title Nos. 16896, 16897, T-18241 and T-18242.
“SO ORDERED.”8
Hence this appeal where petitioner-spouses Occeña raise the following issues:
I

WHETHER OR NOT A VERBAL INFORMATION COULD BE MADE TO PREVAIL OVER A CLEAN CERTIFICATE
OF TITLE OF A REGISTERED LAND WHICH IS FREE OF ANY LIEN OR ENCUMBRANCE ANNOTATED ON ITS
CERTIFICATE OF TITLE OR ANY ADVERSE CLAIM RECORDED WITH THE REGISTER OF DEEDS.
II

WHETHER OR NOT A BUYER OF A REGISTERED LAND IS OBLIGATED TO MAKE INQUIRIES OF ANY
POSSIBLE DEFECT OR ADVERSE CLAIM AFFECTING ITS OWNERSHIP WHICH DOES NOT APPEAR ON THE
CERTIFICATE OF TITLE.
_______________

8 Decision dated January 17, 2003, Court of Appeals Special Second Division, Penned by Associate
Justice Mariano del Castillo and concurred in by Associate Justices Teodoro P. Regino and Rebecca Guia-
Salvador; Rollo at pp. 41-54.
123

VOL. 431, JUNE 4, 2004
123
Occeña vs. Esponilla
III

WHETHER OR NOT THE PERIOD OF MORE THAN FORTY (40) YEARS WITHOUT POSITIVE ACTION TAKEN
BY RESPONDENTS, AS WELL AS BY ALBERTA MORALES, TO PROTECT THEIR INTEREST CAN BE
CONSIDERED LACHES AND THUS THEIR PRESENT ACTION HAS PRESCRIBED.
On the first two issues, petitioner-spouses claim that they were purchasers of the land in good faith as
the law does not obligate them to go beyond a clean certificate of title to determine the condition of the
property. They argue that a person dealing with registered land is only charged with notice of the
burden on the property annotated on the title. When there is nothing on the 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 the title in quest of any hidden defect or inchoate right that may subsequently
defeat his right thereto. They claim they had every right to purchase the land despite the verbal warning
made by caretaker Abas as the information was mere hearsay and cannot prevail over the title of the
land which was free from any encumbrance.
Their arguments do not persuade.
The petition at bar presents a case of double sale of an immovable property. Article 1544 of the New
Civil Code provides that in case an immovable property is sold to different vendees, the ownership shall
belong: (1) to the person acquiring it who in good faith first recorded it in the Registry of Property; (2)
should there be no inscription, the ownership shall pertain to the person who in good faith was first in
possession; and, (3) in the absence thereof, to the person who presents the oldest title, provided there
is good faith.
In all cases, good faith is essential. It is the basic premise of the preferential rights granted to the one
claiming ownership over an immovable.9 What is material is whether the second buyer first registers
the second sale in good faith, i.e., without knowledge of any defect in the title of the property sold.10
The defense of indefea-
_______________

9 Gabriel vs. Spouses Mabanta and Colobong, G.R. No. 142403, March 26, 2003, 399 SCRA 573.
10 Coronel vs. Court of Appeals, 263 SCRA 15 (1996).
124

124
SUPREME COURT REPORTS ANNOTATED
Occeña vs. Esponilla
sibility of a Torrens title does not extend to a transferee who takes the certificate of title in bad faith,
with notice of a flaw.11
The governing principle of prius tempore, potior jure (first in time, stronger in right) enunciated under
Art. 1544 has been clarified, thus:
x x x Knowledge by the first buyer of the second sale cannot defeat the first buyer’s rights except when
the second buyer first registers in good faith the second sale (Olivares vs. Gonzales, 159 SCRA 33).
Conversely, knowledge gained by the second buyer of the first sale defeats his rights even if he is first to
register, since such knowledge taints his registration with bad faith (see also Astorga vs. Court of
Appeals, G.R. No. 58530, 26 December 1984). In Cruz vs. Cabaña (G.R. No. 56232, 22 June 1984, 129
SCRA 656), it was held that it is essential, to merit the protection of Art. 1544, second paragraph, that
the second realty buyer must act in good faith in registering his deed of sale (citing Carbonell vs. Court of
Appeals, 69 SCRA 99 and Crisostomo vs. CA, G.R. No. 95843, 02 September 1992).12
In the case at bar, we find that petitioner-spouses failed to prove good faith in their purchase and
registration of the land. A purchaser in good faith and for value 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. So it is that the
“honesty of intention” which constitutes good faith implies a freedom from knowledge of circumstances
which ought to put a person on inquiry. At the trial, Tomas Occeña admitted that he found houses built
on the land during its ocular inspection prior to his purchase. He relied on the representation of vendor
Arnold that these houses were owned by squatters and that he was merely tolerating their presence on
the land. Tomas should have verified from the occupants of the land the nature and authority of their
possession instead of merely relying on the representation of the vendor that they were squatters,
having seen for himself that the land was occupied by persons other than the vendor who was not in
possession of the land at that time. The settled rule is that a buyer of real property in the possession of
persons other than the seller must be wary and should investigate the rights of those in posses-
_______________

11 Baricuatro, Jr. vs. Court of Appeals, 325 SCRA 137 (2000).
12 Compendium of Civil Law and Jurisprudence, Justice Jose C. Vitug, pp. 604-605.
125

VOL. 431, JUNE 4, 2004
125
Occeña vs. Esponilla
sion. Without such inquiry, the buyer can hardly be regarded as a buyer in good faith and cannot have
any right over the property.13 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.14 His mere refusal to believe that such defect exists or his willful
closing of his eyes to the possibility of the existence of a defect in his vendor’s title will not make him an
innocent purchaser for value if it 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.
Indeed, the general rule is that one who deals with property registered under the Torrens system need
not go beyond the same, but only has to rely on the title. He is charged with notice only of such burdens
and claims as are annotated on the title. However, this principle does 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. One who falls within the exception can neither be denominated an innocent purchaser for
value nor a purchaser in good faith.15
The evidence of the private respondents show that when Tomas Occeña conducted an ocular inspection
of the land prior to the second sale, Abas, the caretaker of the house which Alberta Morales built on the
land, personally informed Tomas that the lot had been previously sold by the same vendor Arnold to
Alberta Morales. With this information, the Occeñas were obliged to look beyond the title of their
vendor and make further inquiries from the occupants of the land as to their authority and right to
possess it. However, despite this information about a prior sale, the Occeñas proceeded with the
purchase in haste. They did not inquire from Abas
_______________

13 Spouses Castro vs. Miat, G.R. No. 143297, February 11, 2003, 397 SCRA 271.
14 Heirs of Ramon Durano, Sr. vs. Uy, 344 SCRA 238 (2000).
15 Spouses Domingo vs. Roces, G.R. No. 147468, April 9, 2003, 401 SCRA 197; Dela Merced vs.
Government Service Insurance System, 365 SCRA 1 (2001).
126

126
SUPREME COURT REPORTS ANNOTATED
Occeña vs. Esponilla
how they could get in touch with the heirs or representatives of Alberta to verify the ownership of the
land. Neither do the records reveal that they exerted effort to examine the documents pertaining to the
first sale. Having discovered that the land they intended to buy was occupied by a person other than the
vendor not in actual possession thereof, it was incumbent upon the petitioners to verify the extent of
the occupant’s possessory rights.16 The Occeñas did nothing and chose to ignore and disbelieve Abas’
statement.
On the third issue, we hold that the action to annul title filed by respondents-heirs is not barred by
laches and prescription. Firstly, laches is a creation of equity and its application is controlled by
equitable considerations. Laches cannot be used to defeat justice or perpetuate fraud and injustice.
Neither should its application be used to prevent the rightful owners of a property from recovering what
has been fraudulently registered in the name of another.17 Secondly, prescription does not apply when
the person seeking annulment of title or reconveyance is in possession of the lot because the action
partakes of a suit to quiet title which is imprescriptible.18 In this case, Morales had actual possession of
the land when she had a house built thereon and had appointed a caretaker to oversee her property.
Her undisturbed possession of the land for a period of fifty (50) long years gave her and her heirs a
continuing right to seek the aid of a court of equity to determine the nature of the claim of ownership of
petitioner-spouses.19 As held by this Court in Faja vs. Court of Appeals:20
x x x There is settled jurisprudence that one who is in actual possession of a piece of land claiming to be
owner thereof may wait until his possession is disturbed or his title 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 and
its effect on his own title, which right can be claimed only by one who is in possession, x x x
_______________

16 Gonzales vs. Toledo, G.R. No. 149465, December 8, 2003, 417 SCRA 260; Mathay vs. Court of Appeals,
295 SCRA 556 (1998).
17 Alcantara-Daus vs. Spouses De Leon, G.R. No. 149750, June 16, 2003, 404 SCRA 75.
18 Heirs of Simplicio Santiago vs. Heirs of Mariano E. Santiago, G.R. No. 151440, June 17, 2003, 404
SCRA 193.
19 Millena vs. Court of Appeals, 324 SCRA 126 (2000).
20 75 SCRA 441 (1977).
127

VOL. 431, JUNE 4, 2004
127
Occeña vs. Esponilla
The right to quiet title to the property, seek its reconveyance and annul any certificate of title covering it
accrued only from the time the one in possession was made aware of a claim adverse to his own, and it
is only then that the statutory period of prescription commences to run against such possessor.
In the case at bar, Morales’ caretaker became aware of the second sale to petitioner-spouses only in
1991 when he received from the latter a notice to vacate the land. Respondents-heirs did not sleep on
their rights for in 1994, they filed their action to annul petitioners’ title over the land. It likewise bears to
stress that when vendor Arnold reacquired title to the subject property by means of fraud and
concealment after he has sold it to Alberta Morales, a constructive trust was created in favor of Morales
and her heirs. As the defrauded parties who were in actual possession of the property, an action of the
respondents-heirs to enforce the trust and recover the property cannot prescribe. They may vindicate
their right over the property regardless of the lapse of time.21 Hence, the rule that registration of the
property has the effect of constructive notice to the whole world cannot be availed of by petitioners and
the defense of prescription cannot be successfully raised against respondents.
In sum, the general rule is that registration under the Torrens system is the operative act which gives
validity to the transfer of title on the land. However, it does not create or vest title especially where a
party has actual knowledge of the claimant’s actual, open and notorious possession of the property at
the time of his registration.22 A buyer in bad faith has no right over the land. As petitioner-spouses
failed to register the subject land in good faith, ownership of the land pertains to respondent-heirs who
first possessed it in good faith.
IN VIEW WHEREOF, the petition is DISMISSED. No costs. [Occeña vs. Esponilla, 431 SCRA 116(2004)]

G.R. No. 109410. August 28, 1996.*
CLARA M. BALATBAT, petitioner, vs. COURT OF APPEALS and Spouses JOSE REPUYAN and AURORA
REPUYAN, respondents.
Civil Law; Sales; The failure of the buyer to make good the price does not, in law, cause the ownership to
revest to the seller unless the bilateral contract of sale is first rescinded or resolved pursuant to Article
1191 of the New Civil Code.—Devoid of any stipulation that “ownership in the thing shall not pass to the
purchaser until he has fully paid the price,” ownership in the thing shall pass from the vendor to the
vendee upon actual or constructive delivery of the thing “sold even if the purchase price has not yet
been fully paid. The failure of the buyer to make good the price does not, in law, cause the ownership to
revest to the seller unless the bilateral contract of sale is first rescinded or resolved pursuant to Article
1191 of the New Civil Code. Non-payment only creates a right to demand the fulfillment of the
obligation or to rescind the contract.
Same; Same; When the sale is made through a public instrument, the execution thereof shall be
equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary
does not appear or cannot be inferred.—With respect to the nondelivery of the possession of the
subject property to the private respondent, suffice it to say that ownership of the thing sold is acquired
only from the time of delivery thereof, either actual or con-
_______________

* SECOND DIVISION.
129

VOL. 261, AUGUST 28, 1996
129
Balatbat vs. Court of Appeals
structive. Article 1498 of the Civil Code provides that—when the sale is made through a public
instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of
the contract, if from the deed the contrary does not appear or cannot be inferred. The execution of the
public instrument, without actual delivery of the thing, transfers the ownership from the vendor to the
vendee, who may thereafter exercise the rights of an owner over the same.
Same; Same; The provision of Article 1358 on the necessity of a public document is only for
convenience, not for validity or enforceability.—In the instant case, vendor Roque delivered the owner’s
certificate of title to herein private respondent. It is not necessary that vendee be physically present at
every square inch of the land bought by him, possession of the public instrument of the land is sufficient
to accord him the rights of ownership. Thus, delivery of a parcel of land may be done by placing the
vendee in control and possession of the land (real) or by embodying the sale in a public instrument
(constructive). The provision of Article 1358 on the necessity of a public document is only for
convenience, not for validity or enforceability. It is not a requirement for the validity of a contract of sale
of a parcel of land that this be embodied in a public instrument.
Same; Same; A contract of sale being consensual, it is perfected by the mere consent of the parties.—A
contract of sale being consensual, it is perfected by the mere consent of the parties. Delivery of “the
thing bought or payment of the price is not necessary for the perfection of the contract; and failure of
the vendee to pay the price after the execution of the contract does not make the sale null and void for
lack of consideration but results at most in default on the part of the vendee, for which the vendor may
exercise his legal remedies.
Same; Same; Double Sales; Persons to whom ownership of an immovable property shall be transferred
in case of double sale.—Article 1544 of the Civil Code provides that in case of double sale of an
immovable property, ownership shall be transferred (1) to the person acquiring it who in good faith first
recorded it in the Registry of Property; (2) in default thereof, to the person who in good faith was first in
possession; and (3) in default thereof, to the person who presents the oldest title, provided there is
good faith.
130

130
SUPREME COURT REPORTS ANNOTATED
Balatbat vs. Court of Appeals
Same; Same; Same; The annotation of the adverse claim on TCT No. 135671 in the Registry of Property is
sufficient compliance as mandated by law and serves notice to the whole world.—This is an instance of a
double sale of an immovable property hence, the ownership shall vest in the person acquiring it who in
good faith first recorded it in the Registry of Property. Evidently, private respondents Repuyans caused
the annotation of an adverse claim on the title of the subject property denominated as Entry No.
5627/T135671 on July 21, 1980. The annotation of the adverse claim on TCT No. 135671 in the Registry
of Property is sufficient compliance as mandated by law and serves notice to the whole world.
Same; Same; Same; As between two purchasers, the one who has registered the sale in his favor, has a
preferred right over the other who has not registered his title even if the latter is in actual possession of
the immovable property.—As between two purchasers, the one who has registered the sale in his favor,
has a preferred right over the other who has not registered his title even if the latter is in actual
possession of the immovable property. Further, even in default of the first registrant or first in
possession, private respondents have presented the oldest title. Thus, private respondents who
acquired the subject property in good faith and for valuable consideration established a superior right as
against the petitioner.
Same; Same; Same; A purchaser of a valued piece of property cannot just close his eyes to facts which
should put a reasonable man upon his guard and then claim that he acted in good faith and under the
belief that there was no defect in the title of the vendor.—It is incumbent upon the vendee of the
property to ask for the delivery of the owner’s duplicate copy of the title from the vendor. A purchaser
of a valued piece of property cannot just close his eyes to facts which should put a reasonable man upon
his guard and then claim that he acted in good faith and under the belief that there were no defect in
the title of the vendor. One who purchases real estate with knowledge of a defect or lack of title in his
vendor cannot claim that he has acquired title thereto in good faith as against the true owner of the
land or of an interest therein; and the same rule must be applied to one who has knowledge of facts
which should have put him upon such inquiry and investigation as might be necessary to acquaint him
with the defects in the title of his vendor. Good faith, or the want of it is not a visible, tangible fact that
can be seen or touched, but rather a state or condition of mind which can only be judged of by actual or
fancied tokens or signs.
131

VOL. 261, AUGUST 28, 1996
131
Balatbat vs. Court of Appeals
PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.
Facundo T. Bautista for petitioner.
Federico R. Onandia for private respondents.
TORRES, JR., J.:

Petitioner Clara M. Balatbat instituted this petition for review pursuant to Rule 45 of the Revised Rules
of Court seeking to set aside the decision dated August 12, 1992 of the respondent Court of Appeals in
CA-G.R. CV No. 29994 entitled “Alejandro Balatbat and Clara Balatbat, plaintiffs-appellants versus Jose
Repuyan and Aurora Repuyan, defendantsappellees,” the dispositive portion of which reads:1
“WHEREFORE, the judgment appealed from is affirmed with the modification that the awards of
P10,000.00 for attorney’s fees and P5,000.00 as costs of litigation are deleted.
SO ORDERED."
The records show the following factual antecedents:
It appears that on June 15, 1977, Aurelio A. Roque filed a complaint for partition docketed as Civil Case
No. 109032 against Corazon Roque, Alberto. de los Santos, Feliciano Roque, Severa Roque and Osmundo
Roque before the then Court of First Instance of Manila, Branch IX.2 Defendants therein were declared
in default and plaintiff presented evidence ex-parte. On March 29, 1979, the trial court rendered a
decision in favor of plaintiff Aurelio A. Roque, the pertinent portion of which reads:3 “From the
evidence, it has been clearly established that the lot in question covered by Transfer Certificate of Title
No. 51330 was acquired by plaintiff Aurelio Roque and Maria Mesina during their conjugal union and the
house constructed thereon was likewise built during their marital union, Out of their union, plaintiff and
Maria Mesina had four children, who are the defendants in this case. When Maria Mesina died on
August 28, 1966, the only conjugal properties left are the house and lot above stated of which plaintiff
herein, as the legal spouse, is entitled to one-half share pro-indiviso thereof. With respect to the one-
half share pro-indiviso now forming the estate of Maria Mesina, plaintiff and the four children, the
defendants here, are each entitled to one-fifth (1/5) share pro-indiviso. The deceased wife left no debt.
Wherefore, judgment is hereby rendered ordering the partition of the properties, subject matter of this
case consisting of the house and lot, in the following manner:
1. Of the house and lot forming the conjugal properties, plaintiff is entitled to one-half share pro-indiviso
thereof while the other half forms the estate of the deceased Maria Mesina;
2. Of the Estate of deceased Maria Mesina, the same is to be divided into five (5) shares and plaintiff and
his four children are entitled each to one-fifth share thereof pro-indiviso.
Plaintiff claim for moral, exemplary and actual damages and attorney’s fees not having been established
to the satisfaction of the Court, the same is hereby denied.
Without pronouncement as to costs.
SO ORDERED."
On June 2, 1979, the decision became final and executory. The corresponding entry of judgment was
made on March 29, 1979.4 On October 5, 1979, the Register of Deeds of Manila issued a Transfer
Certificate of Title No. 135671 in the name of the following persons in the following proportions:5
Aurelio A. Roque 6/10 share
Severina M. Roque 1/10 share
Osmundo M. Roque 1/10 share
Feliciano M. Roque 1/10 share
Corazon M. Roque 1/10 share
On April 1, 1980, Aurelio A. Roque sold his 6/10 share in T.C.T. No. 135671 to spouses Aurora Tuazon-
Repuyan and Jose Repuyan as evidenced by a “Deed of Absolute Sale."6
On July 21, 1980, Aurora Tuazon Repuyan caused the annotation of her affidavit of adverse claim7 on
the Transfer Certificate of Title No. 135671,8 to wit:
“Entry No. 5627/T-135671—NOTICE OF ADVERSE CLAIM—Filed by Aurora Tuazon Repuyan, married,
claiming among others that she bought 6/10 portion of the property herein described from Aurelio
Roque for the amount of P50,000.00 with a down payment of P5,000.00 and the balance of P45,000.00
to be paid after the partition and subdivision of the property herein described, other claims set forth in
Doc. No. 954, page 18, Book 94 of ___________________ 64 ____________PEDRO DE CASTRO, Notary
Public of Manila.
Date of instrument—July 21, 1980
Date of inscription—July 21, 1980 at 3:35 p.m.
TERESITA H. NOBLEJAS
Acting Register of Deeds
By:
RAMON D. MACARICAN
Acting Second Deputy”
On August 20, 1980, Aurelio A. Roque filed a complaint for “Rescission of Contract” docketed as Civil
Case No. 134131 against spouses Aurora Tuazon-Repuyan and Jose Repuyan before Branch IV of the
then Court of First Instance of Manila. The complaint is grounded on spouses Repuyan’s failure to pay
the balance of P45,000.00 of the purchase price.9 On
September 5, 1980, spouses Repuyan filed their answer with counterclaim.10
In the meantime, the trial court issued an order in Civil Case No. 109032 (Partition case) dated February
2, 1982, to wit:
“In view of all the foregoing and finding that the amount of P 100,000.00 as purchase price for the sale
of the parcel of land covered by TCT No. 51330 of the Registry of Deeds of Manila consisting of 84
square meters situated in Callejo Sulu, District of Santa Cruz, Manila, to be reasonable and fair, and
considering the opportunities given defendants to sign the deed of absolute sale voluntarily, the Court
has no alternative but to order, as it hereby orders, the Deputy Clerk of this Court to sign the deed of
absolute sale for and in behalf of defendants pursuant to Sec. 10, Rule 39 of the Rules of Court, in order
to effect the partition of the property involved in this case.
SO ORDERED."
A deed of absolute sale was executed on February 4, 1982 between Aurelio S. Roque, Corazon Roque,
Feliciano Roque, Severa Roque and Osmundo Roque and Clara Balatbat, married to Alejandro
Balatbat.12 On April 14, 1982, Clara Balatbat filed a motion for the issuance of a writ of possession
which -was granted by the trial court on September 14, 1982 “subject, however, to valid rights and
interest of third persons over the same portion thereof, other than vendor or any other person or
persons privy to or claiming any rights or interest under it.” The corresponding writ of possession was
issued on September 20, 1982.13
On May 20, 1982, petitioner Clara Balatbat filed a motion to intervene in Civil Case No. 13413114 which
was granted as per court’s resolution of October 21, 1982.15 However, Clara Balatbat failed to file her
complaint in intervention.16 On April 15, 1986, the trial court rendered a decision dismissing the
complaint, the pertinent portion of which reads:17
The rescission of contracts are provided for in the laws and nowhere in the provision of the Civil Code
under the title Rescissible Contracts does the circumstances in the case at bar appear to have occurred,
hence, the prayer for rescission is outside the ambit for which rescissible [sic] could be granted.
“The Intervenor—Plaintiff, Clara Balatbat, although allowed to intervene, did not file her complaint in
intervention.
“Consequently, the plaintiff having failed to prove with sufficient preponderance his action, the relief
prayed for had to be denied. The contract of sale denominated as “Deed of Absolute Sale” (Exh. 7 and
sub-markings) being valid and enforceable, the same pursuant to the provisions of Art, 1159 of the Civil
Code which says:
“Obligations arising from contracts have the force of law between the contracting parties and should be
complied with in good faith.”
has the effect of being the law between the parties and should be complied with. The obligation of the
plaintiff under the contract being to have the land covered by TCT No. 135671 partitioned and
subdivided, and title issued in the name of the defendant buyer (see page 2 par. C of Exh. 7-A) plaintiff
had to comply thereto to give effect to the contract.
“WHEREFORE, judgment is rendered against the plaintiff, Aurelio A. Roque, and the plaintiff in
intervention, Clara Balatbat, and in favor of the defendants, dismissing the complaint for lack of merit,
and declaring the Deed of Absolute Sale dated April 1, 1980 as valid and enforceable and the plaintiff is,
as be is hereby ordered, to partition and subdivide the land covered by T.C.T. No. 135671, and to
aggregate therefrom a portion equivalent to 6/10 thereof, and cause the same to be titled in the name
of the defendants, and after which, the defendants to pay the plaintiff the sum of P45,000.00.
Considering further that the defendants suffered damages since they were forced to litigate
unnecessarily, by way of their counter-claim, plaintiff is hereby ordered to pay defendants the sum of
P15,000.00 as moral damages, attorney’s fees in the amount of P5,000.00.
Costs against plaintiff.
SO ORDERED."
On March 3, 1987, petitioner Balatbat filed a notice of lis pendens in Civil Case No. 109032 before the
Register of Deeds of Manila.18
On December 9, 1988, petitioner Clara Balatbat and her husband, Alejandro Balatbat filed the instant
complaint for delivery of the owners duplicate copy of T.C.T. No. 135671 docketed as Civil Case No. 88–
47176 before Branch 24 of the Regional Trial Court of Manila against private respondents Jose Repuyan
and Aurora Repuyan.19
On January 27, 1989, private respondents filed their answer with affirmative defenses and compulsory
counterclaim.20
On November 13, 1989, private respondents filed their memorandum21 while petitioners filed their
memorandum on November 23, 1989.22
On August 2, 1990, the Regional Trial Court of Manila, Branch 24, rendered a decision dismissing the
complaint, the dispositive portion of which reads:23
“Considering all the foregoing, this Court finds that the plaintiffs have not been able to establish their
cause of action against the defendants and have no right to the reliefs demanded in the complaint and
the complaint of the plaintiff against the defendants is hereby DISMISSED. On the counterclaim, the
plaintiff are ordered to pay defendants the amount of Ten Thousand Pesos by way of attorney’s fees,
Five Thousand Pesos as costs of litigation and further to pay the costs of the suit.
SO ORDERED."
Dissatisfied, petitioner Balatbat filed an appeal before the respondent Court of Appeals which rendered
the assailed decision on August 12, 1992, to wit:24
“WHEREFORE, the judgment appealed from is affirmed with the modification that the awards of
P10,000.00 for attorney’s fees and P5,000.00 as costs of litigation are deleted.
SO ORDERED."
On March 22, 1993, the respondent Court of Appeals denied petitioner’s motion for reconsideration.25
Hence, this petition for review.
Petitioner raised the following issues for this Court’s resolution:
I WHETHER OR NOT THE ALLEGED SALE TO THE PRIVATE RESPONDENTS WAS MERELY EXECUTORY AND
NOT A CONSUMMATED TRANSACTION?
II WHETHER OR NOT THERE WAS A DOUBLE SALE AS CONTEMPLATED UNDER ART. 1544 OF THE CIVIL
CODE?
III WHETHER OR NOT PETITIONER WAS A BUYER IN GOOD FAITH AND FOR VALUE?
IV WHETHER OR NOT THE COURT OF APPEALS ERRED IN GIVING WEIGHT AND CONSIDERATION TO THE
EVIDENCE OF THE PRIVATE RESPONDENTS WHICH WERE NOT OFFERED?
Petitioner asseverates that the respondent Court of Appeals committed grave abuse of discretion
tantamount to lack or excess of jurisdiction in affirming the appealed judgment considering (1) that the
alleged sale in favor of the private respondents Repuyan was merely executory; (2) that there is no
double sale; (3) that petitioner is a buyer in good faith and for value; and (4) that private respondents
did not offer their evidence during the trial.
Contrary to petitioner’s contention that the sale dated April 1, 1980 in favor of private respondents
Repuyan was merely executory for the reason that there was no delivery of the subject property and
that consideration/price was not fully paid, we find the sale as consummated, hence, valid and
enforceable. In a decision dated April 15, 1986 of the Regional Trial Court of Manila, Branch IV in Civil
Case No. 134131, the Court dismissed vendor Aurelio Roque’s complaint for rescission of the deed of
sale and declared that the sale dated April 1, 1980, as valid and enforceable. No appeal having been
made, the decision became final and executory. It must be noted that herein petitioner Balatbat filed a
motion for intervention in that case but did not file her complaint in intervention. In that case wherein
Aurelio Roque sought to rescind the April 1, 1980 deed of sale in favor of the private respondents for
non-payment of the P45,000.00 balance, the trial court dismissed the complaint for rescission.
Examining the terms and conditions of the “Deed of Sale” dated April 1, 1980, the P45,000.00 balance is
payable only “after the property covered by T.C.T. No. 135671 has been partitioned and subdivided, and
title issued in the name of the BUYER" hence, vendor Roque cannot demand payment of the balance
unless and until the property has been subdivided and titled in the name of the private respondents.
Devoid of any stipulation that “ownership in the thing shall not pass to the purchaser until he has fully
paid the price,"26 ownership in the thing shall pass from the vendor to the vendee upon actual or
constructive delivery of the thing sold even if the purchase price has not yet been fully paid. The failure
of the buyer to make good the price does not, in la, cause the ownership to revest to the seller unless
the bilateral contract of sale is first rescinded or resolved pursuant to Article 1191 of the New Civil
Code.27 Non-payment only creates a right to demand the fulfillment of the obligation or to rescind the
contract.
With respect to the non-delivery of the possession of the subject property to the private respondent,
suffice it to say that ownership of the thing sold is acquired only from the time of delivery thereof, either
actual or constructive.28 Article 1498 of the Civil Code provides that—when the sale is made through a
public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the
object of the contract, if from the deed the contrary does not appear or cannot be inferred.29 The
execution of the public instrument, without actual delivery of the thing, transfers the ownership from
the vendor to the vendee, who may thereafter exercise the rights of an owner over the same.30 In the
instant case, vendor Roque delivered the owner’s certificate of title to herein private respondent. It is
not necessary that vendee be physically present at every square inch of the land bought by him,
possession of the public instrument of the land is sufficient to accord him the rights of ownership. Thus,
delivery of a parcel of land may be done by placing the vendee in control and possession of the land
(real) or by embodying the sale in a public instrument (constructive). The provision of Article 1358 on
the necessity of a public document is only for convenience, not for validity or enforceability. It is not a
requirement for the validity of a contract of sale of a parcel of land that this be embodied in a public
instrument.31
A contract of sale being consensual, it is perfected by the mere consent of the parties.32 Delivery of the
thing bought or payment of the price is not necessary for the perfection of the contract; and failure of
the vendee to pay the price after the execution of the contract does not make the sale null and void for
lack of consideration but results at most in default on the part of the vendee, for which the vendor may
exercise his legal remedies.33
Article 1544 of the New Civil Code provides:
“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 movable property, the ownership shall belong to the person acquiring it who in good faith
first recorded it in the Registry of Property.
“Should there be no inscription, the ownership shall pertain to the person who in good faith was first in
the possession and in the absence thereof, to the person who present the oldest title, provided there is
good faith.”
Article 1544 of the Civil Code provides that in case of double sale of an immovable property, ownership
shall be transferred (1) to the person acquiring it who in good faith first recorded it in the Registry of
Property; (2) in default thereof, to the person who in good faith was first in possession; and (3) in
default thereof, to the person who presents the oldest title, provided there is good faith.34
In the case at bar, vendor Aurelio Roque sold 6/10 portion of his share in TCT No. 135671 to private
respondents Repuyan on April 1, 1980. Subsequently, the same lot was sold again by vendor Aurelio
Roque (6/10) and his children (4/10), represented by the Clerk of Court pursuant to Section 10, Rule 39
of the Rules of Court, on February 4, 1982. Undoubtedly, this is a case of double sale contemplated
under Article 1544 of the New Civil Code.
This is an instance of a double sale of an immovable property hence, the ownership shall vest in the
person acquiring it who in good faith first recorded it in the Registry of Property. Evidently, private
respondents Repuyans caused the annotation of an adverse claim on the title of the subject property
denominated as Entry No. 5627/T-135671 on July 21, 1980.35 The annotation of the adverse claim on
TCT No. 135671 in the Registry of Property is sufficient compliance as mandated by law and serves
notice to the whole world.
On the other hand, petitioner filed a notice of /is pendens only on February 2, 1982. Accordingly, private
respondents who first caused the annotation of the adverse claim in good faith shall have a better right
over herein petitioner. Moreover, the physical possession of herein petitioners by virtue of a writ of
possession issued by the trial court on September 20, 1982 is “subject to the valid rights and interest of
third persons over the same portion thereof, other than vendor or any other person or persons privy to
or claiming any rights to interest under it."36 As between two purchasers, the one who has registered
the sale in his favor, has a preferred right over the other who has not registered his title even if the
latter is in actual possession of the immovable property.37 Further, even in default of the first registrant
or first in possession, private respondents have presented the oldest title.38 Thus, private respondents
who acquired the subject property in good faith and for valuable consideration established a superior
right as against the petitioner.
Evidently, petitioner cannot be considered as a buyer in good faith. In the complaint for rescission filed
by vendor Aurelio Roque on August 20, 1980, herein petitioner filed a motion for intervention on May
20, 1982 but did not file her complaint in intervention, hence, the decision was rendered adversely
against her. If petitioner did investigate before buying the land on February 4, 1982, she should have
known that there was a pending case and an annotation of adverse claim was made in the title of the
property before the Register of Deeds and she could have discovered that the subject property was
already sold to the private respondents. It is incum“bent upon the vendee of the property to ask for the
delivery of the owner’s duplicate copy of the title from the vendor. A purchaser of a valued piece of
property cannot just close his eyes to facts which should put a reasonable man upon his guard and then
claim that he acted in good faith and under the belief that there were no defect in the title of the
vendor.39 One who purchases real estate with knowledge of a defect or lack of title in his vendor cannot
claim that he has acquired title thereto in good faith as against the true owner of the land or of an
interest therein; and the same rule must be applied to one who has knowledge of facts which should
have put him upon such inquiry and investigation as might be necessary to acquaint him with the
defects in the title of his vendor. Good faith, or the want of it is not a visible, tangible fact that can be
seen or touched, but rather a state or condition of mind which can only be judged of by actual or fancied
tokens or signs.40
In fine, petitioner had nobody to blame but herself in dealing with the disputed property for failure to
inquire or discover a flaw in the title to the property, thus, it is axiomatic that—culpa lata dolo
aequiparatur—gross negligence is equivalent to intentional wrong.
IN VIEW OF THE FOREGOING PREMISES, this petition for review is hereby DISMISSED for lack of merit.
No pronouncement as to costs.
IT IS SO ORDERED. [Balatbat vs. Court of Appeals, 261 SCRA 128(1996)]

G.R. No. 118509. March 29, 1996.*
LIMKETKAI SONS MILLING, INC., petitioner, vs. COURT OF APPEALS, et al., respondents.
Civil Law; Contracts; Sale; Petitioner’s Exhibits “A” to “I” either scrutinized singly or collectively, do not
reveal a perfection of the purported contract of sale.—The bottomline issue is whether or not a contract
of sale of the subject parcel of land existed between the petitioner and respondent BPI. A re-evaluation
of the attendant facts and the evidence on record, specifically petitioner’s Exhibits “A” to “I,” yields the
negative. x x x These exhibits, either scrutinized singly or collectively, do not reveal a perfection of the
purported contract of sale.
Same; Same; Same; A definite agreement on the manner of payment of the price is an essential element
in the formation of a binding and enforceable contract of sale.—The Court in Toyota Shaw, Inc. v. Court
of Appeals had already ruled that a definite agreement on the manner of payment of the price is an
essential element in the formation of a binding and enforceable contract of sale. Petitioner’s exhibits did
not establish any definitive agreement or meeting of the minds between the concerned parties as
regards the price or term of payment.
Same; Same; Same; Acceptance of an offer must be unqualified and absolute.—The acceptance of an
offer must therefor be unqualified and absolute. In other words, it must be identical in all respects with
that of the offer so as to produce consent or meeting of the minds. This was not the case herein
considering that petitioner’s acceptance of the offer was qualified, which amounts to a rejection of the
original offer.
MELO, J., Dissenting Opinion:

Civil Law; Contracts; Sale; Appeal; There are well-established exceptions to the general rule that the
factual findings and conclusions drawn therefrom by the Court of Appeals should be treated as
conclusive.—There are also well-established exceptions to the general rule that the factual findings and
conclusions drawn therefrom by the Court of Appeals should be treated as conclusive.
Same; Same; Same Same; Exceptional circumstances that would compel the Supreme Court to review
findings of fact of the Court of Appeals.—In several decisions of recent vintage (Rizal Cement Co., Inc. v.
Villareal, G.R. No. L-30272, February 28, 1985, 135 SCRA 15; Ramos v. Court of Appeals, G.R. No. L-
25463, April 4, 1975, 63 SCRA 331; Garcia v. Court of Appeals, G.R. No. L-26490, June 30, 1970, 33 SCRA
623; Ramos v. Pepsi-Cola Bottling Co., G.R. No. L-22533, February 9, 1967, 19 SCRA 289), the Court
summarized and enumerated the exceptional circumstances that would compel the Supreme Court to
review findings of fact of the Court of Appeals, to wit: (1) when the conclusion is a finding grounded
entirely on speculation, surmises or conjectures (Joaquin v. Navarro, 93 Phil. 257 (1953); (2) when the
interference made is manifestly absurd, mistaken or impossible (Luna v. Linatoc, 74 Phil. 15 (1942); (3)
when there is grave abuse of discretion in the appreciation of facts (Buyco v. People, 95 Phil. 253 (1954);
(4) when the judgment is premised on a misapprehension of facts (Dela Cruz v. Sosing, 94 Phil. 26
(1953); Castillo v. Court of Appeals, G.R. No. L-48290, September 29, 1983, 124 SCRA 808); (5) when the
findings of fact are conflicting (Casica v. Villeseca, 101 Phil. 1205 (1957); and (6) when the Court of
Appeals, in making its findings, went beyond the issues of the case and the same is contrary to the
admissions of both appellant and appellee (Evangelista v. Alto Surety & Ins. Co., Inc., 103 Phil. 401
(1958).
Same; Same; Same; A sale of land is valid regardless of the form it may have been entered into.—The
contention of respondents that a formal deed of sale is essential before the contract may be perfected
and proved indicates a misapprehension of the Statute of Frauds. As emphasized in the decision, a sale
of land is valid regardless of the form it may have been entered into (Claudel vs. Court of Appeals, 199
SCRA 113, 199 [1991]). The fact that the deed of sale still had to be signed and notarized does not mean
that no contract was perfected. If the law requires a document or special legal form, the contracting
parties may require each other to observe the formality after the contract is perfected.
Same; Statute of Frauds; The cross-examination on the contract is deemed a waiver of the defense of
the Statute of Frauds.—Even assuming for purposes of argument that the perfected contract infringes
the Statute of Frauds, in Abrenica vs. Gonda (34 Phil. 379 [1916]), this Court ruled that the questioned
contract is ratified when the defense fails to object or asks questions on cross-examination. As decided
in Abrenica and later cases such as Talosig vs. Vda. de Nieba (43 SCRA 472 [1972]), assuming that parole
evidence was initially inadmissible, the same became competent and admissible because of the cross-
examination. The cross-examination on the contract is deemed a waiver of the defense of the statute of
frauds.
MOTION FOR RECONSIDERATION of a decision of the Supreme Court, Third Division.

The facts are stated in the resolution of the Court.
Amadeo D. Seno for petitioner.
Alfonso B. Verzosa for BPI.
Manahan, Cornago, De Vera, Aquino & Associates for National Bookstore, Inc.
R E S O L U T I O N
FRANCISCO, J.:

In this motion for reconsideration, the Court** is called upon to take a second hard look on its
December 1, 1995 decision reversing and setting aside respondent Court of Appeals’ judgment of
August 12, 1994 that dismissed petitioner Limketkai Sons Milling Inc.’s complaint for specific
performance and damages against private respondents Bank of Philippine Islands (BPI) and National
Book Store (NBS). Petitioner Limketkai Sons Milling, Inc., opposed the motion and filed its Consolidated
Comment, to which private respondent NBS filed a Reply. Thereafter, petitioner filed its Manifestation
and Motion for the voluntary inhibition of Chief Justice Andres R. Narvasa from taking part in any
“subsequent deliberations in this case.” The Honorable Chief Justice declined.1
The Court is swayed to reconsider.
The bottomline issue is whether or not a contract of sale of the subject parcel of land existed between
the petitioner and respondent BPI. A re-evaluation of the attendant facts and the evidence on record,
specifically petitioner’s Exhibits “A” to “I,” yields the negative. To elaborate:
Exhibit “A”2 is a Deed of Trust dated May 14, 1976, entered into between Philippine Remnants Co., Inc.,
as grantor, and respondent BPI, as trustee, stating that subject property covered by TCT 493122
(formerly TCT No. 27324)3 “has *been+ assigned, transferred, conveyed and set over unto the Trustee”4
expressly authorizing and empowering the same “inits own name to sell and dispose of said trust
property or any lot or parcel thereof”5 and “to facilitate *the+ sale of the trust property, the Trustee may
engage the services of real estate broker or brokers, under such terms and conditions which the Trustee
may deem proper, to sell the Trust property or any lot or parcel thereof.”6
Exhibit “B” is a Letter of Authority for the petitioner issued by respondent BPI to Pedro A. Revilla, Jr., a
real estate broker, to sell the property pursuant to the Deed of Trust. The full text of Exhibit “B” is
hereby quoted:
“Trust Account No. 75-09

23 June 1988

ASSETRADE CO.
70 San Francisco St.
Capitol Subdivision
Pasig, Metro Manila

Attention: Mr. Pedro P. Revilla, Jr.
Managing Partner

Gentlemen:

This will serve as your authority to sell on an “as is” “where is” basis the property located at Pasig Blvd.,
Bagong Ilog, Pasig, Metro Manila, under the following details and basic terms and conditions:
TCT No.:
493122 in the name of BPI as trustee of Philippine Remnants Co., Inc.
Area:
33,056.0 square meters (net of 890 sq. m. sold to the Republic of the Philippines due to the widening of
Pasig Blvd.)
Price:
P1,100.00 per sq. m. or
P36,361,600.00.
Terms:
Cash
Broker’s Commission:
2%
Others:
a) Docuemntary (sic) stamps to be affixed to Deed of Absolute Sale, transfer tax, registration expenses,
and other titling expenses for account of the Buyer.
b) Capital gains tax, if payable, and real estate taxes up to 30 June 1988 shall be for the account of the
Seller.
This authority which is good for thirty (30) days only from date hereof is non-exclusive and on a ”first-
come” “first-serve” basis.
Very truly yours,
BANK OF THE PHILIPPINE ISLANDS
as trustee of
Philippine Remnants Co., Inc.
(Sgd.)
(Sgd.)
FERNANDO J. SISON, III
ALFONSO R. ZAMORA
Assistant Vice-President
Vice President”
[Note: Emphasis supplied]

Exhibit “C” is the letter dated July 8, 1988, issued to Pedro Revilla, Jr., upon his request by respondent
BPI addressed to the security guard on duty at subject property to allow him (Revilla, Jr.) and his
companion to conduct an ocular inspection of the premises.7
_______________

7 The Full Text of Exhibit “C” is as follows:
Trust Account No. 75-11

08 July 1988
The Security Guard
On Detail
Universal Security &
Investigation Agency
c/o Phil. Remnants Co., Inc.
Pasig Blvd., Bagong-Ilog
Pasig, Metro Manila

Dear Sir:

Please allow Mr. Pedro Revilla, Jr., whose specimen signature appears below, and company to enter the
premises that you are securing located at the above-given address for the purpose of conducting an
ocular inspection and verification survey of the same.
Exhibit “D” is a letter addressed by Pedro Revilla, Jr. to respondent BPI informing the latter that he has
procured a prospective buyer.8
_______________

Kindly extend to Mr. Revilla your usual courtesies and assistance on this matter. Thank you.
Very truly yours,
BANK OF THE PHILIPPINE ISLANDS
As Trustees For
Philippine Remnants Co., Inc.
By:
(Sgd.) (Sgd.)
PEDRO REVILLA, JR. ROLANDO V. AROMIN
Assistant Vice-President

8 Exhibit “D” reads as follows:
July 9, 1988

Bank of the Philippine Islands
Bank of P.I. Building
Ayala Avenue, Makati
Metro Manila

ATTN: Mr. Alfonso R. Zamora
Vice President
and
Mr. Fernando J. Sison III
Asst. Vice President

Gentlemen:

I refer to the authority you gave me on June 23, 1988, in your capacity as Trustee of the Philippine
Remnants Co., Inc., in connection with the sale of one (1) parcel of land, located along Pasig Boulevard,
Bagong Ilog, Pasig, Metro Manila, with an area of 33,056 square meters and covered by Transfer
Certificate of Title No. 493122.
I am pleased to inform you that I have procured a buyer for the above described property in the name of
Limketkai Sons Milling, Inc., with office address at Limketkai Building, Greenhills, San Juan, Metro Manila
and represented by its Executive Vice President, Mr. Alfonso Lim.
It is understood therefore, that pursuant to my authority, I shall be paid a brokers fee of 2% of the gross
purchase price in the
Exhibit “E” is the written proposal submitted by Alfonso Y. Lim in behalf of petitioner Limketkai Sons
Milling, Inc., offering to buy the subject property at P1,000.00/sq. m.9
_______________

event the sale to the above named buyer is consumated.
Very truly yours,
(Sgd.)
Pedro P. Revilla, Jr.
[Note: Emphasis supplied]

9 Exhibit “E” has these salient portions:
Gentlemen:

This confirms our conversation this morning regarding the purchase of a parcel of land in Barrio Bagong
Ilog, Municipality of Pasig, covered by Transfer Certificate of Title No. 493122 of the Registry of Deeds of
Rizal, (specified therein as having an area of 33,946 sq. m. minus 890 sq. m. previously sold to the
Republic of the Philippines, or a net area of 33,056 sq. m.), registered in your name as trustee of the
Philippine Remnants Company. Specifically, this confirms your offer to sell the said property at One
Thousand (P1,000.00) Pesos per square meter, and our acceptance in principle of that offer, subject to
the following terms:
a) We are to give an initial amount equivalent to Ten (10%) Percent of the total purchase price as
earnest money;
b) The balance is to be paid by us within ninety (90) days from the execution of the agreement;
c) If the balance is not paid within the above-stated period, by reason of any cause other than those
mentioned in paragraphs (d), (e) and (f) below, Twenty (20%) Percent of The Ten (10%) Percent paid
under paragraph (a) shall be forfeited in your favor, the remaining Eighty (80%) is to be refunded to us;
in the event the non-payment of the said balance is caused by non-performance of any of the
stipulations in paragraphs (d), (e) and (f) below, the entire sum paid as earnest money shall be refunded
to us;
d) The Title of the property shall be free from all liens and encumbrances and the property itself free
from all squatters;
e) The BPI as trustee—title holder is to warrant that it has the legal right and title to transfer ownership
to us;
f) Physical possession by us upon the payment of the Ten (10%) Percent referred to in paragraph (a)
above.
Exhibit “F” is respondent BPI’s letter addressed to petitioner pointing out that petitioner’s proposal
embodied in its Letter (Exhibit “E”) has been rejected by the respondent BPI’s Trust Committee.10
_______________

Anticipating your favorable action, we thank you for your prompt attention and early reply.
Very truly yours,
LIMKETKAI SONS MILLING, INC.
(Sgd.)
ALFONSO U. LIM
Executive Vice President
[Note: Emphasis added]

10 Exhibit “F” states:
Attention: Mr. Alfonso U. Lim
Executive Vice President

Gentlemen:

Re: Bo. Bagong Ilog (Pasig) Property
In connection with subject property, we regret to inform you that the Bank’s Trust Committee did not
approve your proposal to purchase said property under the terms and conditions of your letter to our
Mr. Merlin A. Albano dated 11 July 1988. Instead, the Trust Committee instructed us to consider offers
from other interested parties.
In a meeting held on 20 July 1988, Senior Management instructed us to offer the same property to all
interested buyers under the following terms and conditions:
a. 15% downpayment upon notification of acceptance by BPI;
b. balance payable upon signing of the Deed of Sale;
c. price to BPI shall be net of broker’s commission;
d. the party with the best price shall have five (5) days within which to pay the downpayment,
otherwise, the party with the next best price shall be entertained.
Should you still be interested in subject property, kindly submit to us not later than 12:00 noon of 22
July 1988 your written offer together with the price per square meter. The Bank shall not entertain
proposals received after said cut-off time.
Exhibit “G” is petitioner’s letter dated July 22, 1988 reiterating its offer to buy the subject property at
P1,000/sq. m. but now on cash basis.11
_______________

It is understood, however, that acceptance of any offer is still subject to the approval of the Beneficial
Owner of the property as well as the Trust Committee of the Bank.
Very truly yours,

(Sgd.)
(Sgd.)
ALFONSO R. ZAMORA
FERNANDO J. SISON III
Vice President
Asst. Vice President
[Note: Emphasis added]

11 Exhibit “G” quoted in full is as follows:
July 22, 1988

The Chairman
Trust Committee
Bank of the Philippine Islands
Makati, Metro Manila

Dear Sir:

We are in receipt of the letter dated July 20, 1988, signed by Mr. Alfonso Zamora and Mr. Fernando J.
Sison III, copy of which we are hereto attaching.
Please consider our letter of July 21, 1988 addressed to Mr. Xavier P. Loinaz, Bank President, and copy
furnished your committee, as our reply thereto.
We are, therefore, hereby adopting and reiterating our former offer to buy the lot at P1,000.00 per
square meter but on cash basis.
Very truly yours,
LIMKETKAI SONS MILLING, INC.
(Sgd.)
ALFONSO U. LIM
Executive Vice-President
[Note: Emphasis added]

Exhibit “H” refers to respondent BPI’s another rejection of petitioner’s offer to buy the property at
P1,000/sq. m.12
And finally, Exhibit “I” is a letter by petitioner addressed to respondent BPI claiming the existence of a
perfected contract of sale of the subject property between them.13
_______________

12 Exhibit “H’s” pertinent portions read as follows:
Attention: Mr. Alfonso U. Lim
Exec. Vice President

Gentlemen:

We reply to your letter dated 29 July 1988 addressed to the Chairman of our Trust Committee.
We again regret to inform you that your offer to purcxhase the Bo. Bagong Ilog, Pasig property (TCT
493122) at P1,000.00 per square meter has not been approved, as previously communicated to you per
our letter dated 20 July 1988.
Per the Deed of Trust entered into by and between the Grantor of said property and ourselves, the Bank
as Trustee is duty-bound, in the event of sale of the property, to select the terms and consideration it
deems to be most advantageous to the Grantor. The 30-day authority given to your broker also
presupposed that during said period, the Bank on its own would also consider other offers. This is why
no offer to purchase was deemed final and accepted until formally approved by the Trust Committee.
x x x x x x x x x
Very truly yours,
(Sgd.)
(Sgd.)
NELSON M. BONA
FERNANDO J. SISON III
Vice President
Asst. Vice President
[Note: Emphasis added]
13 Exhibit “I” pertinently provides:
August 8, 1988

Mr. Nelson M. Bona
Vice-President
and
Mr. Fernando J. Sison III

These exhibits, either scrutinized singly or collectively, do not reveal a perfection of the purported
contract of sale. Article 1458 of the Civil Code defines a contract of sale as follows:
_______________

Asst. Vice-President
BANK OF THE PHILIPPINE ISLANDS
Manila

Gentlemen:

This refers to your letter of 2 August 1988 regarding our agreement to purchase the Barrio Bagong Ilog
property under TCT No. 493122 at P1,000.00 per square meter.
x x x x x x x x x
Under the afore-quoted provision of the Deed of Trust, your Bank as Trustee, has the absolute authority
to sell and dispose of the property under trust without consulting the Grantor as to price and terms.
Moreover, under said quoted stipulation, the Bank may engage the services of a real estate broker or
brokers under such terms and conditions which the Trustee may deem proper. Consequently, on 23
June 1988, you authorized Mr. Pedro P. Revilla, Jr. as broker to sell the property covered by Title No.
493122 on a “firstcome” “first-serve” basis as per written authority signed by Mr. Fernando J. Sison III
and Mr. Alfonso R. Zamora in behalf of the Bank as Trustee of Philippine Remnants Co., Inc.
We would like to invite your kind attention that we are the “first-come” offeror of the lot. And, while the
price mentioned in the authority granted to Mr. Revilla is P1,000.00 per square meter, nonetheless, in
the negotiations between us and your responsible bank officials done in the presence of Mr. Revilla, the
price per square meter was finally agreed at P1,000.00.
True, we requested for payment of the price on terms but, should the terms we requested be not
accepted by your bank, we were ready to pay in cash per our understanding with your Mr. Albano and
Mr. Aromin and which we have clearly made known in our July 22, 1988 letters. As a matter of fact, even
before July 21 and 22, 1988 we personally tendered a check for the entire purchase price to Mr. Albano
but he refused to accept the check because, according to him, the authority to transact the sale was
taken away from him. The same proposal to pay in cash was made by us in a meeting with Mr. Bona, Mr.
Sison and other Bank officials, and we were told that the matter will be resolved by the Bank officials
concerned in due time but nothing positive came about. We are still
“ART. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the
ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money
or its equivalent.
A contract of sale may be absolute or conditional.”
Article 1475 of the same code specifically provides when a contract of sale is deemed perfected, to wit:
“ART. 1475. The contract of sale is perfected at the moment there is 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.”
The Court in Toyota Shaw, Inc. v. Court of Appeals14 had already ruled that a definite agreement on the
manner of payment of the price is an essential element in the formation of a binding and enforceable
contract of sale. Petitioner’s exhibits did not establish any definitive agreement or meeting of the minds
between the concerned parties as regards the price or term of payment. Instead, what merely appears
therefrom is respondent BPI’s repeated rejection of the petitioner’s proposal to buy the property at
P1,000/sq. m.15 In addition, even on the assumption that Exhibit “E” reflects that respondent BPI
offered to sell the disputed property for P1,000/sq. m., petitioner’s acceptance of the offer is
conditioned upon or qualified by its proposed terms16 to which respondent BPI must first agree with.
On the subject of consent as an essential element of contracts, Article 1319 of the Civil Code has this to
say:
“ART. 1319. Consent is manifested by the meeting of the offer and the acceptance upon the thing and
the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. A
qualified acceptance constitutes a counter-offer.
x x x x x x x x x.”
The acceptance of an offer must therefor be unqualified and absolute. In other words, it must be
identical in all respects with that of the offer so as to produce consent or meeting of the minds. This was
not the case herein considering that petitioner’s acceptance of the offer was qualified, which amounts
to a rejection of the original offer.17 And contrary to petitioner’s assertion that its offer was accepted by
respondent BPI, there was no showing that petitioner complied with the terms and conditions explicitly
laid down by respondent BPI for prospective buyers.18 Neither was the petitioner able to prove that its
offer to buy the subject property was formally approved by the beneficial owner of the property and the
Trust Committee of the Bank, an essential requirement for the acceptance of the offer which was clearly
specified in Exhibits F and H. Even more telling is petitioner’s unexplained failure to reduce in writing the
alleged acceptance of its offer to buy the property at P1,000/sq. m.
The Court also finds as unconvincing petitioner’s representation under Exhibits “E,” “G,” and “I” that its
proposal to buy the subject property for P1,000/sq. m. has been accepted by respondent BPI,
considering that none of the said Exhibits contained the signature of any responsible official of
respondent bank.
It is therefore evident from the foregoing that petitioner’s documentary evidence floundered in
establishing its claim of a perfected contract of sale.
Moreover, petitioner’s case failed to hurdle the strict requirements of the Statute of Frauds. Article 1403
of the Civil Code states:
“ART. 1403.—The following contracts are unenforceable, unless they are ratified:
(1) x x x
(2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following
cases an agreement hereafter made shall be unenforceable by action, unless the same, or some note or
memorandum, thereof, be in writing, and subscribed by the party charged, or by his agent; evidence,
therefore, of the agreement cannot be received without the writing, or a secondary evidence of its
contents:
x x x x x x x x x
(e) An agreement for the leasing for a long period than one year, or for the sale of real property or of an
interest therein.
x x x x x x x x x.”
In this case there is a patent absence of any deed of sale categorically conveying the subject property
from respondent BPI to petitioner. Exhibits “E,” “G,” “I” which petitioner claims as proof of perfected
contract of sale between it and respondent BPI were not subscribed by the party charged, i.e.,
BPI, and did not constitute the memoranda or notes that the law speaks of.19 To consider them
sufficient compliance with the Statute of Frauds is to betray the avowed purpose of the law to prevent
fraud and perjury in the enforcement of obligations. We share, in this connection, respondent Court of
Appeals’ observation when it said:
“x x x. The requirement that the notes or memoranda be subscribed by BPI or its agents, as the party
charged, is very vital for the strict compliance with the avowed purpose of the Statute of Frauds which is
to prevent fraud and perjury in the enforcement of obligations depending for their evidence on the
unassisted memory of witnesses by requiring certain enumerated contracts and transactions to be
evidenced by a writing signed by the party to be charged (Asia Production Co., Inc. vs. Paño, 205 SCRA
458). It cannot be gainsaid that a shrewd person could easily concoct a story in his letters addressed to
the other party and present the letters to the court as notes to prove the existence of a perfected oral
contract of sale when in truth there is none.
“In adherence to the provisions of the Statute of Frauds, the examination and evaluation of the notes or
memoranda adduced by the appellee was confined and limited to within the four corners of the
documents. To go beyond what appears on the face of the documents constituting the notes or
memoranda, stretching their import beyond what is written in black and white, would certainly be
uncalled for, if not violative of the Statute of Frauds and opening the doors to fraud, the very evil sought
to be avoided by the statute. In fine, considering that the documents adduced by the appellee do not
embody the essentials of the contract of sale aside from not having been subscribed by the party
charged or its agent, the transaction involved definitely falls within the ambit of the Statute of
Frauds.”20
[Note: Emphasis added]
Corollarily, as the petitioner’s exhibits failed to establish the perfection of the contract of sale, oral
testimony cannot take their place without violating the parol evidence rule.21 It was therefore irregular
for the trial court to have admitted in evidence testimony to prove the existence of a contract of sale of
a real property between the parties despite the persistent objection made by private respondents’
counsels as early as the first scheduled hearing. While said counsels crossexamined the witnesses, this,
to our view, did not constitute a waiver of the parol evidence rule. The Talosig v. Vda. de Nieba,22 and
Abrenica v. Gonda and de Gracia23 cases cited by the Court in its initial decision, which ruled to the
effect that an objection against the admission of any evidence must be made at the proper time, i.e., “x
x x at the time question is asked,”24 and that if not so made it will be understood to have been waived,
do not apply as these two cases involved facts25 different from the case at bench. More importantly,
here, the direct testimonies of the witnesses were presented in “affidavit-form” where prompt
objection to inadmissible evidence is hardly possible, whereas the direct testimonies in these cited cases
were delivered orally in open court. The best that counsels could have done, and which they did, under
the circumstances was to preface the cross-examination with objection. Thus:
“ATTY. VARGAS:

Before I proceed with the cross-examination of the witness, your Honor, may we object to the particular
portion of the affidavit which attempt to prove the existence of averbal contract to sell more specifically
the answers contained in page 3. Par. 1, the whole of the answer.

“x x x x x x x x x
“COURT:

Objection overruled.
“ATTY. VARGAS:

Your Honor, what has been denied by the Court was the motion for preliminary hearing on affirmative
defenses. The statement made by the witness to prove that there was a verbal contract to sell is
inadmissible in evidence in this case because an agreement must be in writing.
“COURT:

Go ahead, that has been already overruled.
“ATTY. VARGAS:

So may we reiterate our objection with regards to all other portions of the affidavit which deal on the
verbal contract. (TSN, Feb. 28, 1989, pp. 3-5. Italics supplied.)”26

“x x x x x x x x x
“ATTY. CORNAGO:

Before we proceed, we would like to make of record our continuing objection in so far as questions and
answers propounded to Pedro Revilla dated February 27, 1989, in so far as questions would illicit (sic)
answers which would be violative of the best evidence rule in relation to Art. 1403. I refer to questions
Nos. 8, 13, 16 and 19 of the affidavit of this witness which is considered as his direct testimony.” (T.S.N.,
June 29, 1990, p. 2)
“ATTY. CORNAGO:

May we make of record our continued objection on the testimony which is violative of the best evidence
rule in relation to Art. 1403 as contained in the affidavit particularly questions Nos. 12, 14, 19 and 20 of
the affidavit of Alfonso Lim executed on February 24, 1989. x x x.”
(T.S.N., June 28, 1990, p. 8).”27
Counsels should not be blamed and, worst, penalized for taking the path of prudence by choosing to
cross-examine the witnesses instead of keeping mum and letting the inadmissible testimony in “affidavit
form” pass without challenge. We thus quote with approval the observation of public respondent Court
of Appeals on this point:
“As a logical consequence of the above findings, it follows that the court a quo erred in allowing the
appellee to introduce parol evidence to prove the existence of a perfected contract of sale over and
above the objection of the counsel for the defendant-appellant. The records show that the court a quo
allowed the direct testimony of the witnesses to be in affidavit form subject to cross-examination by the
opposing counsel. If the purpose thereof was to prevent the opposing counsel from objecting timely to
the direct testimony, the scheme failed for as early as the first hearing of the case on February 28, 1989
during the presentation of the testimony in affidavit form of Pedro Revilla, Jr., plaintiff-appellee’s first
witness, the presentation of such testimony was already objected to as inadmissible.”28
[Emphasis supplied.]
WHEREFORE, in view of the foregoing premises, the Court hereby GRANTS the motion for
reconsideration, and SETS ASIDE its December 1, 1995 decision. Accordingly, the petition is DENIED and
the Court of Appeals’ decision dated August 12, 1994, appealed from is AFFIRMED in toto.
SO ORDERED. [Limketkai Sons Milling, Inc. vs. Court of Appeals, 255 SCRA 626(1996)]

G.R. No. 118509. December 1, 1995.*
LIMKETKAI SONS MILLING, INC., petitioner, vs. COURT OF APPEALS, BANK OF THE PHILIPPINE ISLANDS
and NATIONAL BOOK STORE, respondents.
Sales; Agency; Brokers; Banks and Banking; If a bank could give the authority to sell to a licensed broker,
the Court sees no reason to doubt the authority to sell of two of the bank’s vice-presidents whose
precise job therein was to manage and administer real estate property.—At the start of the transactions,
broker Revilla by himself already had full authority to sell the disputed lot. Exhibit B dated June 23, 1988
states, “this will serve as your authority to sell on an as is, where is basis, the property located at Pasig
Blvd., Bagong Ilog x x x.” We agree with Revilla’s testimony that the authority given to him was to sell
and not merely to look for a buyer, as contended by respondents. Revilla testified that at the time he
perfected the agreement to sell the litigated property, he was acting for and in behalf of the BPI as if he
were the Bank itself. This notwithstanding and to firm up the sale of the land, Revilla saw it fit to bring
BPI officials into the transaction. If BPI could give the authority to sell to a licensed broker, we see no
reason to doubt the authority to sell of the two BPI Vice-Presidents whose precise job in the Bank was to
manage and administer real estate property.
Same; Contracts; The Phases in Contract-Making.—The phases that a contract goes through may be
summarized as follows: a. preparation, conception or generation, which is the period of negotiation and
bargaining, ending at the moment of agreement of the parties; b. perfection or birth of the contract,
which is the moment when the parties come to agree on the terms of the contract; and c.
consummation or death, which is the fulfillment or performance of the terms agreed upon in the
contract (Toyota Shaw, Inc. vs. Court of Appeals, G.R. No. 116650, May 23, 1995).
Same; Same; Statute of Frauds; The fact that the deed of sale still has to be signed and notarized does
not mean that no contract has already been perfected—the requisite form under Article 1458 of the
Civil Code is merely for greater efficacy or convenience and the failure to comply therewith does not
affect the validity and binding effect of the act between the parties.—In the case at bench, the
allegation of NBS that there was no concurrence of the offer and acceptance upon the cause of the
contract is belied by the testimony of the very BPI official with whom the contract was perfected.
Aromin and Albano concluded the sale for BPI. The fact that the deed of sale still had to be signed and
notarized does not mean that no contract had already been perfected. A sale of land is valid regardless
of the form it may have been entered into (Claudel vs. Court of Appeals, 199 SCRA 113, 119 [1991]). The
requisite form under Article 1458 of the Civil Code is merely for greater efficacy or convenience and the
failure to comply therewith does not affect the validity and binding effect of the act between the parties
(Vitug, Compendium of Civil Law and Jurisprudence, 1993 Revised Edition, p. 552). If the law requires a
document or other special form, as in the sale of real property, the contracting parties may compel each
other to observe that form, once the contract has been perfected. Their right may be exercised
simultaneously with action upon the contract (Article 1359, Civil Code).
Same; Same; Same; Cross-examination on the contract is deemed a waiver of the defense of the Statute
of Fraud.—In any event, petitioner cites Abrenica vs. Gonda (34 Phil. 739 [1916]) wherein it was held
that contracts infringing the Statute of Frauds are ratified when the defense fails to object, or asks
questions on cross-examination. In the instant case, counsel for respondents cross-examined
petitioner’s witnesses at length on the contract itself, the purchase price, the tender of cash payment,
the authority of Aromin and Revilla, and other details of the litigated contract. Under the Abrenica rule
(reiterated in a number of cases, among them Talosig vs. Vda. De Nieba, 43 SCRA 472 [1972]), even
assuming that parol evidence was initially inadmissible, the same became competent and admissible
because of the cross-examination, which elicited evidence proving the evidence of a perfected contract.
The cross-examination on the contract is deemed a waiver of the defense of the Statute of Frauds
(Vitug, Compendium of Civil Law and Jurisprudence, 1993 Revised Edition, supra, p. 563).
Same; Same; Same; An exception to the unenforceability of contracts pursuant to the Statute of Frauds
is the existence of a written note or memorandum evidencing the contract, which memorandum may be
found in several writings, not necessarily in one document.—Moreover, under Article 1403 of the Civil
Code, an exception to the unenforceability of contracts pursuant to the Statute of Frauds is the
existence of a written note or memorandum evidencing the contract. The memorandum may be found
in several writings, not necessarily in one document. The memorandum or memoranda is/are written
evidence that such a contract was entered into.
Same; Evidence; Witnesses; It is a settled principle of civil procedure that the conclusions of the trial
court regarding the credibility of witnesses are entitled to great respect from the appellate courts.—On
the matter of credibility of witnesses where the findings or conclusions of the Court of Appeals and the
trial court are contrary to each other, the pronouncement of the Court in Serrano vs. Court of Appeals
(196 SCRA 107 [1991]) bears stressing: It is a settled principle of civil procedure that the conclusions of
the trial court regarding the credibility of witnesses are entitled to great respect from the appellate
courts because the trial court had an opportunity to observe the demeanor of witnesses while giving
testimony which may indicate their candor or lack thereof. While the Supreme Court ordinarily does not
rule on the issue of credibility of witnesses, that being a question of fact not properly raised in a petition
under Rule 45, the Court has undertaken to do so in exceptional situations where, for instance, as here,
the trial court and the Court of Appeals arrived at divergent conclusions on questions of fact and the
credibility of witnesses.
Same; Badges of Fraud; A buyer could not be considered an innocent purchaser for value where it
ignored the notice of lis pendens on the title when it bought the lot.—On the fourth question of
whether or not NBS is an innocent purchaser for value, the record shows that it is not. It acted in bad
faith. Respondent NBS ignored the notice of lis pendens annotated on the title when it bought the lot. It
was the willingness and design of NBS to buy property already sold to another party which led BPI to
dishonor the contract with Limketkai.
Same; Same; The circumstance that in the deed of absolute sale, instead of the vendee insisting that the
vendor guarantee its title to the land and recognize the right of the vendee to proceed against the
vendor if the title to the land turns out to be defective, the reverse is found, clearly negates any
allegation of good faith on the part of the buyer.—It is the very nature of the deed of absolute sale
between BPI and NBS which, however, clearly negates any allegation of good faith on the part of the
buyer. Instead of the vendee insisting that the vendor guarantee its title to the land and recognize the
right of the vendee to proceed against the vendor if the title to the land turns out to be defective as
when the land belongs to another person, the reverse is found in the deed of sale between BPI and NBS.
Any losses which NBS may incur in the event the title turns out to be vested in another person are to be
borne by NBS alone. BPI is expressly freed under the contract from any recourse of NBS against it should
BPFs title be found defective.
Same; Same; There are innumerable situations where fraud is manifested—one enumeration in a 1912
decision cannot possibly cover all indications of fraud from that time up to the present and into the
future.—NBS, in its reply memorandum, does not refute or explain the above circumstance squarely. It
simply cites the badges of fraud mentioned in Oria v. McMicking (21 Phil. 243 [1912]) and argues that
the enumeration there is exclusive. The decision in said case plainly states “the following are some of
the circumstances attending sales which have been denominated by courts (as) badges of fraud.” There
are innumerable situations where fraud is manifested. One enumeration in a 1912 decision cannot
possibly cover all indications of fraud from that time up to the present and into the future.
Same; Damages; The profits and the use of the land which were denied to vendee because of the non-
compliance or interference with a solemn obligation by the vendor and a third party is somehow made
up by the appreciation of the land values in the meantime.—The Court of Appeals did not discuss the
issue of damages. Petitioner cites the fee for filing the amended complaint to implead NBS, sheriff’s
fees, registration fees, place fare and hotel expenses of Cebu-based counsel. Petitioner also claimed,
and the trial court awarded, damages for the profits and opportunity losses caused to petitioner’s
business in the amount of P10,000,000.00. We rule that the profits and the use of the land which were
denied to petitioner because of the non-compliance or interference with a solemn obligation by
respondents is somehow made up by the appreciation in land values in the meantime.
PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.
Amadeo D. Seno for petitioner.
Manahan, Cornago, De Vera, Aquino & Associates for National Book Store, Inc.
Alfonso B. Versoza for Bank of P.I.
MELO, J.:

The issue in the petition before us is whether or not there was a perfected contract between petitioner
Limketkai Sons Milling, Inc. and respondent Bank of the Philippine Islands (BPI) covering the sale of a
parcel of land, approximately 3.3 hectares in area, and located in Barrio Bagong Hog, Pasig City, Metro
Manila.
Branch 151 of the Regional Trial Court of the National Capital Judicial Region stationed in Pasig ruled
that there was a perfected contract of sale between petitioner and BPI. It stated that there was mutual
consent between the parties; the subject matter is definite; and the consideration was determined. It
concluded that all the elements of a consensual contract are attendant. It ordered the cancellation of a
sale effected by BPI to respondent National Book Store (NBS) while the case was pending and the
nullification of a title issued in favor of said respondent NBS.
Upon elevation of the case to the Court of Appeals, it was held that no contract of sale was perfected
because there was no concurrence of the three requisites enumerated in Article 1318 of the Civil Code.
The decision of the trial court was reversed and the complaint dismissed.
Hence, the instant petition.
Shorn of the interpretations given to the acts of those who participated in the disputed sale, the findings
of facts of the trial court and the Court of Appeals narrate basically the same events and occurrences.
The records show that on May 14, 1976, Philippine Remnants Co., Inc. constituted BPI as its trustee to
manage, administer, and sell its real estate property. One such piece of property placed under trust was
the disputed lot, a 33,056square meter lot at Barrio Bagong Hog, Pasig, Metro Manila covered by
Transfer Certificate of Title No. 493122.
On June 23, 1988, Pedro Revilla, Jr., a licensed real estate broker was given formal authority by BPI to
sell the lot for P1,000.00 per square meter. This arrangement was concurred in by the owners of the
Philippine Remnants.
Broker Revilla contacted Alfonso Lim of petitioner company who agreed to buy the land. On July 8, 1988,
petitioner’s officials and Revilla were given permission by Rolando V. Aromin, BPI Assistant Vice-
President, to enter and view the property they were buying.
On July 9, 1988, Revilla formally informed BPI that he had procured a buyer, herein petitioner. On July
11, 1988, petitioner’s officials, Alfonso Lim and Albino Limketkai, went to BPI to confirm the sale. They
were entertained by Vice-President Merlin Albano and Asst. Vice-President Aromin. Petitioner asked
that the price of P1,000.00 per square meter be reduced to P900.00 while Albano stated the price to be
P1,100.00. The parties finally agreed that the lot would be sold at P1,000.00 per square meter to be paid
in cash. Since the authority to sell was on a first come, first served and non-exclusive basis, it may be
mentioned at this juncture that there is no dispute over petitioner’s being the first comer and the buyer
to be first served.
Notwithstanding the final agreement to pay P1,000.00 per square meter on a cash basis, Alfonso Lim
asked if it was possible to pay on terms. The bank officials stated that there was no harm in trying to ask
for payment on terms because in previous transactions, the same had been allowed. It was the
understanding, however, that should the term payment be disapproved, then the price shall be paid in
cash.
It was Albano who dictated the terms under which the installment payment may be approved, and
acting thereon, Alfonso Lim, on the same date, July 11, 1988, wrote BPI through Merlin Albano
embodying the payment initially of 10% and the remaining 90% within a period of 90 days.
Two or three days later, petitioner learned that its offer to pay on terms had been frozen. Alfonso Lim
went to BPI on July 18, 1988 and tendered the full payment of P33,056,000.00 to Albano. The payment
was refused because Albano stated that the authority to sell that particular piece of property in Pasig
had been withdrawn from his unit. The same check was tendered to BPI Vice-President Nelson Bona
who also refused to receive payment.
An action for specific performance with damages was thereupon filed on August 25, 1988 by petitioner
against BPI. In the course of the trial, BPI informed the trial court that it had sold the property under
litigation to NBS on July 14, 1989. The complaint was thus amended to include NBS.
On June 10, 1991, the trial court rendered judgment in the case as follows:
WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendants Bank of the
Philippine Islands and National Book Store, Inc.:—
1. Declaring the Deed of Sale of the property covered by T.C.T. No. 493122 in the name of the Bank of
the Philippine Islands, situated in Barrio Bagong Ilog, Pasig, Metro Manila, in favor of National Book
Store, Inc., null and void;
2. Ordering the Register of Deeds of the Province of Rizal to cancel the Transfer Certificate of Title which
may have been issued in favor of National Book Store, Inc. by virtue of the aforementioned Deed of Sale
dated July 14, 1989;
3. Ordering defendant BPI, upon receipt by it from plaintiff of the sum of P33,056,000.00, to execute a
Deed of Sale in favor of plaintiff of the aforementioned property at the price of P1,000.00 per square
meter, in default thereof, the Clerk of this Court is directed to execute the said deed;
4. Ordering the Register of Deeds of Pasig, upon registration of the said deed, whether executed by
defendant BPI or the Clerk of Court and payment of the corresponding fees and charges, to cancel said
T.C.T. No. 493122 and to issue, in lieu thereof, another transfer certificate of title in the name of
plaintiff;
5. Ordering defendants BPI and National Book Store, Inc. to pay, jointly and severally, to the plaintiff the
sums of P10,000,000.00 as actual and consequential damages and P150,000.00 as attorney’s fees and
litigation expenses, both with interest at 12% per annum from date hereof;
6. On the cross-claim of defendant bank against National Book Store, ordering the latter to indemnify
the former of whatever amounts BPI shall have paid to the plaintiff by reason hereof; and
7. Dismissing the counterclaims of the defendants against the plaintiff and National Book Store’s cross-
claim against defendant bank.
Costs against defendants.
(pp. 44-45, Rollo.)
As earlier intimated, upon the decision being appealed, the Court of Appeals (Buena [P], Rasul, and
Mabutas, JJ.),on August 12, 1994, reversed the trial court’s decision and dismissed petitioner’s
complaint for specific performance and damages.
The issues raised by the parties revolve around the following four questions:
(1) Was there a meeting of the minds between petitioner Limketkai and respondent BPI as to the
subject matter of the contract and the cause of the obligation?
(2) Were the bank officials involved in the transaction authorized by BPI to enter into the questioned
contract?
(3) Is there competent and admissible evidence to support the alleged meeting of the minds?
(4) Was the sale of the disputed land to the NBS during the pendency of trial effected in good faith?
There is no dispute in regard to the following: (a) that BPI as trustee of the property of Philippine
Remnant Co. authorized a licensed broker, Pedro Revilla, to sell the lot for P1,000.00 per square meter;
(b) that Philippine Remnants confirmed the authority to sell of Revilla and the price at which he may sell
the lot; (c) that petitioner and Revilla agreed on the former buying the property; (d) that BPI Assistant
Vice-President Rolando V. Aromin allowed the broker and the buyer to inspect the property; and (e) that
BPI was formally informed about the broker having procured a buyer.
The controversy revolves around the interpretation or the significance of the happenings or events at
this point.
Petitioner states that the contract to sell and to buy was perfected on July 11, 1988 when its top officials
and broker Revilla finalized the details with BPI Vice-Presidents Merlin Albano and Rolando V. Aromin at
the BPI offices.
Respondents, however, contend that what transpired on this date were part of continuing negotiations
to buy the land and not the perfection of the sale. The arguments of respondents center on two
propositions—(1) Vice-Presidents Aromin and Albano had no authority to bind BPI on this particular
transaction and (2) the subsequent attempts of petitioner to pay under terms instead of full payment in
cash constitutes a counter-offer which negates the existence of a perfected contract.
The alleged lack of authority of the bank officials acting in behalf of BPI is not sustained by the record.
At the start of the transactions, broker Revilla by himself already had full authority to sell the disputed
lot. Exhibit-B dated June 23, 1988 states, “this will serve as your authority to sell on an as is, where is
basis, the property located at Pasig Blvd., Bagong Ilog x x x.” We agree with Revilla’s testimony that the
authority given to him was to sell and not merely to look for a buyer, as contended by respondents.
Revilla testified that at the time he perfected the agreement to sell the litigated property, he was acting
for and in behalf of the BPI as if he were the Bank itself. This notwithstanding and to firm up the sale of
the land, Revilla saw it fit to bring BPI officials into the transaction. If BPI could give the authority to sell
to a licensed broker, we see no reason to doubt the authority to sell of the two BPI Vice-Presidents
whose precise job in the Bank was to manage and administer real estate property.
Respondent BPI alleges that sales of trust property need the approval of a Trust Committee made up of
top bank officials. It appears from the record that this trust committee meets rather infrequently and it
does not have to pass on regular transactions.
Rolando Aromin was BPI Assistant Vice-President and Trust Officer. He directly supervised the BPI Real
Property Management Unit. He had been in the Real Estate Division since 1985 and was the head
supervising officer of real estate matters. Aromin had been with the BPI Trust Department since 1968
and had been involved in the handling of properties of beneficial owners since 1975 (tsn., December 3,
1990, p. 5).
Exhibit 10 of BPI, the February 15, 1989 letter from Senior Vice-President Edmundo Barcelon, while
purporting to inform Aromin of his poor performance, is an admission of BPI that Aromin was in charge
of Torrens titles, lease contracts, problems of tenants, insurance policies, installment receivables,
management fees, quitclaims, and other matters involving real estate transactions. His immediate
superior, Vice-President Merlin Albano had been with the Real Estate Division for only one week but he
was present and joined in the discussions with petitioner.
There is nothing to show that Alfonso Lim and Albino Limketkai knew Aromin before the incident. Revilla
brought the brothers directly to Aromin upon entering the BPI premises. Aromin acted in a perfectly
natural manner on the transaction before him with not the slightest indication that he was acting ultra
vires. This shows that BPI held Aromin out to the public as the officer routinely handling real estate
transactions and, as Trust Officer, entering into contracts to sell trust properties.
Respondents state and the record shows that the authority to buy and sell this particular trust property
was later withdrawn from Trust Officer Aromin and his entire unit. If Aromin did not have any authority
to act as alleged, there was no need to withdraw authority which he never possessed.
Petitioner points to Areola vs. Court of Appeals (236 SCRA 643 [1994]) which cited Prudential Bank vs.
Court of Appeals (22 SCRA 350 [1993]), which in turn relied upon Mclntosh vs. Dakota Trust Co. (52 ND
752, 204 NW 818, 40 ALR 1021), to wit:
Accordingly a banking corporation is liable to innocent third persons where the representation is made
in the course of its business by an agent acting within the general scope of his authority even though, in
the particular case, the agent is secretly abusing his authority and attempting to perpetrate a fraud upon
his principal or some other person for his own ultimate benefit.
(at pp. 652-653.)
In the present case, the position and title of Aromin alone, not to mention the testimony and
documentary evidence about his work, leave no doubt that he had full authority to act for BPI in the
questioned transaction. There is no allegation of fraud, nor is there the least indication that Aromin was
acting for his own ultimate benefit. BPI later dismissed Aromin because it appeared that a top official of
the bank was personally interested in the sale of the Pasig property and did not like Aromin’s testimony.
Aromin was charged with poor performance but his dismissal was only sometime after he testified in
court. More than two long years after the disputed transaction, he was still Assistant Vice-President of
BPI.
The records show that the letter of instruction dated June 14, 1988 from the owner of Philippine
Remnants Co. regarding the sale of the firm’s property was addressed to Aromin. The P1,000.00 figure
on the first page of broker Revilla’s authority to sell was changed to P1,100.00 by Aromin. The price was
later brought down again to P1,000.00, also by Aromin. The permission given to petitioner to view the
lot was signed by Aromin and honored by the BPI guards. The letter dated July 9, 1988 from broker
Revilla informing BPI that he had a buyer was addressed to Aromin. The conference on July 11, 1988
when the contract was perfected was with Aromin and Vice-President Albano. Albano and Aromin were
the ones who assured petitioner Limketkai’s officers that term payment was possible. It was Aromin
who called up Miguel Bicharra of Philippine Remnants to state that the BPI rejected payment on terms
and it was to Aromin that Philippine Remnants gave the go signal to proceed with the cash sale.
Everything in the record points to the full authority of Aromin to bind the bank, except for the self-
serving memoranda or letters later produced by BPI that Aromin was an inefficient and undesirable
officer and who, in fact, was dismissed after he testified in this case. But, of course, Aromin’s alleged
inefficiency is not proof that he was not fully clothed with authority to bind BPI.
Respondents’ second contention is that there was no perfected contract because petitioner’s request to
pay on terms constituted a counter-offer and that negotiations were still in progress at that point.
Asst. Vice-President Aromin was subpoenaed as a hostile witness for petitioner during trial. Among his
statements is one to the effect that—
. . . Mr. Lim offered to buy the property at P900.00 per square meter while Mr. Albano counter-offered
to sell the property at P1,100.00 per square meter but after the usual haggling, we finally agreed to sell
the property at the price of P1,000.00 per square meter . . . (tsn, 12-3-90, p. 17; Emphasis supplied.)
Asked if there was a meeting of the minds between the buyer and the bank in respect to the price of
P1,000.00 per square meter, Aromin answered:
Yes, sir, as far as my evaluation there was a meeting of the minds as far as the price is concerned, sir.
(ibid, p. 17.)
The requirements in the payment of the purchase price on terms instead of cash were suggested by BPI
Vice-President Albano. Since the authority given to broker Revilla specified cash payment, the possibility
of paying on terms was referred to the Trust Committee but with the mutual agreement that “if the
proposed payment on terms will not be approved by our Trust Committee, Limketkai should pay in cash
. . . the amount was no longer subject to the approval or disapproval of the Committee, it is only on the
terms.” (ibid, p. 19). This is incontrovertibly established in the following testimony of Aromin:
A.
After you were able to agree on the price of P1,000.00/sq m., since the letter or authority says the
payment must be in cash basis, what transpired later on?
B.
After we have agreed on the price, the Lim brothers inquired on how to go about submitting the
covering proposal if they will be allowed to pay on terms. They requested us to give them a guide on
how to prepare the corresponding letter of proposal. I recall that, upon the request of Mr. Albino
Limketkai, we dictated a guide on how to word a written firm offer that was to be submitted by Mr. Lim
to the bank setting out the terms of payment but with the mutual agreement that if his proposed
payment on terms will not be approved by our trust committee, Limketkai should pay the price in cash.
Q
And did buyer Limketkai agree to pay in cash in case the offer of terms will be cash (disapproved).
A
Yes, sir.
Q
At the start, did they show their willingness to pay in cash?
A
Yes, sir.
Q
You said that the agreement on terms was to be submitted to the trust committee for approval, are you
telling the Court that what was to be approved by the trust committee was the provision on the
payment on terms?
A
Yes, sir.
Q
So the amount was no longer subject to the approval or disapproval of the committee, it is only on the
terms?
A
Yes, sir.
(tsn, Dec. 3, 1990, pp. 18-19; Emphasis supplied.)
The record shows that if payment was in cash, either broker Revilla or Aromin had full authority. But
because petitioner took advantage of the suggestion of Vice-President Albano, the matter was sent to
higher officials. Immediately upon learning that payment on terms was frozen and/or denied, Limketkai
exercised his right within the period given to him and tendered payment in full. The BPI rejected the
payment.
In its Comment and Memorandum, respondent NBS cites Ang Yu Asuncion vs. Court of Appeals (238
SCRA 602 [1994]) to bolster its case. Contrarywise, it would seem that the legal principles found in said
case strengthen and support petitioner’s submission that the contract was perfected upon the meeting
of the minds of the parties.
The negotiation or preparation stage started with the authority given by Philippine Remnants to BPI to
sell the lot, followed by (a) the authority given by BPI and confirmed by Philippine Remnants to broker
Revilla to sell the property, (b) the offer to sell to Limketkai, (c) the inspection of the property and finally
(d) the negotiations with Aromin and Albano at the BPI offices.
The perfection of the contract took place when Aromin and Albano, acting for BPI, agreed to sell and
Alfonso Lim with Albino Limketkai, acting for petitioner Limketkai, agreed to buy the disputed lot at
P1,000.00 per square meter. Aside from this there was the earlier agreement between petitioner and
the authorized broker. There was a concurrence of offer and acceptance, on the object, and on the
cause thereof.
The phases that a contract goes through may be summarized as follows:
a. preparation, conception or generation, which is the period of negotiation and bargaining, ending at
the moment of agreement of the parties;
b. perfection or birth of the contract, which is the moment when the parties come to agree on the terms
of the contract; and
c. consummation or death, which is the fulfillment or performance of the terms agreed upon in the
contract (Toyota Shaw, Inc. vs. Court of Appeals, G.R. No. 116650, May 23, 1995).
But in more graphic prose, we turn to Ang Yu Asuncion, per Justice Vitug:
. . . A contract undergoes various stages that include its negotiation or preparation, its perfection and,
finally, its consummation. Negotiation covers the period fromthe time the prospective contracting
parties indicate interest in the contract tothe time the contract is concluded (perfected). The perfection
of the contract takes place upon the concurrence of the essential elements thereof. A contract which is
consensual as to perfection is so established upon a mere meeting of minds, i.e., the concurrence of
offer and acceptance, on the object and on the cause thereof.A contract which requires, in addition to
the above, the delivery of the object of the agreement, as in a pledge or commodatum,is commonly
referred to as a real contract.In a solemn contract, compliance with certain formalities prescribed by
law, such as in a donation of real property, is essential in order to make the act valid, the prescribed
form being thereby an essential element thereof. The stage of consummation begins when the parties
perform their respective undertakings under the contract culminating in the extinguishment thereof.
Until the contract is perfected, it cannot, as an independent source of obligation, serve as a binding
juridical relation. In sales, particularly, to which the topic for discussion about the case at bench belongs,
the contract is perfected when a person, called the seller, obligates himself, for a price certain, to deliver
and to transfer ownership of a thing or right to another, called the buyer, over which the latter agrees.
(238 SCRA 602; 611 [1994].)
In Villonco Realty Company vs. Bormaheco (65 SCRA 352 [1975]), bearing factual antecedents similar to
this case, the Court, through Justice Aquino (later to be Chief Justice), quoting authorities, upheld the
perfection of the contract of sale thusly:
“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.” (Art. 1475, Ibid.).
x x x
x x x
x x x
“Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause
which are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified
acceptance constitutes a counter-offer” (Art. 1319, Civil Code). “An acceptance may be express or
implied” (Art. 1320, Civil Code).
x x x
x x x
x x x
“It is true that an acceptance may contain a request for certain changes in the terms of the offer and yet
be a binding acceptance. ‘So long as it is clear that the meaning of the acceptance is positively and
unequivocally to accept the offer, whether such request is granted or not, a contract is formed.” (Stuart
vs. Franklin Life Ins. Co., 105 Fed. 2nd 965, citing Sec. 79, Williston on Contracts).
x x x
x x x
x x x
. . . the vendor’s change in a phrase of the offer to purchase, which change does not essentially change
the terms of the offer, does not amount to a rejection of the offer and the tender or a counter-offer.”
(Stuart v. Franklin Life Ins. Co., supra.)
(at pp. 362-363; 365-366.)
In the case at bench, the allegation of NBS that there was no concurrence of the offer and acceptance
upon the cause of the contract is belied by the testimony of the very BPI official with whom the contract
was perfected. Aromin and Albano concluded the sale for BPI. The fact that the deed of sale still had to
be signed and notarized does not mean that no contract had already been perfected. A sale of land is
valid regardless of the form it may have been entered into (Claudel v. Court of Appeals, 199 SCRA 113,
119 [1991]). The requisite form under Article 1458 of the Civil Code is merely for greater efficacy or
convenience and the failure to comply therewith does not affect the validity and binding effect of the
act between the parties (Vitug, Compendium of Civil Law and Jurisprudence, 1993 Revised Edition, p.
552). If the law requires a document or other special form, as in the sale of real property, the
contracting parties may compel each other to observe that form, once the contract has been perfected.
Their right may be exercised simultaneously with action upon the contract (Article 1359, Civil Code).
Regarding the admissibility and competence of the evidence adduced by petitioner, respondent Court of
Appeals ruled that because the sale involved real property, the statute of frauds is applicable.
In any event, petitioner cites Abrenica v. Gonda (34 Phil. 739 [1916]) wherein it was held that contracts
infringing the Statute of Frauds are ratified when the defense fails to object, or asks questions on cross-
examination. The succinct words of Justice Araullo still ring in judicial cadence:
As no timely objection or protest was made to the admission of the testimony of the plaintiff with
respect to the contract; and as the motion to strike out said evidence came too late; and, furthermore,
as the defendants themselves, by the cross-questions put by their counsel to the witnesses in respect to
said contract, tacitly waived their right to have it stricken out, that evidence, therefore, cannot be
considered either inadmissible or illegal, and court, far from having erred in taking it into consideration
and basing his judgment thereon, notwithstanding the fact that it was ordered to be stricken out during
the trial, merely corrected the error he committed in ordering it to be so stricken out and complied with
the rules of procedure hereinbefore cited. (at p. 748.)
In the instant case, counsel for respondents cross-examined petitioner’s witnesses at length on the
contract itself, the purchase price, the tender of cash payment, the authority of Aromin and Revilla, and
other details of the litigated contract. Under the Abrenica rule (reiterated in a number of cases, among
them Talosig vs. Vda. De Nieba, 43 SCRA 472 [1972]), even assuming that parol evidence was initially
inadmissible, the same became competent and admissible because of the cross-examination, which
elicited evidence proving the evidence of a perfected contract. The cross-examination on the contract is
deemed a waiver of the defense of the Statute of Frauds (Vitug, Compendium of Civil Law and
Jurisprudence, 1993 Revised Edition, supra, p. 563).
The reason for the rule is that as pointed out in Abrenica “if the answers of those witnesses were
stricken out, the crossexamination could have no object whatsoever, and if the questions were put to
the witnesses and answered by them, they could only be taken into account by connecting them with
the answers given by those witnesses on direct examination” (pp. 747-748).
Moreover, under Article 1403 of the Civil Code, an exception to the unenforceability of contracts
pursuant to the Statute of Frauds is the existence of a written note or memorandum evidencing the
contract. The memorandum may be found in several writings, not necessarily in one document. The
memorandum or memoranda is/arewritten evidence that such a contract was entered into.
We cite the findings of the trial court on this matter:
In accordance with the provisions of Art. 1403 of the Civil Code, the existence of a written contract of
the sale is not necessary so long as the agreement to sell real property is evidenced by a written note or
memorandum, embodying the essentials of the contract and signed by the party charged or his agent.
Thus, it has been held:
“The Statute of Frauds, embodied in Article 1403 of the Civil Code of the Philippines, does not require
that the contract itself be written. The plain test of Article 1403, paragraph (2) is clear that a written
note or memorandum, embodying the essentials of the contract and signed by the party charged, or his
agent suffices to make the verbal agreement enforceable, taking it out of the operation of the statute.
(Italics supplied)
x x x
“In the case at bar the complaint in its paragraph 3 pleads that the deal had been closed by letter and
telegram (Record on Appeal, p. 2), and the letter referred to was evidently the one copy of which was
appended as Exhibit A to plaintiff’s opposition to the motion to dismiss. The letter, transcribed above in
part, together with the one marked as Appendix B, constitute an adequate memorandum of the
transaction. They are signed by the defendant-appellant; refer to the property sold as a Lot in Puerto
Princesa, Palawan, covered by T.C.T. No. 62, give its area as 1,825 square meters and the purchase price
of four (P4.00) pesos per square meter payable in cash. We have in them, therefore, all the essential
terms of the contract and they satisfy the requirements of the Statute of Frauds.
([Footnote 26, Paredes vs. Espino, 22 SCRA 1000 [1968]).
While there is no written contract of sale of the Pasig property executed by BPI in favor of plaintiff, there
are abundant notes and memoranda extant in the records of this case evidencing the elements of a
perfected contract. There is Exhibit P, the letter of Kenneth Richard Awad addressed to Roland Aromin,
authorizing the sale of the subject property at the price of P1,000.00 per square meter giving 2%
commission to the broker and instructing that the sale be on cash basis. Concomitantly, on the basis of
the instruction of Mr. Awad, (Exh. P), an authority to sell, (Exh. B) was issued by BPI to Pedro Revilla, Jr.,
representing Assetrade Co., authorizing the latter to sell the property at the initial quoted price of
P1,000.00 per square meter which was altered on an unaccepted offer by Technoland. After the letter
authority was issued to Mr. Revilla, a letter authority was signed by Mr. Aromin allowing the buyer to
enter the premises of the property to inspect the same (Exh. C). On July 9, 1988, Pedro Revilla, Jr., acting
as agent of BPI, wrote a letter to BPI informing it that he had procured a buyer in the name of Limketkai
Sons Milling, Inc. with offices at Limketkai Bldg., Greenhills, San Juan, Metro Manila, represented by its
Exec. Vice-President, Alfonso Lim (Exh. D). On July 11, 1988, the plaintiff, through Alfonso Lim, wrote a
letter to the bank, through Merlin Albano, confirming their transaction regarding the purchase of the
subject property (Exh. E). On July 18, 1988, the plaintiff tendered upon the officials of the bank a check
for P33,056,000.00 covered by Check No. CA510883, dated July 18, 1988. On July 1, 1988, Alfonso
Zamora instructed Mr. Aromin in a letter to resubmit new offers only if there is no transaction closed
with Assetrade Co. (Exh. S). Combining all these notes and memoranda, the Court is convinced of the
existence of perfected contract of sale. Aptly, the Supreme Court, citing American cases with approval,
held:
“No particular form of language or instrument is necessary to constitute a memorandum or note in
writing under the statute of frauds; any document or writing, formal or informal, written either for the
purpose of furnishing evidence of the contract or for another purpose, which satisfies all the
requirements of the statute as to contents and signature, as discussed respectively infra secs. 178-200,
and infra secs. 201-205, is a sufficient memorandum or note. A memorandum may be written as well
with lead pencil as with pen and ink. It may also be filled in on a printed form.’ (37 C.J.S, 653-654).
“The note or memorandum required by the statute of frauds need not be contained in a single
document, nor, when contained in two or more papers, need each paper be sufficient as to contents
and signature to satisfy the statute. Two or more writings properly connected may be considered
together, matters missing or uncertain in one may be supplied or rendered certain by another, and their
sufficiency will depend on whether, taken together, they meet the requirements of the statute as to
contents and the requirements of the statutes as to signature, as considered respectively infra secs. 179-
200 and secs. 201-215.’ ”
(pp. 460-463, Original RTC Record).
The credibility of witnesses is also decisive in this case. The trial court directly observed the demeanor
and manner of testifying of the witnesses while the Court of Appeals relied merely on the transcript of
stenographic notes.
In this regard, the court of origin had this to say:
Apart from weighing the merits of the evidence of the parties, the Court had occasion to observe the
demeanor of the witnesses they presented. This is one important factor that inclined the Court to
believe in the version given by the plaintiff because its witnesses, including hostile witness Roland V.
Aromin, an assistant vice-president of the bank, were straightforward, candid and unhesitating in giving
their respective testimonies. Upon the other hand, the witnesses of BPI were evasive, less than candid
and hesitant in giving their answers to cross-examination questions. Moreover, the witnesses for BPI
and NBS contradicted each other. Fernando Sison III insisted that the authority to sell issued to Mr.
Revilla was merely an evidence by which a broker may convince a prospective buyer that he had
authority to offer the property mentioned therein for sale and did not bind the bank. On the contrary,
Alfonso Zamora, a Senior Vice-President of the bank, admitted that the authority to sell issued to Mr.
Pedro Revilla, Jr. was valid, effective and binding upon the bank being signed by two class “A”
signatories and that the bank cannot back out from its commitment in the authority to sell to Mr.
Revilla.
While Alfredo Ramos of NBS insisted that he did not know personally and was not acquainted with
Edmundo Barcelon, the latter categorically admitted that Alfredo Ramos was his friend and that they
have even discussed in one of the luncheon meetings the matter of the sale of the Pasig property to
NBS. George Feliciano emphatically said that he was not a consultant of Mr. Ramos nor was he
connected with him in any manner, but his calling card states that he was a consultant to the chairman
of the Pacific Rim Export and Holdings Corp. whose chairman is Alfredo Ramos. This deliberate act of Mr.
Feliciano of concealing his being a consultant to Mr. Alfredo Ramos evidently was done by him to avoid
possible implication that he committed some underhanded maneuvers in manipulating to have the
subject property sold to NBS, instead of being sold to the plaintiff.
(pp. 454-455, Original RTC Record.)
On the matter of credibility of witnesses where the findings or conclusions of the Court of Appeals and
the trial court are contrary to each other, the pronouncement of the Court in Serrano v. Court of
Appeals (196 SCRA 107 [1991]) bears stressing:
It is a settled principle of civil procedure that the conclusions of the trial court regarding the credibility
of witnesses are entitled to great respect from the appellate courts because the trial court had an
opportunity to observe the demeanor of witnesses while giving testimony which may indicate their
candor or lack thereof. While the Supreme Court ordinarily does not rule on the issue of credibility of
witnesses, that being a question of fact not properly raised in a petition under Rule 45, the Court has
undertaken to do so in exceptional situations where, for instance, as here, the trial court and the Court
of Appeals arrived at divergent conclusions on questions of fact and the credibility of witnesses.
(at p. 110.)
On the fourth question of whether or not NBS is an innocent purchaser for value, the record shows that
it is not. It acted in bad faith.
Respondent NBS ignored the notice of lis pendens annotated on the title when it bought the lot. It was
the willingness and design of NBS to buy property already sold to another party which led BPI to
dishonor the contract with Limketkai.
Petitioner cites several badges of fraud indicating that BPI and NBS conspired to prevent petitioner from
paying the agreed price and getting possession of the property:
1. The sale was supposed to be done through an authorized broker, but top officials of BPI personally
and directly took over this particular sale when a close friend became interested.
2. BPI Senior Vice President Edmundo Barcelon admitted that NBS’s President, Alfredo Ramos, was his
friend; that they had lunch meetings before this incident and discussed NBS’s purchase of the lot.
Barcelon’s father was a business associate of Ramos.
3. George Feliciano, in behalf of NBS, offered P5 million and later P7 million if petitioner would drop the
case and give up the lot. Feliciano went to petitioner’s office and haggled with Alfonso Lim but failed to
convince him inspite of various and increasing offers.
4. In a place where big and permanent buildings abound, NBS had constructed only a warehouse marked
by easy portability. The warehouse is bolted to its foundations and can easily be dismantled.
It is the very nature of the deed of absolute sale between BPI and NBS which, however, clearly negates
any allegation of good faith on the part of the buyer. Instead of the vendee insisting that the vendor
guarantee its title to the land and recognize the right of the vendee to proceed against the vendor if the
title to the land turns out to be defective as when the land belongs to another person, the reverse is
found in the deed of sale between BPI and NBS. Any losses which NBS may incur in the event the title
turns out to be vested in another person are to be borne by NBS alone. BPI is expressly freed under the
contract from any recourse of NBS against it should BPF’s title be found defective.
NBS, in its reply memorandum, does not refute or explain the above circumstance squarely. It simply
cites the badges of fraud mentioned in Oria v. McMicking (21 Phil. 243 [1912]) and argues that the
enumeration there is exclusive. The decision in said case plainly states “the following are some of the
circumstances attending sales which have been denominated by courts (as) badges of fraud.” There are
innumerable situations where fraud is manifested. One enumeration in a 1912 decision cannot possibly
cover all indications of fraud from that time up to the present and into the future.
The Court of Appeals did not discuss the issue of damages. Petitioner cites the fee for filing the amended
complaint to implead NBS, sheriff’s fees, registration fees, plane fare and hotel expenses of Cebu-based
counsel. Petitioner also claimed, and the trial court awarded, damages for the profits and opportunity
losses caused to petitioner’s business in the amount of P10,000,000.00.
We rule that the profits and the use of the land which were denied to petitioner because of the non-
compliance or interference with a solemn obligation by respondents is somehow made up by the
appreciation in land values in the meantime.
Prescinding from the above, we rule that there was a perfected contract between BPI and petitioner
Limketkai; that the BPI officials who transacted with petitioner had full authority to bind the bank; that
the evidence supporting the sale is competent and admissible; and that the sale of the lot to NBS during
the trial of the case was characterized by bad faith.
WHEREFORE, the questioned judgment of the Court of Appeals is hereby REVERSED and SET ASIDE. The
June 10, 1991 judgment of Branch 151 of the Regional Trial Court of The National Capital Judicial Region
stationed in Pasig, Metro Manila is REINSTATED except for the award of Ten Million Pesos
(P10,000,000.00) damages which is hereby DELETED.
SO ORDERED. [Limketkai Sons Milling, Inc. vs. Court of Appeals, 250 SCRA 523(1995)]

G.R. No. 156055. March 5, 2007.*
R.R. PAREDES, W.S. TIFFANY, T.R. KOTZE, H. MUSSAIN, FRANCISCO A. CRUZ, EDGARDO C. CATAGUIS,
E.M. LAPUZ, ATTY. JOSELIA POBLADOR, JOSE DE LUSONG, EDUARDO A. RICARDO, ATTY. ARIEL F.
ABONAL, and ADOLFO GARCIA, petitioners, vs. TARCISIO S. CALILUNG, respondent.
Criminal Law; Estafa by Means of Deceit; Elements.—The elements of estafa by means of deceit,
whether committed by false pretenses or concealment, are the following—(a) That there must be a false
pretense, fraudulent act or fraudulent means. (b) That such false pretense, fraudulent act or fraudulent
means must be made or executed prior to or simultaneously with the commission of the fraud. (c) That
the offended party must have relied on the false pretense, fraudulent act, or fraudulent means, that is,
he was induced to part with his money or property because of the false pretense, fraudulent act, or
fraudulent means. (d) That as a result thereof, the offended party suffered damage.
Same; Preliminary Investigation; Probable Cause; Words and Phrases; Probable cause is a reasonable
ground of presumption that a matter is, or may be, well-founded, such a state of facts in the mind of the
prosecutor as would lead a person of ordinary caution and prudence to believe, or entertain an honest
or strong suspicion, that a thing is so—the term does not mean “actual and positive cause” nor does it
import absolute certainty. It is merely based on opinion and reasonable belief; While probable cause
demands more than “bare suspicion,” it requires “less than evidence which would justify conviction.”—
Probable cause has been defined as the existence of such facts and circumstances as would excite the
belief, in a reasonable mind, acting on the facts within the knowledge of the prosecutor, that the person
charged was guilty of the crime for which he was prosecuted. Probable cause is a reasonable ground of
presumption that a matter is, or may be, well-founded, such a state of facts in the mind of the
prosecutor as would lead a person of ordinary caution and prudence to believe, or entertain an honest
or strong suspicion,that a thing is so. The term does not mean “actual and positive cause” nor does it
import absolute certainty. It is merely based on opinion and reasonable belief. Thus, a finding of
probable cause does not require an inquiry into whether there is sufficient evidence to procure a
conviction. It is enough that it is believed that the act or omission complained of constitutes the offense
charged. Precisely, there is a trial for the reception of evidence of the prosecution in support of the
charge. While probable cause demands more than “bare suspicion,” it requires “less than evidence
which would justify conviction.” A finding of probable cause merely binds over the suspect to stand trial.
It is not a pronouncement of guilt.
Same; Same; Same; The conduct of preliminary investigation for the purpose of determining the
existence of probable cause is executive in nature—the prosecution of crimes appertains to the
executive department of the government whose principal power and responsibility is to see that the
laws of the land are faithfully executed.—The conduct of preliminary investigation for the purpose of
determining the existence of probable cause is executive in nature. The prosecution of crimes
appertains to the executive department of the government whose principal power and responsibility is
to see that the laws of the land are faithfully executed. A necessary component of this power to execute
the laws is the right to prosecute their violators. The right to prosecute vests the prosecutor with a wide
range of discretion, the discretion of whether, what and whom to charge, the exercise of which depends
on a smorgasbord of factors which are best appreciated by prosecutors.
Same; Same; Same; The purpose of a preliminary investigation is to secure the innocent against hasty,
malicious and oppressive prosecution, and to protect him from an open and public accusation of crime,
from the trouble, expense and anxiety of a public trial, and also to protect the state from useless and
expensive trials.—The main function of a government prosecutor during his conduct of preliminary
investigation is to determine the existence of probable cause and to file the corresponding information
should he find it to be so. The purpose of a preliminary investigation is to secure the innocent against
hasty, malicious and oppressive prosecution, and to protect him from an open and public accusation of
crime, from the trouble, expense and anxiety of a public trial, and also to protect the state from useless
and expensive trials. A preliminary investigation serves not only the purposes of the State. More
important, it is a part of the guarantees of freedom and fair play which are birthrights of all who live in
this country. It is, therefore, imperative upon the fiscal to relieve the accused from the pain of going
through a trial once it is ascertained that no probable cause exists to form a sufficient belief as to the
guilt of the accused.
Same; Same; Same; The Supreme Court must have to recognize that a prosecutor should not be unduly
compelled to work against his conviction.—A prosecutor, by the nature of his office, is under no
compulsion to file a particular criminal information where he is not convinced that he has evidence to
prop up the averments thereof, or that the evidence at hand points to a different conclusion. This is not
to discount the possibility of the commission of abuses on the part of the prosecutor. But this Court
must have to recognize that a prosecutor should not be unduly compelled to work against his
conviction. Although the power and prerogative of the prosecutor, to determine whether or not the
evidence at hand is sufficient to form a reasonable belief that a person committed an offense, is not
absolute but subject to judicial review, it would be embarrassing for him to be compelled to prosecute a
case when he is in no position to do so, because in his opinion he does not have the necessary evidence
to secure a conviction, or he is not convinced of the merits of the case. Hence, this Court consistently
adheres to its policy of non-interference in the conduct of preliminary investigations, and to leave to the
investigating prosecutor sufficient latitude of discretion in the determination of what constitutes
sufficient evidence as will establish probable cause for the filing of an information against a supposed
offender.
Same; Same; Same; Certiorari; Although it is entirely possible that the investigating prosecutor may
erroneously exercise the discretion lodged in him by law, this does not render his act amenable to
correction and annulment by the extraordinary remedy of certiorari, absent any showing of grave abuse
of discretion amounting to excess of jurisdiction.—It should do well for the Court of Appeals to
remember that the DOJ Resolutions, dated 27 July 1998 and 30 June 1999, affirming the dismissal by the
Makati City Prosecution Office of respondent’s complaint against petitioners, were brought before it via
a Petition on Certiorari under Rule 65 of the Rules of Court. Its duty is confined to determining whether
the executive determination of probable cause was done without or in excess of jurisdiction or with
grave abuse of discretion. Thus, although it is entirely possible that the investigating prosecutor may
erroneously exercise the discretion lodged in him by law, this does not render his act amenable to
correction and annulment by the extraordinary remedy of certiorari, absent any showing of grave abuse
of discretion amounting to excess of jurisdiction.
Same; Same; Same; Probable cause need not be based on clear and convincing evidence of guilt, neither
on evidence establishing guilt beyond reasonable doubt and definitely, not on evidence establishing
absolute certainty of guilt, but it certainly demands more than bare suspicion and can never be left to
presupposition, conjecture, or even convincing logic.—It is worth stressing that it was respondent who
initiated the complaint before the Makati City Prosecution Office. Thus, upon him rests the burden of
supporting his charges with affidavits and any other evidence, for it is upon these evidence thus
adduced, that the investigating prosecutor determines the existence, or in this case, the absence, of
probable cause to hold the petitioners for trial for the crimes charged. Respondent must have
necessarily tendered evidence, independent of and in support of the allegations in his affidavit-
complaint, of such quality as to engender belief in an ordinarily prudent and cautious man that the
offense charged therein has been committed by the petitioners. Indeed, probable cause need not be
based on clear and convincing evidence of guilt, neither on evidence establishing guilt beyond
reasonable doubt and definitely, not on evidence establishing absolute certainty of guilt, but it certainly
demands more than bare suspicion and can never be left to presupposition, conjecture, or even
convincing logic.
Evidence; Positive statement is stronger and attains greater evidentiary weight than negative
evidence.—As between the mere denial constituting self-serving negative assertions of respondent that
he did not fully know of the circumstances and the current status of the subject real properties he
acquired from CPI, and the positive and categorical declarations of petitioners and their witnesses that
respondent was duly informed thereof, the choice is not hard to make, for the jurisprudence on the
matter is that positive statement is stronger and attains greater evidentiary weight than negative
evidence.
Same; Evidence to be believed must not only proceed from the mouth of a credible witness but must be
credible in itself—such as the common experience and observation of mankind can approve as probable
under the circumstances.—Respondent’s contention of his seeming disconnection and isolation from
the affairs of his wife’s family is undoubtedly contrary to the common family life experience of Filipinos.
Reference is made herein to the quote of Vice-Chancellor Van Fleet, reproduced in Pacheco v. Hon Court
of Appeals and People of the Philippines, 319 SCRA 595 (1999)—“Evidence to be believed must not only
proceed from the mouth of a credible witness but must be credible in itself—such as the common
experience and observation of mankind can approve as probable under the circumstances. We have no
test of the truth of human testimony, except its conformity to our knowledge, observation and
experience. Whatever is repugnant to these belongs to the miraculous, and is outside of judicial
cognizance.”
Sales; While one who buys from the registered owner does not need to look behind the certificate of
title, one who buys from one who is not the registered owner is expected to examine not only the
certificate of title but all factual circumstances necessary for him to determine if there are any flaws in
the title of the transferor, or in his capacity to transfer the land.—Assuming that respondent had
absolutely no knowledge of the circumstances surrounding CPI’s acquisition of its interest in the subject
real properties from Antonia Vda. de Medina, then his examination of the transfer certificates of title
(TCTs) should have revealed to him such circumstances or, at the very least, led him to ask questions
about the same. The court processes issued by the Manila RTC in Civil Case No. 84–22434, affecting the
subject real properties, and duly served on the Register of Deeds, were clearly annotated on the TCTs
covering the subject real properties. What is more, the TCTs were all still in the name of the Heirs of
Antonio Medina, not CPI. Such a fact should have been a caveat to respondent to proceed with the
transaction with more prudence and to inquire into CPI’s title to or interest in the subject properties, as
well as the circumstances attendant to its acquisition thereof. According to a well-established rule in our
jurisdiction—“The law protects to a greater degree a purchaser who buys from the registered owner
himself. Corollarily, it requires a higher degree of prudence from one who buys from a person who is not
the registered owner, although the land object of the transaction is registered. While one who buys
from the registered owner does not need to look behind the certificate of title, one who buys from one
who is not the registered owner is expected to examine not only the certificate of title but all factual
circumstances necessary for him to determine if there are any flaws in the title of the transferor, or in
his capacity to transfer the land.” (Emphasis supplied) Respondent could be reasonably assumed to be
familiar with the foregoing since he is a lawyer.
Same; Attorneys; A lawyer is presumed to know the law.—Respondent is a lawyer and, as such, he is
presumed to know the law. Though respondent may not be actively practicing law as a profession, the
legal rules and principles applicable to the present Petition are so basic and fundamental, and which
respondent must have learned even while he was still studying law. Respondent is also a businessman
who must possess some degree of shrewdness in his dealings so as to protect his business interests.
With respondent’s qualifications as a lawyer and a businessman, while they may not protect him
absolutely, make him less susceptible to deception as compared to an ordinary layperson.
Same; Agrarian Reform; Voluntary Offer to Sell (VOS); A Voluntary Offer to Sell (VOS) is not deemed a
consummated sale.—Should the VOS covering the subject real properties already be deemed a
consummated sale? This Court rules in the negative. The CARL of 1988 encourages landowners to
voluntarily offer for sale their lands by giving an additional five percent compensation to those who avail
of this option. To implement the VOS scheme under the CARL of 1988, the DAR issued Administrative
Order No. 3, series of 1989, subsequently revised by Administrative Order No. 9, series of 1990, which
provided for the rules and procedure governing the acquisition by the government of land subject of a
VOS. A cursory reading of these Administrative Orders would reveal that a VOS undergoes a long
process. It is initiated by the filing by the landowner of the VOS Form and other required documents.
The VOS is reviewed, among other personalities, by the Municipal Agrarian Reform Officer (MARO), the
Provincial Agrarian Reform Officer (PARO), the DAR Regional Director, the Bureau of Land Acquisition
and Development (BLAD), and the Landbank, for purposes of identifying the land and the qualified
tenants, the valuation of the land, and payment of just compensation to the landowner.
Same; Same; Same; While a landowner who voluntarily offered his land for sale is precluded from
withdrawing his offer except under specified circumstances, such a condition does not make the mere
offer a consummated sale.—A VOS, as its name implies, is a voluntary offer to sell the land to the
government so that the latter can distribute the same to qualified tenants. While a landowner who
voluntarily offered his land for sale is precluded from withdrawing his offer except under specified
circumstances, such a condition does not make the mere offer a consummated sale. It bears to
emphasize that the offer still needs to be accepted by the DAR on behalf of the government, and just
compensation for the land determined and paid to the landowner. The sale is deemed consummated
when the landowner has received payment or deposit by the DAR of just compensation with an
accessible bank, in cash or Landbank bonds, since only then is ownership of the land finally transferred
from the landowner to the government.
Conspiracy; Conspiracy cannot be established by mere inferences or conjectures—it is incumbent on the
one alleging to prove that each of the persons he charged performed an overt act in pursuance or
furtherance of the alleged complicity, so as to convince the investigating prosecutor that there is
probable cause that they conspired with one another to commit the crime.—After finding that
petitioners did not deceive respondent into purchasing CPI’s limited interest in the subject real
properties, then it necessarily follows that there can be no conspiracy to commit such deception. This
Court would still want to point out that respondent’s accusation of conspiracy was so stretched that he
implicated in his complaint members of the CPI Board of Directors who did nothing more than sign a
resolution authorizing the sale of CPI’s interest in the subject real properties to respondent. Yet again,
the existence of conspiracy among the CPI officers rests on no other evidence but respondent’s own
allegations in his affidavits. Conspiracy cannot be established by mere inferences or conjectures. It is
incumbent upon respondent to prove that each of the petitioners performed an overt act in pursuance
or furtherance of the alleged complicity, so as to convince the investigating prosecutor that there is
probable cause that petitioners conspired with one another to commit the crime. However,
respondent’s general accusations against petitioners and the other CPI officers do little to persuade.
PETITION for review on certiorari of the decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
Angara, Abello, Concepcion, Regala and Cruz for petitioners.
Jaime G. Hofileña co-counsel for petitioner Joselia Poblador.
Angelito C. Lo for respondent.
CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court seeking the
reversal and setting aside of the Decision,2 dated 29 January 2001, and Resolution,3 dated 14 November
2002, of the Court of Appeals in CA-G.R. SP No. 54862. In its assailed Decision, the Court of Appeals
reversed the Resolution,4 dated 27 July 1998, of the Department of Justice (DOJ), which affirmed the
Resolution,5 dated 7 October 1997, of the Makati City Prosecution Office, finding no probable cause and
dismissing the herein respondent’s complaint, docketed as I.S. No. 97–22188–191; and, instead,
disposed as follows—
“WHEREFORE, the resolution of the Department of Justice dated November 26, 1997, is hereby set
aside. The Prosecutor of Makati, is hereby Ordered to file an information of Estafa against the
respondents.”
During the time material to the Petition at bar, petitioners Francisco A. Cruz (Cruz), Edgardo C. Cataguis
(Cataguis), Atty. Joselia J. Poblador (Atty. Poblador), Jose De Lusong (De Lusong), Eduardo A. Ricardo
(Ricardo), and Atty. Ariel F. Abonal (Atty. Abonal) were serving, in various capacities, as officials of Caltex
Philippines, Inc. (CPI). Petitioner Cruz was the Vice President for Corporate Planning and a member of
the Board of Directors of CPI; petitioner Cataguis was the General Manager for Marketing and also a
member of the Board of Directors of CPI; petitioner Atty. Poblador was the Corporate Secretary and
General Manager for Legal and Tax of CPI; petitioner De Lusong was the General Manager for Marketing
Retail of CPI; petitioner Ricardo was the General Manager for Marketing of CPI for the years 1990–1996;
and petitioner Atty. Abonal was the internal Legal Counsel of CPI.
On 3 May 1997, respondent Tarcisio S. Calilung (Atty. Calilung), a lawyer and a businessman, instituted a
Complaint, docketed as I.S. No. 97–22188–191, against the aforementioned petitioners and several
others. Respondent included in his complaint R.R. Paredes, W.S. Tiffany, T.R. Kotze, H. Mussain, and
E.M. Lapuz, who had likewise served as officials of CPI but are no longer connected with the company
and whose whereabouts as of present time are unknown. They did not participate in any proceedings.
Respondent also included in his complaint Adolfo B. Garcia (Garcia), the Deputy Sheriff of the Manila
Regional Trial Court (RTC), Branch 31, who participated in the proceedings before the Makati City
Prosecution Office and the DOJ, but no longer participated in the instant petition.
In his complaint before the Makati City Prosecution Office, respondent charged petitioners, et al., with
several counts of estafa. Respondent’s Original Complaint was summarized in the Resolution,6 dated 7
October 1997, of the Makati City Prosecution Office, to wit—
“*Herein respondent+ Tarcisio S. Calilung alleged that [herein petitioner] Atty. Joselia Poblador, Chief
Legal Counsel of Caltex Philippines (Caltex for brevity) negotiated to him the sale of several parcels of
land consisting of 228.9 hectares, more or less[,] situated at Barrio Alibagu, Ilagan, Isabela. Atty.
Poblador represented to [respondent] that Caltex is the absolute owner of all the parcels [of] land as it
acquired the same at a Sheriff’s Auction Sale, a copy of a Sheriff’s Certificate of Final Sale was shown to
[respondent]. Likewise, Atty. Poblador represented and assured complainant that subject property is not
covered by the Agrarian Reform Program and that the adverse occupants thereof are mere squatters.
Consequently, [respondent] paid the total amount of P3.5 Million for all the said parcels of land in two
payments. Thereupon, a Deed of Assignment with Consolidation of Title dated June 22, 1995 was
executed between Caltex Philippines and Tarcisio S. Calilung. Later, [respondent] discovered that none
of the representations made to him by *petitioner+ Atty. Poblador is true. Contrary to Atty. Poblador’s
representation, Caltex Philippines is not the absolute owner of the several parcels of land sold to him.
Accordingly, the several parcels of land are owned by the heirs of Antonia Medina (sic). Caltex
Philippines is the owner of only one share of the co-heirs which it acquired at the Sheriff’s Auction.
Further, [respondent] learned that on August 3, 1993, Caltex thru E.A. Ricardo, manager for Marketing,
has already sold the subject parcels of land to the Department of Agrarian Reform under Voluntary Offer
To Sell program of the Government. Also, complainant averred that the Sheriff’s Certificate of Final Sale
executed by Deputy Sheriff Adolfo Garcia shown to him was falsified as it showed that Caltex’s bid of
P2.7 Million was successful and it is the absolute owner of all the parcels of land. The truth however, is
that Caltex is the owner of only one share of one of the co-heirs. Lastly, Caltex through E.A. Ricardo
misrepresented to the Department of Agrarian Reform that the subject property is agricultural inorder
(sic) that it will qualify and be sold under the Agrarian Reform Program. The truth of the matter is the
said parcels of land are pasturelands thus, exempt from the coverage of the Agrarian Reform Program.
Hence, [respondent] filed this complaint for Estafa against R.H. Paredes, W.S. Tiffany, T.R. Kotze, H.
Mussain, F.A. Cruz, E.C. Cataguis, E.M. Lauz who are members of the Board of Caltex Philippines, Atty.
Joselia Poblador, Chief Legal Counsel, Jose De Lusong, signatory of the Deed of Assignment and E.A.
Ricardo, manager for Marketing and Atty. Ariel F. Abonal, assistant Secretary to the Board of Caltex
Philippines who according to him acted in concert in perpetrating the crime charged. Likewise, a
complaint for Falsification is instituted against Adolfo Garcia who connived with the above-mentioned
officers/members of the Board of Caltex Philippines for falsification.”
To answer the respondent’s accusations against them, petitioners Atty. Poblador, Cruz, Cataguis, De
Lusong, and Ricardo, submitted their Joint Counter-Affidavit,7 averring that the respondent’s complaint
was without basis in fact and in law, and that they could not be held liable for estafa. The contents of
their Joint Counter-Affidavit were concisely recounted by the Makati City Prosecutor in her Resolution,8
dated 7 October 1997—
“Jose de Lusong and Atty. Poblador claimed that they did not at any time represent that Caltex
Philippines is the absolute owner of the entire subject parcels of land.
*Herein petitioners+ narrated that Caltex’s rights and interests on subject parcels of land arose from Civil
Case No. 84–22434 entitled Caltex Philippines vs. Antonia Vda. de Medina at Branch 31, RTC-Manila.
Antonia Vda. de Medina is Caltex’s judgment debtor and is *respondent’s+ mother-in-law. During the
pendency of the case, or on February 7, 1984, 5 Notices of Levy on Attachment were issued against the
rights, titles and interest of *respondent’s+ mother-in-law. The undivided shares of the other heirs, two
(2) children of Antonia Vda. de Medina were never levied. On September 17, 1984, a decision was
rendered in favor of Caltex Philippines and the same became final and executory. On July 24, 1989, a
Writ of Execution was issued. On July 24, 1989, Deputy Sheriff Adolfo B. Garcia issued a Notice of Levy
Execution [sic] where only the shares, rights and interests of [respondent’s+ mother-in-law over subject
parcels of land were levied upon. Likewise, a notice of Sheriff’s Sale was issued. On August 23, 1989,
Caltex, through Atty. Rafael Durian bidded P4.5 Million for the purchase of the rights, shares of
*respondent’s+ mother-in-law in subject parcels of land. Consequently, the subject parcels of land
(shares and interests of Antonia Vda. de Medina which is 66.67% of the entire property) were sold to
Caltex Philippines in the amount of P2,785,620.00. After the execution of the sale, *respondent’s+
mother-in-law was given one (1) year within which to redeem her interest over the subject land.
After the lapse of the one (1) year redemption period given to Antonia Vda. de Medina, [respondent]
went to Caltex office and propose [sic] to reacquire the interest of Antonia Vda. de Medina and to pay
the defficiency (sic) judgment obligation of his mother-in-law. Caltex Philippines, through its office
accepted the proposal of [respondent] to buy the parcels of land. Complainant further requested that all
cases against his mother-in-law be withdrawn. Caltex Philippines agreed and the sale of the said subject
parcels of land to [respondent] in the amount of P3.5 Million materialized. On the first payment made
by the [respondent], Caltex Philippines executed a Deed of Waiver and Quitclaim in all cases filed
against *respondent’s+ mother-in-law. Thereupon, a Deed of Assignment with Consolidation of Title was
executed by herein parties after the balance [thereof] was tendered by [respondent].
On the alleged sale by Caltex Philippines of subject parcels of land to the Department of Agrarian
Reform, [petitioners] denied having sold the same to DAR. According to [petitioners], it was Antonia
Vda. de Medina through her attorney-in-fact Carlito Baluang who transacted the voluntary Officer (sic)
To Sell with the Department of Agrarian Reform sometime in 1988 and 1989. Subsequently, by virtue of
the Deed of Assignment (With Special Power of Attorney Couple (sic) With Interest) executed by Antonia
Vda. de Medina ceded in favor of Caltex Philippines, wherein Antonia Vda. de Medina “all her rights,
interests, claims and participation from the proceeds of land compensation for all the property that she
has voluntarily offered to sell” to Caltex Philippines and constituted the latter as its (sic) exclusive
attorney-in-fact to follow-up with the Department of Agrarian Reform. Accordingly, this matter is make
(sic) known to *respondent+. It was on the strength of *respondent’s+ relation to Antonia Vda. de Medina
and his assurance that he has connections with DAR that CPI decided to sell subject property to
[respondent].
[Petitioners] denied the allegation of [respondent] that Caltex officers and directors conspire (sic) with
Deputy Sheriff Adolfo B. Garcia and notary Public Atty. Ariel Abonal in the falsification of the Sheriff’s
Certificate of Final Sale by representing that Caltex bidded for the entirety of all the parcels of land
subject of the sale and using the said falsified documents to convince *respondent+ of Caltex’s absolute
title over the subject parcels of land.
Lastly, the declaration [of] Mr. Eduardo A. Ricardo that subject parcels of land is (sic) agricultural in
nature in the Voluntary Officer (sic) To Sell to the DAR can hardly be considered a crime moreso that
there is no other proof presented than the mere self-serving statement of Mr. Ricardo. Besides, in the
Deed of Assignment with Consolidation of Title, there is not (sic) warranty as to the properties*’+
classification or primary use given.”
Deputy Sheriff Garcia submitted his own Counter-Affidavit with a Counter-Complaint for Perjury.9 He
essentially affirmed the narration made in the petitioners’ Joint CounterAffidavit, particularly, the
events arising from Civil Case No. 84–22434, instituted by CPI against respondent’s mother-inlaw,
Antonia Vda. de Medina, before the Manila RTC. After the Decision, dated 17 September 1984, rendered
by the Manila RTC against Antonia Vda. de Medina, became final and executory, and upon failure of
Antonia Vda. de Medina to pay her judgment debt to CPI, Deputy Sheriff Garcia proceeded to
implement the Writ of Execution which levied upon Antonia Vda. de Medina’s rights, interests, title and
participation in the subject real properties. At the execution sale held on 24 August 1989, CPI won the
bidding. It bought Antonia Vda. de Medina’s limited interests over the subject real properties in the total
amount of P4.5 Million. CPI’s winning bid was broken down10 as follows—
P2,785,620.00
For the parcels of land covered by TCT Nos. T-132694, T-133034, T-94234, T-124684, T-139590, T-
138153, T-138154, T-138155, T-133033, T-133021, T-133022, T-133023, T-133024, T-133025, T-133026,
T-133027, T-133028, T-133029, T-133030, T-133031, T-133032, T-133033 and T-133034; and,
P1,714,380.00
For the parcels of land covered by Tax Declaration Nos. 01–262, 01–265, 01–25080, 01–29376 and 01–
23470
P4,500,000.00
Total
When Antonia Vda. de Medina failed to redeem her interest in the subject real properties within a year
from the execution sale, ownership over the said interest was consolidated in CPI. Deputy Sheriff Garcia
explained that he prepared the Final Certification of Sale on 24 October 1990, although it was notarized
only on 1 February 1994. He denied that he ever conspired with CPI, through its officers and directors,
to make false representations to respondent that CPI was the absolute owner of the subject real
properties; to maliciously conceal from respondent that CPI already sold the subject real properties to
the Department of Agrarian Reform (DAR); or to falsify the Sheriff’s Certificate of Final Sale so as to
convince respondent that CPI had absolute title over the subject real properties. He averred that he
conducted the execution sale as part of his official duties and in accordance with the Rules of Court and
the judgment issued by the Manila RTC in Civil Case No. 84–22434. He also maintained that only the
rights and interests of Antonia Vda. de Medina over the subject real properties were covered by the
execution.
Respondent submitted a Reply-Affidavit in which he insisted that the concealment of a prior sale, the
falsification of the Sheriff’s Certificate of Final Sale and the conspiracy among the petitioners, et al., and
the others can be readily seen. Once again, reference is herein made to the Resolution, dated 7 October
1997 of the Makati City Prosecution Office which related11 thus—
“*Herein respondent+ alleged that he married the daughter of Antonia Vda. de Medina on November 22,
1994. In early November of 1994, Atty. Villacorta, *respondent’s+ counsel, inquired from Caltex about
the redemption of subject parcels of land. Caltex refused their offer to redeem the property because the
period for redemptions (sic) has long expired. However, Caltex proposed that if they are interested in
the remaining subject properties, they can purchase the same, Caltex demanded for P9 Million for the
fourteen (14) parcels of land consisting of 228.9 hectares. Caltex never informed [respondent] or his
counsel that the entire properties were sold to DAR for [P]1 Million. On November 1994, [respondent]
formally offered to buy the entire fourteen (14) parcels of land [pay for] P3.5 Million as earnest money
which was accepted by Atty. Poblador. Even if the titles over the subject parcels of land was (sic) still in
the name of Antonia Medina (sic), he believed Atty. Poblador’s representation that Caltex is the
absolute owner by virtue of the Sheriff’s Certificate of Final Sale handed to him. Nowhere in the Sheriff’s
Certificate of Final Sale that only 1/4 undivided share of Antonia Medina was auctioned.
The certificate of Final Sale was dated October 24, 1990 but notarized only on November 15, 1994,
which is more than a week before he paid the earnest money on November 29, 1994. Lastly, the
declared sale price of P2,785,620.00 does not correspond to the written winning bid by Caltex for P4.5
Million.”
To support his foregoing allegations, respondent also submitted the Affidavit12 of his counsel, Atty.
Rolando A. Villacorta (Atty. Villacorta), who supposedly represented and assisted him during the
negotiations with CPI for the purchase of the subject real properties. Atty. Villacorta attested that he
met with both petitioners Attys. Poblador and Abonal of CPI regarding respondent’s offer to purchase
the subject real properties; that Atty. Poblador, in response to a direct query by respondent, expressly
denied that the subject real properties were covered by the Comprehensive Agrarian Reform Program
(CARP) of the Government; and that respondent was never informed that what he was purchasing was
not the whole of the subject real properties, consisting of 229 hectares, but only an undivided share
therein.
In their Joint Rejoinder,13 petitioners Cruz, Cataguis, De Lusong, Ricardo and Attys. Poblador and Abonal
denied meeting and talking to Atty. Villacorta. According to petitioners Attys. Poblador and Abonal, at
the beginning of their negotiations for the purchase by respondent of the subject real properties from
CPI, the latter was accompanied, not by Atty. Villacorta, but an Atty. Karl Miranda from the Office of the
Solicitor General (OSG), acting as a broker. During their meeting, they discussed about the redemption
of the rights, interests, and title of Antonia Vda. de Medina over the subject real properties. In their
succeeding meetings, petitioners stressed that respondent was informed that CPI was selling and
assigning only the limited rights, interests, and title of Antonia Vda. de Medina over the subject real
properties, and that the subject real properties were under the coverage of CARP and were subject of a
Voluntary Offer to Sell (VOS). Petitioners pointed out that respondent himself admitted that he was
purchasing only the limited interest of Antonia Vda. de Medina in the subject real properties when he
stated in his letter,14 dated 29 November 1994, addressed to CPI, that, “We are pleased to inform you
that we accept your offer to sell to us for P3.5 Million your interest in the foreclosed Medina
properties.”
Moreover, to belie the attestations of respondent and Atty. Villacorta in their affidavits, petitioners
presented the Affidavits of Attys. Rodrigo B. Libunao, Jr.15 and Catherine T. Manahan,16 Legal Counsel
and Tax Counsel, respectively, of CPI, who were also present during the meetings of petitioner Atty.
Poblador with respondent. They both alleged that they were called to join the meeting in October 1994
wherein respondent was accompanied, not by Atty. Villacorta, but Atty. Miranda of the OSG; that
respondent claimed to be married to Ma. Luisa Victoria Medina, the daughter of Antonia Vda. de
Medina, and he was interested in acquiring CPI’s rights, interests, and title to the subject real properties
in exchange for CPI’s execution of a waiver or quitclaim to secure the release of Antonia Vda. de Medina
who was in prison by reason of the criminal cases filed by CPI against her; and that Atty. Poblador made
full disclosure to respondent that CPI had, and was assigning to respondent, only the limited rights,
interests, and title of Antonia Vda. de Medina over the subject real properties, and that the subject real
properties were under the coverage of CARP and the subject of the VOS initiated by Antonia Vda. de
Medina herself, through her attorney-in-fact Carlito Balauag.
Atty. Libunao further claimed that on 1 December 1994, when respondent came unaccompanied to the
CPI Office to pay the P1 Million earnest money, Atty. Libunao again explained to him in detail the
following—
‘a. That CPI was merely a co-owner of the said properties as there were other heirs to the estate, one of
whom was his wife, and that only the undivided share pertaining to Antonia Vda. de Medina which we
acquired in an execution sale in Civil Case No. 84–22434 could be transferred to him.
b. That photocopies of the TCT’s to the subject parcels of land were furnished, and exhibited to, him and
he carefully noted that the subject parcels of land were in the name of “Heirs of Antonio Medina.”
c. That the subject parcels of land were covered by the Comprehensive Agrarian Reform Program (CARP)
by virtue of a
Voluntary Offer to Sell signed by Antonia Vda. de Medina, through her attoreney-in-fact, Mr. Carlito
Balauag. A copy of this document was also furnished Atty. Calilung.
d. That out of the sixteen (16) parcels of land under process by the DAR, two (2) lots are ready for
compensation and that the money has already been deposited by the DAR in a trust account in the
Landbank branch in Tuguegarao, Cagayan.
e. That the fourteen (14) subject parcels of land are still under process by the MARO in Ilagan, Isabela
and that the latter has started to identify the actual occupants and proposed beneficiaries of the same.
f. That payment of compensation under the CARP was being delayed by the fact that the heirs of
Antonio Medina have not initiated any estate settlement proceeding and that none of the heirs has ever
participated in the DAR conferences, despite notice.’17
When Atty. Libunao again asked him if he really understood the complexities of the CARP issues
affecting the subject real properties, respondent allegedly “confidently replied that he had been
successful in preserving his and his family’s landholdings in Pampanga and that he will do the same for
the subject parcels of land.”18
On 7 October 1997, the Makati City Prosecution Office wrapped up its preliminary investigation and
issued its Resolution, in which it made the following findings and recommendations19—
“After a careful examination of the evidence obtaining in this case the undersigned finds that: (1) there
appears no conceivable fraudulent representations committed by [herein petitioners, et al.] (Caltex
Officers) in the negotiation and sale of subject parcels of land, (2) there is no sufficient proof to show
that the Sheriff’s Certificate of Final Sale was falsified by *Deputy Sheriff Garcia+ in connivance with
[petitioners, et al.] Caltex Officers; and (3) that there is insufficient evidence to substantiate
*respondent’s+ claim that *petitioners, et al.] (Caltex Officers) made false declaration that subject parcels
of land are productive agricultural land so these parcels of land may be covered and sold under the
Agrarian Reform Program of the Government.
x x x x
Seemingly, [respondent] would want to extricate himself from a bad bargain and annul the effects of an
unwise act. If the [respondent] failed to apprise himself of the consequence of his purchase of subject
parcels of land from Caltex[,] he was simply unfortunate. As it would appear all documents and
informations (sic) about the parcels of land subject matter of the sale transactions entered by the
parties are in *respondent’s+ hands for his scrutiny. *Respondent] is a lawyer and as such it can be
presumed that he knows the complexities/controversies attached to the interests and rights of his
motherin-law (Antonia Vda. de Medina) over the parcels of land he wants to purchase from [petitioners,
et al.] Caltex Officers. Clearly, there was no misrepresentation and/or concealment regarding the
ownership of Caltex over subject parcels of land. Neither was there falsification committed on the
Sheriff’s Certificate of Title.
x x x x
WHEREFORE, premises considered, it is respectfully recommended that complainant (sic) against
[petitioners, et al.] Caltex Officers and Adolfo Garcia be dismissed, as it is hereby upon, approval,
dismissed.
Likewise, it is recommended that the counter-charge of perjury against [respondent] be dismissed.”
Aggrieved, respondent filed with the DOJ a Petition for Review of the Resolution, dated 7 October 1997,
of the Makati City Prosecution Office. However, on 27 July 1998, the DOJ resolved20 to dismiss his
Petition for Review, ratiocinating thus—
‘The record clearly shows that the subject parcels of land were previously owned by the late Antonio
Medina. Upon the latter’s death, the said properties were inherited by Antonia Vda. de Medina and her
children through intestate succession. When Caltex filed a civil case against Antonia Vda. de Medina,
who is *herein respondent’s+ mother-in-law, the latter’s rights, title and interests over the subject
properties were levied on attachment during the pendency of the said case. Thereafter, upon judgment
in favor of Caltex in the said civil case; and, pursuant to the writ of execution issued therein, the rights,
title and interests of Antonia Vda. de Medina over the said parcels of land were levied on execution and,
consequently, sold at public auction with Caltex eventually winning the bid. Finally, a certificate of
sheriff’s sale was issued and based thereon Caltex became the owner of the undivided interest of
Antonia Vda. de Medina over the subject parcels of land.
We find it incredible for [respondent] not to have known the foregoing circumstances. It must be
stressed that *respondent is+ a member of the family of Antonia Vda. de Medina. It taxes one’s credulity
that *respondent+ would have had no personal knowledge about the family’s properties which were the
subject of the sale transaction [respondent] had with Caltex. Besides, [respondent is] a lawyer [himself].
As such, not only [was respondent] expected to know the intricacies and complexities of the sale
transaction [he] entered with Caltex but also [respondent] had all the means and resources to check and
counter-check the veracity of *herein petitioners, et al.’s+ representations. Indeed, it is hard to believe
that [respondent] chose to just take the word of [petitioners, et al.] that Caltex is the owner of all the
subject properties rather than examine the documents pertaining thereto before parting with a
substantial amount of money. We take with a grain of salt *respondent’s+ allegation that during the sale
negotiations [respondent was] unaware of the extent of the ownership of Caltex over the properties in
question not only because of *respondent’s+ stature as a lawyer-businessman but also because of [his]
personal knowledge thereon by reason of [his] being a member of the family of Antonia Vda. de Medina
from whom Caltex acquired the subject properties. Under this milieu, no amount of fraudulent
misrepresentations from [petitioners, et al.] could have misled [him] into executing with Caltex the Deed
of Assignment with Consolidation of Title over the properties in question.
The foregoing circumstances not only create suspicion as to *respondent’s+ actual motive in filing the
instant complaint but also strengthen *petitioners’+ claim that there is, indeed, reasonable ground to
believe that [respondent] entered into the transaction in question knowing fully well that what was
being sold by Caltex wasonly the undivided interest of [his] mother-in-law who is one (1) of the co-heirs
in (sic) the subject parcels of land.
Besides, no clearer acknowledgment by [respondent] of [his] knowledge on (sic) the circumstances
surrounding the subject properties than as stated in par. 3, p. 5, of the Deed of Assignment with
Consolidation of Title can be made, which states thus—
x x x x
“4. ASSIGNEE *respondent+ further acknowledges that he is fully aware of the circumstances under
which these Properties were acquired by ASSIGNOR [CPI] and that he has examined the title and
inspected the said properties and has verified their location together with their boundaries.” x x x
As regards the findings of the City Prosecutor on *respondent’s+ other charges for estafa under Article
315, par. (3) of the Revised Penal Code and falsification/use of falsified documents, we can find no
cogent reason to alter, modify much less reverse the same.
WHEREFORE, *respondent’s+ instant petition for review is hereby dismissed.’
Respondent’s Motion for Reconsideration was denied by the DOJ in another Resolution dated 30 June
1999.
This prompted respondent to file with the Court of Appeals a Petition for Certiorari under Rule 65 of the
Rules of Court, contending that the DOJ and the Makati City Prosecution Office committed grave abuse
of discretion amounting to lack or excess of jurisdiction in dismissing respondent’s complaint in I.S. No.
97–22188–191. The Court of Appeals, in its Decision,21 dated 29 January 2001, reversed the findings of
the DOJ and the Makati City Prosecution Office, and ordered the filing of an information for estafa
against the petitioners, based on the following raison d’être—
“The Court after a perusal over (sic) the ruling of the Department of Justice believes that said resolution
deserves scant consideration. This is so because the issue on double sale was just taken in passing by the
Department of Justice, when that issue is paramount in the case.
It appears on record that E.A. Ricardo, General Manager – Marketing commercial of Caltex offered for
sell (sic) to DAR the subject property.
x x x x
It should be noted that the sale to DAR is unlike the ordinary contract to sell transactions wherein one
could determine when a sale is consummated. But at this instance, where voluntary offer to sell has
been made, where process has been undergoing at that time, We opine that there is already sale
considering the unique circumstance of selling the subject landholding to the DAR.
This is so because under Administrative Order No. 5 series of 1992, it provides that landowners who
entered into Voluntary Offer to sell can no longer back out, except under the exceptional circumstances
as earlier illustrated. The present case is one that is not of the exception. Hence, if a landowner can no
longer back out since he entered into that kind of transaction and by entering into another sale such as
in this case, fully knowing of the circumstances but without divulging the same to the petitioner, would
that not tantamount to misrepresentation, fraud and deceit.
A careful perusal on (sic) the comments and arguments of the [herein petitioners] that it (sic) did not
refute in whatever manner that there was a sale that took place between the Department of Agrarian
Reform and the CPI. As a matter of fact, a reading of the foregoing, in consonance with the VOS would
connote that the sale has indeed been entered into because Caltex knew that a process has been
undertaken by the DAR (p. 175 *petitioners’+ Comment) x x x.
These are an admission (sic) so far, that there was indeed a previous transfer of the subject parcels of
land to the DAR as they never disputed that there was a sale between CPI and DAR. The words of
CALTEX are simple and explicit, there was an “offer” and “transfer” and that there was already an
ongoing process of the VOS. Hence, there was a sale by virtue of the voluntary offer to sell under the
Comprehensive Agrarian Reform Program. The only thing is that, Caltex denies responsibility that it was
the one who offered the sale to DAR, but it claim (sic) instead that it was Antonia Vda. de Medina. But
this argument bears no weight. Regardless of whether or not Antonia Vda. de Medina was the one who
offered to sell the property to DAR, CALTEX can’t absolve itself from any responsibility.
x x x x
So whether or not the first voluntary offer to sell to the Department of Agrarian Reform was made by
Antonia Vda. de Medina and the second offer was made by CALTEX to DAR, to our mind is, of no
moment. One thing is thus, clear, CALTEX who duly executed the necessary documents. There is nothing
on record which would reveal that [petitioners] was (sic) able to prove that [herein respondent] was
fully informed of the first sale made to DAR.
Further, [petitioners] claimed that being a son-in-law, it (sic) would be impossible for [respondent] not
to know it. This is not sufficient reason to conclude that [respondent] was aware of the attending
circumstances. And we cannot therefore, agree with the conclusion of the DOJ.
Clearly then, the evidence points out that what appears to have been sold were the properties
described in the 14 TCT’s without any qualification thereon. And that the existence of a double sale can’t
be contested, there being an admission by the [petitioners] that there was a sale made to DAR prior to
herein [respondent].
x x x x
With the acts of CALTEX in the case at bar it can be gleaned therefrom that there was no clear
transactions [sic] that took place, thus, there was an evident misrepresentation to the damage and
prejudice of the [respondent]. As supported by the Deed of Assignment itself, the assurances given by
the assignor CALTEX to [respondent] is a grave misrepresentation to the [respondent] who is the buyer
of the properties in question. That where there was no divulgement made by the CALTEX to petitioner
of the sale to DAR, there is no question that deceit is present. The presence of damage and deceit are
(sic) apparent in the present case, hence, the very elements of Estafa exist.
Even granting that the sale was only with respect to the individual share or interest of CALTEX, it can’t
be denied that deceit was committed by [petitioners, et al.] in not being fair, honest in not revealing the
real status of the subject lot. x x x Had it not been of such misrepresentation, the Court believes that
[respondent] would not have parted substantial amount of money.
From the foregoing premises, a prima facie case of ESTAFA was herein committed by the [petitioners, et
al.] on the ground of double sale. And the only way to determine whether [petitioners, et al.] herein are
guilty or not is in a full blown trial before a Court. However, we do not find any participation of the
Deputy Sheriff Adolfo Garcia on the issue of double sale, it appearing that he has nothing to do with the
transaction between CALTEX and Department of Agrarian Reform. This Court is convinced that the
Deputy Sheriff had just performed a ministerial duty imposed upon him by law.”
After their Motion for Reconsideration was denied by the Court of Appeals, in its Resolution,22 dated 14
November 2002, petitioners come before this Court via a Petition for Review on Certiorari under Rule 45
of the Rules of Court. Petitioners posit that the Court of Appeals erred in finding that there exists a
prima facie case against them considering that: (1) Petitioners never deceived respondent with regard to
the background circumstances of the subject real properties; (2) There was no “double sale” made by
CPI of its rights and interests in the subject real properties; and (3) There exists no proof of specific overt
acts or omission of each of the petitioners which would constitute conspiracy in committing the alleged
crime of estafa.
This Court finds the Petition at bar meritorious.
In his complaint, respondent charges petitioners, together with other persons no longer part of the
present Petition, of two counts of estafa by means of deceit: (1) estafa by means of false pretenses,
under Article 315(2)(a) of the Revised Penal Code; and (2) estafa by means of concealment, under Article
315(3)(c) of the same Code. Relevant provisions of the Revised Penal Code expressly read thus—
“ART. 315. Swindling (estafa).—Any person who shall defraud another by any of the means mentioned
hereinbelow shall be punished by:
x x x x
[P]rovided that in the four cases mentioned, the fraud be committed by any of the following means:
x x x x
(2) By means of any of the following false pretenses or fraudulent acts executed prior to or simultaneous
with the commission of the fraud:
(a) By using a fictitious name, or falsely pretending to possess power, influence, qualifications, property,
credit, agency, business or imaginary transactions, or by means of other similar deceits;
x x x x
(3) Through any of the following fraudulent means:
x x x x
(c) By removing, concealing or destroying, in whole or in part, any court record, office files, document or
any other paper. The elements of estafa by means of deceit,23 whether committed by false pretenses or
concealment, are the following—
“a. That there must be a false pretense, fraudulent act or fraudulent means.
b. That such false pretense, fraudulent act or fraudulent means must be made or executed prior to or
simultaneously with the commission of the fraud.
c. That the offended party must have relied on the false pretense, fraudulent act, or fraudulent means,
that is, he was induced to part with his money or property because of the false pretense, fraudulent act,
or fraudulent means.
d. That as a result thereof, the offended party suffered damage.”
Now the question is whether there exists probable cause that petitioners committed the crime of estafa
by means of deceit which would warrant the filing of an information against them before the trial court.
Probable cause has been defined as the existence of such facts and circumstances as would excite the
belief, in a reasonable mind, acting on the facts within the knowledge of the prosecutor, that the person
charged was guilty of the crime for which he was prosecuted. Probable cause is a reasonable ground of
presumption that a matter is, or may be, wellfounded, such a state of facts in the mind of the
prosecutor as would lead a person of ordinary caution and prudence to believe, or entertain an honest
or strong suspicion, that a thing is so. The term does not mean “actual and positive cause” nor does it
import absolute certainty. It is merely based on opinion and reasonable belief. Thus, a finding of
probable cause does not require an inquiry into whether there is sufficient evidence to procure a
conviction. It is enough that it is believed that the act or omission complained of constitutes the offense
charged. Precisely, there is a trial for the reception of evidence of the prosecution in support of the
charge.24 While probable cause demands more than “bare suspicion,” it requires “less than evidence
which would justify conviction.” A finding of probable cause merely binds over the suspect to stand trial.
It is not a pronouncement of guilt.25
The conduct of preliminary investigation for the purpose of determining the existence of probable cause
is executive in nature.26 The prosecution of crimes appertains to the executive department of the
government whose principal power and responsibility is to see that the laws of the land are faithfully
executed. A necessary component of this power to execute the laws is the right to prosecute their
violators. The right to prosecute vests the prosecutor with a wide range of discretion, the discretion of
whether, what and whom to charge, the exercise of which depends on a smorgasbord of factors which
are best appreciated by prosecutors.27
The main function of a government prosecutor during his conduct of preliminary investigation is to
determine the existence of probable cause and to file the corresponding information should he find it to
be so.28 The purpose of a preliminary investigation is to secure the innocent against hasty, malicious
and oppressive prosecution, and to protect him from an open and public accusation of crime, from the
trouble, expense and anxiety of a public trial, and also to protect the state from useless and expensive
trials. A preliminary investigation serves not only the purposes of the State. More important, it is a part
of the guarantees of freedom and fair play which are birthrights of all who live in this country. It is,
therefore, imperative upon the fiscal to relieve the accused from the pain of going through a trial once it
is ascertained that no probable cause exists to form a sufficient belief as to the guilt of the accused.29
A prosecutor, by the nature of his office, is under no compulsion to file a particular criminal information
where he is not convinced that he has evidence to prop up the averments thereof, or that the evidence
at hand points to a different conclusion. This is not to discount the possibility of the commission of
abuses on the part of the prosecutor. But this Court must have to recognize that a prosecutor should not
be unduly compelled to work against his conviction.30 Although the power and prerogative of the
prosecutor, to determine whether or not the evidence at hand is sufficient to form a reasonable belief
that a person committed an offense, is not absolute but subject to judicial review, it would be
embarrassing for him to be compelled to prosecute a case when he is in no position to do so, because in
his opinion he does not have the necessary evidence to secure a conviction, or he is not convinced of the
merits of the case.31
Hence, this Court consistently adheres to its policy of noninterference in the conduct of preliminary
investigations, and to leave to the investigating prosecutor sufficient latitude of discretion in the
determination of what constitutes sufficient evidence as will establish probable cause for the filing of an
information against a supposed offender.32
In the present case, the Makati City Prosecution Office, as well as the DOJ, found no probable cause that
petitioners committed estafa by deceit to the damage of respondent. There was no factual or legal basis
for the Court of Appeals to reverse the findings of the prosecutor who conducted the preliminary
investigation in I.S. No. 97–22188–191.
It should do well for the Court of Appeals to remember that the DOJ Resolutions, dated 27 July 1998 and
30 June 1999, affirming the dismissal by the Makati City Prosecution Office of respondent’s complaint
against petitioners, were brought before it via a Petition on Certiorari under Rule 65 of the Rules of
Court. Its duty is confined to determining whether the executive determination of probable cause was
done without or in excess of jurisdiction or with grave abuse of discretion. Thus, although it is entirely
possible that the investigating prosecutor may erroneously exercise the discretion lodged in him by law,
this does not render his act amenable to correction and annulment by the extraordinary remedy of
certiorari, absent any showing of grave abuse of discretion amounting to excess of jurisdiction.33
For the courts to grant the extraordinary writ of certiorari, so as to justify the reversal of the
investigating prosecutor’s finding on the existence or absence of probable cause to file an information,
the one seeking the writ must be able to establish the following—
“For grave abuse of discretion to prosper as a ground for certiorari, it must first be demonstrated that
the lower court or tribunal has exercised its power in an arbitrary and despotic manner, by reason of
passion or personal hostility, and it must be patent and gross as would amount to an evasion or to a
unilateral refusal to perform the duty enjoined or to act in contemplation of law. Grave abuse of
discretion is not enough. Excess of jurisdiction signifies that the court, board or office, has jurisdiction
over the case but has transcended the same or acted without authority.”34
Try as we might, this Court cannot find grave abuse of discretion on the part of the DOJ, when it
affirmed the finding of the Makati City Prosecution Office, that there was no probable cause to file an
information for estafa by means of deceit against petitioners and resolved to dismiss respondent’s
complaint. There is absolutely no showing that the DOJ, in the exercise of its power to review on appeal
the findings of the Makati City Prosecution Office, acted in an arbitrary and despotic manner, so patent
or gross as to amount to an evasion or unilateral refusal to perform its legally-mandated duty. On the
contrary, this Court finds the Resolutions of the DOJ, as well as that of the Makati City Prosecution
Office, to be more in accordance with the evidence on record and relevant laws and jurisprudence than
the assailed Decision of the Court of Appeals.
Respondent charges petitioners with the crime of estafa because they allegedly employed deceit to
induce respondent to enter into a contract of sale with CPI by (1) falsely misrepresenting that CPI was
the owner of and, thus, could assign to respondent the entire subject real properties, when in truth, CPI
only acquired and could assign to respondent the limited interest of Antonia Vda. de Medina in the
subject real properties; and (2) fraudulently concealing the fact that the subject real properties were
covered by CARP and were actually the subject of a pending VOS with the DAR.
It is worth stressing that it was respondent who initiated the complaint before the Makati City
Prosecution Office. Thus, upon him rests the burden of supporting his charges with affidavits and any
other evidence, for it is upon these evidence thus adduced, that the investigating prosecutor determines
the existence, or in this case, the absence, of probable cause to hold the petitioners for trial for the
crimes charged. Respondent must have necessarily tendered evidence, independent of and in support of
the allegations in his affidavit-complaint, of such quality as to engender belief in an ordinarily prudent
and cautious man that the offense charged therein has been committed by the petitioners. Indeed,
probable cause need not be based on clear and convincing evidence of guilt, neither on evidence
establishing guilt beyond reasonable doubt and definitely, not on evidence establishing absolute
certainty of guilt, but it certainly demands more than bare suspicion and can never be left to
presupposition, conjecture, or even convincing logic.35
Respondent, however, miserably failed to present sufficient evidence to establish probable cause for the
filing of an information against petitioners for estafa by means of deceit. The only evidence presented
by respondent that would directly establish the deceit allegedly perpetrated by the petitioners consists
of his very own affidavits and that of his alleged counsel, Atty. Villacorta. These had been sufficiently
rebutted by the evidence of the petitioners. The affidavits of petitioners, Deputy Sheriff Garcia, and
witnesses Attys. Libunao and Manahan, all presented a consistent, coherent, and credible version of
events, adequately supported by other documentary evidence. Even respondent’s own documentary
evidence was satisfactorily explained or was even consistent with the version of events as presented by
petitioners and their witnesses. The sale of CPI’s interest in the subject real properties to respondent
was a legitimate business transaction, done in the course of CPI’s business, and petitioners did nothing
more than to carry out their respective functions as officers of CPI to perfect and execute the sale.
Moreover, as between the mere denial constituting selfserving negative assertions of respondent that
he did not fully know of the circumstances and the current status of the subject real properties he
acquired from CPI, and the positive and categorical declarations of petitioners and their witnesses that
respondent was duly informed thereof, the choice is not hard to make, for the jurisprudence on the
matter is that positive statement is stronger and attains greater evidentiary weight than negative
evidence.36
Also, this Court seriously doubts that, given the particular circumstances of this case, respondent was
indeed clueless or ignorant of the true state of affairs of the subject real properties.
First, Antonia Vda. de Medina, from whom CPI acquired its interest in the subject real properties, is the
respondent’s mother-in-law. He is married to Ma. Luisa Victoria Medina, one of the co-heirs and co-
owners of the subject real properties. The Court of Appeals brushed aside the relations between
Antonia Vda. de Medina and respondent as insufficient to conclude that respondent knew of the
circumstances and status of the subject real properties. Although it may not constitute as conclusive
evidence, the relations between Antonia Vda. de Medina and respondent casts serious doubts on
respondent’s assertions. Given the close-knit relations among Filipino family members, it is almost
impossible that his mother-in-law Antonia Vda. de Medina, his wife Ma. Luisa Victoria Medina, and
respondent, never talked about the subject real properties; more so, if we consider that respondent is a
lawyer who can freely and readily give legal advice to his mother-in-law and his wife to protect their
remaining rights and interests in the subject real properties.
Neither can this Court give credence to respondent’s contention that his wife Ma. Luisa Victoria Medina,
born 30 January 1972, was only a minor when CPI instituted Civil Case No. 84–22434 against her mother
Antonia Vda. de Medina, before the Manila RTC on 18 February 1984; when judgment was rendered
therein against her mother on 17 September 1984; and when the subject real properties were sold in
favor of CPI at the execution sale on 24 August 1989. Respondent avers that his wife then still failed to
grasp the significance of the events taking place as regards CPI, her mother, and the subject real
properties. Respondent seems to ignore the fact that his wife grew up, and the likelihood that she
eventually came to understand the history and legal problems besetting the subject real properties. In
fact, respondent does not deny that on 26 September 1996, his wife Ma. Luisa Victoria Medina, together
with the other heirs of her deceased father Antonio Medina, filed a civil complaint with the RTC of
Ilagan, Isabela, docketed as Civil Case No. 948, in which they questioned and, thus, admitted knowledge
of the VOS made by CPI in favor of DAR.37 And if Ma. Luisa Victoria Medina already knew that the
subject real properties were voluntarily offered for sale by CPI to the DAR, it is highly unlikely that she
would have kept such information from respondent, her husband.
It should also be recalled that it was respondent who approached CPI first and sought the purchase of its
interest in the subject real properties. Respondent never explained how he knew of CPI’s interest in the
subject real properties. Neither did respondent allege nor prove that CPI actively offered for sale to the
public its interest in the subject real properties. The only logical deduction would be that respondent
came to know of CPI’s interest in the subject real properties through his wife and/or mother-in-law. In
fact, in consideration of respondent’s purchase of the interest of CPI in the subject real properties for
P3.5 Million, respondent was able to secure the execution by CPI of the Deed of Waiver and Quitclaim,
dated 22 December 1994, by virtue of which, CPI waived any further claim for sum of money and
damages from respondent’s mother-in-law Antonia Vda. de Medina, and discharged the latter from any
and all pending court case liabilities, whether civil or criminal, filed by CPI against her. That respondent
sought the execution by CPI of the said Deed of Waiver and Quitclaim, which obviously benefited his
motherin-law, only supports the view that respondent not only knew of the current status of the subject
real properties, but also the history of the legal tussle between Antonia Vda. de Medina and CPI, which
resulted in the transfer of Antonia Vda. de Medina’s interest in the subject real properties to CPI.
Respondent’s contention of his seeming disconnection and isolation from the affairs of his wife’s family
is undoubtedly contrary to the common family life experience of Filipinos. Reference is made herein to
the quote of Vice-Chancellor Van Fleet, reproduced in Pacheco v. Hon Court of Appeals and People of
the Philippines38—
“Evidence to be believed must not only proceed from the mouth of a credible witness but must be
credible in itself—such as the common experience and observation of mankind can approve as probable
under the circumstances. We have no test of the truth of human testimony, except its conformity to our
knowledge, observation and experience. Whatever is repugnant to these belongs to the miraculous, and
is outside of judicial cognizance.”39
Second, there is a clear paper trail by which respondent could have traced and uncovered the true
status of the subject real properties. CPI itself provided respondent with some of these documents,
while the others are part of public records to which respondent had access.
There is scant evidence on record that CPI or any of its officers, including herein petitioners, had willfully
and maliciously made false misrepresentations to respondent that CPI owned the subject real properties
in its entirety. Again, only the affidavits of respondent and Atty. Villacorta directly and positively
describe how the alleged false misrepresentations were made, and, even therein, they could only
attribute the same to petitioner Atty. Poblador, and no other. Thus, it behooves this Court how, from
respondent’s self-serving and unsubstantiated allegations, it can jump off to conclude that all the
petitioners, in conspiracy and with criminal intent, made false misrepresentations on behalf of CPI to the
damage of respondent.
Instead, the documentary evidence on record establishes that CPI laid claim on and actually acquired
only the limited interest of Antonia Vda. de Medina in the subject real properties and nothing more.
The Notice of Levy on Attachment40 issued on 7 February 1984 by Deputy Sheriff Garcia to the Register
of Deeds of Ilagan, Isabela, during the pendency of Civil Case No. 84–22434 before the Manila RTC,
clearly stated that what was being levied upon was limited to “the rights, interest, title and
participation” which Antonia Vda. de Medina may have in the real properties enumerated therein.
In its letter,41 dated 23 August 1989, addressed to Deputy Sheriff Garcia, CPI presented its bid of P4.5
Million at the auction sale of the properties of Antonia Vda. de Medina, held to satisfy the latter’s
judgment debt to CPI in Civil Case No. 84–22434. CPI’s bid was conditioned on the following—
“*2+ With respect to property under the exclusive name of Antonia Caragayan Vda. de Medina, the
Certificate of Sale shall indicate that the said property together with improvements thereon, is sold to
the successful bidder.
[3] With respect to property registered in the name of Heirs of Antonio Medicna and/or Antonia Vda. de
Medina representing or as Administration [sic] of Estate of Antonio of Antonio Medina the Certificate of
Sale shall refer only [to] the rights, interests, claims and participation of Antonia Vda. de Medina in the
covered property and improvements since she has co-heirs, a son and a daughter. In the computation of
the undivided interest of Antonia Vda. de Medina and the two heirs, since the property appear to be
conjugal, two thirds [66.67%] of the property pertains to Antonia Vda. de Medina while the remaining
one-third *33.34%+ pertains to the heirs, son and daughter.” (Emphasis supplied.)
Respondent himself, in his letter,42 dated 29 November 1994, addressed to CPI, wrote in the first
paragraph that, “We are pleased to inform you that we accept your offer to sell to us for P3.5 Million
your interest in the foreclosed Medina properties.” CPI’s interest in the subject real properties, as
referred to in respondent’s letter, could be nothing more than the same interest therein of Antonia Vda.
de Medina.
Thus, although the Deed of Assignment with Consolidation of Title43 executed between CPI and
respondent on 22 June 1995, provides that –
“1. For and in consideration of the sum of THREE MILLION FIVE HUNDRED THOUSAND PERSOS
(P3,500,000.00), Philippine Currency, receipt of which is acknowledged, [CPI] hereby assigns, transfers
and conveys unto and in favor of [respondent], his heirs, executors and assigns, the Properties
aforedescribed.”
it should not be taken to mean that what CPI was assigning to respondent was the entirety of the
subject real properties, instead of merely the limited interest therein acquired by CPI from Antonia Vda.
de Medina. The reference in the said paragraph, as well as in any other part of the Deed, to “Properties”
without particularly limiting or qualifying the same to the undivided interest of CPI in the subject real
properties, could be more of a problem of imprecise use of terms rather than a criminal intent to
defraud and mislead respondent. Even so, the afore-quoted paragraph should be read in conjunction
with the rest of the Deed, especially the succeeding paragraphs, to wit—
“3. *Respondent+ acknowledges that he is fully aware of the circumstances under which these Properties
were acquired by [CPI] and that he examined the title and inspected the properties and verified their
location together with their boundaries. [CPI] shall therefore be no longer obliged to submit to
[respondent] a location survey plan of the Properties nor pinpoint the same to [respondent].
4. [Respondent] further acknowledges that the Properties are presently occupied by squatters and other
adverse occupants and that [CPI] makes no warranty that possession can be immediately delivered to
[respondent] free and clear of these squatters and other adverse occupants. All the expenses for the
eviction of these persons shall be borne by [respondent].
5. [CPI] warrants the genuineness of its interest over said Properties and that it shall, if necessary,
execute any additional documents to complete the title of [respondent] to above-described Properties.
No warranty, however, as to the Properties’ classification or primary use is hereby given.”
Respondent, by virtue of paragraphs 3 and 4 of the Deed of Assignment with Consolidation of Title,
explicitly acknowledges that he is fully aware of the circumstances by which CPI acquired its interest in
the subject real properties; that he has examined the title; that he has inspected the properties; and
that he acknowledges that the subject real properties are occupied by squatters and other adverse
occupants. The said acknowledgments made by respondent dispute any claim on his part that he was
misled to believe that when he entered into the contract of sale with CPI, he was acquiring the entirety
of the subject real properties.
Respondent had every opportunity to verify what he was actually purchasing from CPI. He already
admits knowing the circumstances by which CPI acquired its interest in the subject real properties. If this
is truly so, respondent should have known that the subject real properties were inherited, intestate, by
Antonia Vda. de Medina and her co-heirs, from Antonia’s deceased husband, Antonio; that Antonia Vda.
de Medina is just one of the heirs of the late Antonio Medina, so she co-owns with the other heirs, in
undivided shares or interests, the subject real properties; that Antonia Vda. de Medina’s undivided
interest in the subject real properties was sold at an auction sale held to satisfy her judgment debt to
CPI in Civil Case No. 84–22434; that CPI gave the highest bid at the auction sale and was thus awarded
Antonia Vda. de Medina’s limited interest in the subject real properties; that when Antonia Vda. de
Medina failed to redeem her interest in the subject real properties within a year, title was thereby
consolidated in CPI; and that even before CPI acquired Antonia Vda. de Medina’s interest in the subject
real properties, she, together with all the other heirs of her late husband Antonio Medina, had already
voluntarily offered to sell the subject real properties to DAR. With respondent’s knowledge of the
foregoing circumstances, coupled with his extensive legal knowledge as a lawyer, then respondent
should have realized that what he was acquiring from CPI shall be nothing more than the same limited
interest in the subject real properties acquired by CPI from Antonia Vda. de Medina.
Even if the Deed of Assignment with Consolidation of Title was prepared entirely by CPI, respondent
cannot claim that the same was a contract of adhesion, in which he had no other participation but to
adhere to. There were several meetings between CPI and respondent precisely for the purpose of
negotiating the terms of their contract. Contrary to respondent’s contention that the Deed contained
“so many ambiguities, subterfurge and clever craft” to allow CPI a “back-door retreat,” if necessary, this
Court finds that it is actually couched in simple terms easily understandable, and capable of no other
possible and reasonable interpretation than what this Court had already discussed in the preceding
paragraphs. Respondent, as a lawyer, is very capable of reviewing the Deed himself. He must also know
that he had a legal right to revise certain terms or provisions thereof if he found these too ambiguous.
Respondent was actually given time to review and revise the Deed, and for some unexplained reason,
his only revision was to change his status from “married” to “single.”
Furthermore, assuming that respondent had absolutely no knowledge of the circumstances surrounding
CPI’s acquisition of its interest in the subject real properties from Antonia Vda. de Medina, then his
examination of the transfer certificates of title (TCTs) should have revealed to him such circumstances
or, at the very least, led him to ask questions about the same. The court processes44 issued by the
Manila RTC in Civil Case No. 84–22434, affecting the subject real properties, and duly served on the
Register of Deeds, were clearly annotated on the TCTs covering the subject real properties. What is
more, the TCTs were all still in the name of the Heirs of Antonio Medina, not CPI. Such a fact should
have been a caveat to respondent to proceed with the transaction with more prudence and to inquire
into CPI’s title to or interest in the subject properties, as well as the circumstances attendant to its
acquisition thereof. According to a well-established rule in our jurisdiction—
“The law protects to a greater degree a purchaser who buys from the registered owner himself.
Corollarily, it requires a higher degree of prudence from one who buys from a person who is not the
registered owner, although the land object of the transaction is registered. While one who buys from
the registered owner does not need to look behind the certificate of title, one who buys from one who is
not the registered owner is expected to examine not only the certificate of title but all factual
circumstances necessary for him to determine if there are any flaws in the title of the transferor, or in
his capacity to transfer the land.”45 (Emphasis supplied.)
Respondent could be reasonably assumed to be familiar with the foregoing since he is a lawyer.
Third, respondent is a lawyer and, as such, he is presumed to know the law.46 Though respondent may
not be actively practicing law as a profession, the legal rules and principles applicable to the present
Petition are so basic and fundamental, and which respondent must have learned even while he was still
studying law. Respondent is also a businessman who must possess some degree of shrewdness in his
dealings so as to protect his business interests. With respondent’s qualifications as a lawyer and a
businessman, while they may not protect him absolutely, make him less susceptible to deception as
compared to an ordinary layperson.
The Court of Appeals, in its Decision, dated 29 January 2001, found that CPI committed a double sale of
the subject real properties when it sold the same first to the DAR, then second to the respondent. It
declared that a VOS is already a consummated sale because landowners who made such an offer can no
longer back out. This declaration by the Court of Appeals has no basis in law or jurisprudence.
Respondent’s mother-in-law Antonia Vda. de Medina decided to avail of the VOS under Republic Act No.
6657, otherwise known as the Comprehensive Agrarian Reform Law (CARL) of 1988. On 5 April 1988, she
executed a Special Power of Attorney (SPA)47 designating a certain Carlito Balauag to represent her and
her children in any and all transactions with the DAR and the Landbank of the Philippines (Landbank)
and to place the subject real properties under the voluntary coverage of CARP. Worth noting is the fact
that the SPA covers not just Antonia Vda. de Medina’s share but all of the subject real properties.
Pursuant to his SPA, Carlito Balauag submitted on 10 March 1989 the VOS Forms covering the subject
real properties to the DAR. He signed the said forms on behalf of the landowners, who he identified as
the “Heirs of Antonio Medina.”
However, just a few days earlier, on 22 February 1989, Antonia Vda. de Medina executed a Deed of
Assignment (with Special Power of Attorney Coupled with Interest),48 in which, for and in consideration
of her unpaid obligations to CPI, she assigned all of her “rights, interests, claims and participation from
the proceeds of land compensation” for the property she voluntarily offered to sell and transfer under
the CARP. She claimed in the same Deed that the VOS was already under process for indorsement to the
Landbank. Hence, she was appointing CPI as her exclusive attorney-in-fact to follow-up the processing of
the VOS papers with the DAR and the Landbank. On 13 August 1993, CPI, pursuant to the authority
granted to it by Antonia Vda. de Medina under the same Deed, submitted new VOS Forms covering the
subject real properties.
By virtue of the foregoing, should the VOS covering the subject real properties already be deemed a
consummated sale? This Court rules in the negative.
The CARL of 1988 encourages landowners to voluntarily offer for sale their lands by giving an additional
five percent compensation to those who avail of this option.49 To implement the VOS scheme under the
CARL of 1988, the DAR issued Administrative Order No. 3, series of 1989, subsequently revised by
Administrative Order No. 9, series of 1990, which provided for the rules and procedure governing the
acquisition by the government of land subject of a VOS. A cursory reading of these Administrative
Orders would reveal that a VOS undergoes a long process. It is initiated by the filing by the landowner of
the VOS Form and other required documents. The VOS is reviewed, among other personalities, by the
Municipal Agrarian Reform Officer (MARO), the Provincial Agrarian Reform Officer (PARO), the DAR
Regional Director, the Bureau of Land Acquisition and Development (BLAD), and the Landbank, for
purposes of identifying the land and the qualified tenants, the valuation of the land, and payment of just
compensation to the landowner.
In the case of Government Service Insurance Systems, Inc. v. Court of Appeals,50 this Court already
ruled that—
“While it is true that under DAR Administrative Order No. 3, series of 1989, it is not necessary that the
voluntary offeror of the lot be the registered owner thereof, private respondent failed to show that the
DAR accepted and approved his offer to sell. Without said approval and acceptance, private respondent
cannot safely presume that his voluntary offer to sell was accepted by the DAR. Notably, the word
“offer,” is subject to acceptance. The voluntary offer to sell is in fact reviewed and evaluated by the DAR
before a corresponding notice of acceptance is sent to the landowner. The applicable rules and
procedure governing voluntary offer to sell (VOS) at the time private respondent made his offer
provides:
x x x x
Evidently, without the notice informing the landowner of the DAR’s conformity with the offer to sell,
private respondent cannot validly presume that his offer to sell has been accepted by the DAR and that
the latter will now assume the payment of the loan to the GSIS.” (Emphasis supplied.)
Hence, a VOS, as its name implies, is a voluntary offer to sell the land to the government so that the
latter can distribute the same to qualified tenants. While a landowner who voluntarily offered his land
for sale is precluded from withdrawing his offer except under specified circumstances, such a condition
does not make the mere offer a consummated sale. It bears to emphasize that the offer still needs to be
accepted by the DAR on behalf of the government, and just compensation for the land determined and
paid to the landowner. The sale is deemed consummated when the landowner has received payment or
deposit by the DAR of just compensation with an accessible bank, in cash or Landbank bonds, since only
then is ownership of the land finally transferred from the landowner to the government.51
In the present case, the VOS covering the subject real properties is still being processed by the DAR.
There has so far been no express acceptance by the DAR of the said VOS or payment of just
compensation to CPI. There being no consummated sale of the subject real properties to DAR, CPI could
not have committed a double sale of the same. It remained a co-owner of the subject real properties,
together with the other heirs of Antonio Medina, and, thus, it could still legally sell its share or interest
therein to another person, such as respondent. Should the DAR finally approve the VOS covering the
subject real properties, then respondent, after acquiring the interest of CPI, shall be entitled to just
compensation corresponding to his interest.
After finding that petitioners did not deceive respondent into purchasing CPI’s limited interest in the
subject real properties, then it necessarily follows that there can be no conspiracy to commit such
deception. This Court would still want to point out that respondent’s accusation of conspiracy was so
stretched that he implicated in his complaint members of the CPI Board of Directors who did nothing
more than sign a resolution authorizing the sale of CPI’s interest in the subject real properties to
respondent. Yet again, the existence of conspiracy among the CPI officers rests on no other evidence but
respondent’s own allegations in his affidavits. Conspiracy cannot be established by mere inferences or
conjectures.52 It is incumbent upon respondent to prove that each of the petitioners performed an
overt act in pursuance or furtherance of the alleged complicity, so as to convince the investigating
prosecutor that there is probable cause that petitioners conspired with one another to commit the
crime.53 However, respondent’s general accusations against petitioners and the other CPI officers do
little to persuade.
WHEREFORE, premises considered, the instant Petition is hereby GRANTED. The Decision, dated 29
January 2001, and Resolution, dated 14 November 2002, of the Court of Appeals in CA-G.R. SP No.
54862, are hereby REVERSED and SET ASIDE. Respondent’s complaint in I.S. No. 97–22188–191 is hereby
ordered DISMISSED.

G.R. No. 151212. September 10, 2003.*
TEN FORTY REALTY AND DEVELOPMENT CORP., Represented by its President, VERONICA G.
LORENZANA, petitioner, vs. MARINA CRUZ, respondent.
Remedial Law; Ejectment; Unlawful Detainer; To justify an action for unlawful detainer, the permission
or tolerance must have been present at the beginning of the possession.—While possession by
tolerance may initially be lawful, it ceases to be so upon the owner’s demand that the possessor by
tolerance vacate the property. To justify an action for unlawful detainer, the permission or tolerance
must have been present at the beginning of the possession. Otherwise, if the possession was unlawful
from the start, an action for unlawful detainer would be an improper remedy.
Same; Same; Same; Forcible Entry; Both causes of action deal only with the sole issue of physical or de
facto possession though they are really separate and distinct.—While both causes of action deal only
with the sole issue of physical or de facto possession, the two cases are really separate and distinct.
Same; Same; Same; Same; To maintain a viable action for forcible entry, plaintiff must have been in prior
physical possession of the property.—The appellate court, therefore, did not err when it ruled that
petitioner’s Complaint for unlawful detainer was a mere subterfuge or a disguised substitute action for
forcible entry, which had already prescribed. To repeat, to maintain a viable action for forcible entry,
plaintiff must have been in prior physical possession of the property; this is an essential element of the
suit.
Civil Law; Sales; Ownership is transferred not by contract but by tradition or delivery; Nowhere in the
Civil Code is it provided that the execution of a Deed of Sale is a conclusive presumption of delivery of
possession of a piece of real estate.—In a contract of sale, the buyer acquires the thing sold only upon
its delivery “in any of the ways specified in Articles 1497 to 1501, or in any other manner signifying an
agreement that the possession is transferred from the vendor to the vendee.” With respect to
incorporeal property, Article 1498 lays down the general rule: the execution of a public instrument shall
be equivalent to the delivery of the thing that is the object of the contract if, from the deed, the
contrary does not appear or cannot be clearly inferred. However, ownership is transferred not by
contract but by tradition or delivery. Nowhere in the Civil Code is it provided that the execution of a
Deed of Sale is a conclusive presumption of delivery of possession of a piece of real estate.
Same; Same; The execution of a public instrument gives rise only to a prima facie presumption of
delivery.—This Court has held that the execution of a public instrument gives rise only to a prima facie
presumption of delivery. Such presumption is destroyed when the delivery is not effected because of a
legal impediment. Pasagui v. Villablanca had earlier ruled that such constructive or symbolic delivery,
being merely presumptive, was deemed negated by the failure of the vendee to take actual possession
of the land sold.
Same; Same; The ownership of immovable property sold to two different buyers at different times is
governed by Article 1544 of the Civil Code; In the absence of the required inscription, the law gives
preferential right to the buyer who in good faith is first in possession; Possession mentioned in Article
1544 includes not only material but also symbolic possession.—The ownership of immovable property
sold to two different buyers at different times is governed by Article 1544 of the Civil Code x x x In the
absence of the required inscription, the law gives preferential right to the buyer who in good faith is first
in possession. In determining the question of who is first in possession, certain basic parameters have
been established by jurisprudence. First, the possession mentioned in Article 1544 includes not only
material but also symbolic possession. Second, possessors in good faith are those who are not aware of
any flaw in their title or mode of acquisition. Third, buyers of real property that is in the possession of
persons other than the seller must be wary—they must investigate the rights of the possessors. Fourth,
good faith is always presumed; upon those who allege bad faith on the part of the possessors rests the
burden of proof.
PETITION for review on certiorari of the decision and resolution of the Court of Appeals.
The facts are stated in the opinion of the Court.
Oscar L. Karaan for petitioner.
Carmelino M. Roque for private respondent.
PANGANIBAN,** J.:

In an ejectment suit, the question of ownership may be provisionally ruled upon for the sole purpose of
determining who is entitled to possession de facto. In the present case, both parties base their alleged
right to possess on their right to own. Hence, the Court of Appeals did not err in passing upon the
question of ownership to be able to decide who was entitled to physical possession of the disputed land.
The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of Court, seeking to nullify the August 31,
2001 Decision2 and December 19, 2001 Resolution3 of the Court of Appeals (CA) in CA-GR SP No. 64861.
The dispositive portion of the assailed Decision is as follows:
“WHEREFORE, premises considered, the petition is hereby DISMISSED and the Decision dated May 4,
2001 is hereby AFFIRMED.”4 The assailed Resolution denied petitioner’s Motion for Reconsideration.
The Facts
The facts of the case are narrated by the CA as follows:
“A complaint for ejectment was filed by *Petitioner Ten Forty Realty and Development Corporation+
against x x x [Respondent Marina Cruz] before the Municipal Trial Court in Cities (MTCC) of Olongapo
City, docketed as Civil Case 4269, which alleged that: petitioner is the true and absolute owner of a
parcel of lot and residential house situated in #71 18th Street, E.B.B. Olongapo City, particularly
described as:
‘A parcel of residential house and lot situated in the abovementioned address containing an area of 324
square meters more or less bounded on the Northeast by 041 (Lot 255, Ts-308); on the Southeast by 044
(Lot 255, Ts-308); on the Southwest by 043 (Lot 226-A & 18th street) and on the Northwest by 045 (Lot
227, Ts-308) and declared for taxation purposes in the name of [petitioner] under T.D. No. 002-4595-R
and 002-4596.’ having acquired the same on December 5, 1996 from Barbara Galino by virtue of a Deed
of Absolute Sale; the sale was acknowledged by said Barbara Galino through a ‘Katunayan’; payment of
the capital gains tax for the transfer of the property was evidenced by a Certification Authorizing
Registration issued by the Bureau of Internal Revenue; petitioner came to know that Barbara Galino sold
the same property on April 24, 1998 to Cruz, who immediately occupied the property and which
occupation was merely tolerated by petitioner; on October 16, 1998, a complaint for ejectment was
filed with the Barangay East Bajac-Bajac, Olongapo City but for failure to arrive at an amicable
settlement, a Certificate to File Action was issued; on April 12, 1999 a demand letter was sent to
[respondent] to vacate and pay reasonable amount for the use and occupation of the same, but was
ignored by the latter; and due to the refusal of [respondent] to vacate the premises, petitioner was
constrained to secure the services of a counsel for an agreed fee of P5,000.00 as attorney’s fee and
P500.00 as appearance fee and incurred an expense of P5,000.00 for litigation.
“In respondent’s Answer with Counterclaim, it was alleged that: petitioner is not qualified to own the
residential lot in dispute, being a public land; according to Barbara Galino, she did not sell her house and
lot to petitioner but merely obtained a loan from Veronica Lorenzana; the payment of the capital gains
tax does not necessarily show that the Deed of Absolute Sale was at that time already in existence; the
court has no jurisdiction over the subject matter because the complaint was filed beyond the one (1)
year period after the alleged unlawful deprivation of possession; there is no allegation that petitioner
had been in prior possession of the premises and the same was lost thru force, stealth or violence;
evidence will show that it was Barbara Galino who was in possession at the time of the sale and vacated
the property in favor of respondent; never was there an occasion when petitioner occupied a portion of
the premises, before respondent occupied the lot in April 1998, she caused the cancellation of the tax
declaration in the name of Barbara Galino and a new one issued in respondent’s name; petitioner
obtained its tax declaration over the same property on November 3, 1998, seven (7) months [after] the
respondent [obtained hers]; at the time the house and lot [were] bought by respondent, the house was
not habitable, the power and water connections were disconnected; being a public land, respondent
filed a miscellaneous sales application with the Community Environment and Natural Resources Office in
Olongapo City; and the action for ejectment cannot succeed where it appears that respondent had been
in possession of the property prior to the petitioner.”5
In a Decision6 dated October 30, 2000, the Municipal Trial Court in Cities (MTCC) ordered respondent to
vacate the property and surrender to petitioner possession thereof. It also directed her to pay, as
damages for its continued unlawful use, P500 a month from April 24, 1999 until the property was
vacated, P5,000 as attorney’s fees, and the costs of the suit.
On appeal, the Regional Trial Court7 (RTC) of Olongapo City (Branch 72) reversed the MTCC. The RTC
ruled as follows: 1) respondent’s entry into the property was not by mere tolerance of petitioner, but by
virtue of a Waiver and Transfer of Possessory Rights and Deed of Sale in her favor; 2) the execution of
the Deed of Sale without actual transfer of the physical possession did not have the effect of making
petitioner the owner of the property, because there was no delivery of the object of the sale as provided
for in Article 1428 of the Civil Code; and 3) being a corporation, petitioner was disqualified from
acquiring the property, which was public land.
Ruling of the Court of Appeals
Sustaining the RTC, the CA held that petitioner had failed to make a case for unlawful detainer, because
no contract—express or implied—had been entered into by the parties with regard to possession of the
property. It ruled that the action should have been for forcible entry, in which prior physical possession
was indispensable—a circumstance petitioner had not shown either.
The appellate court also held that petitioner had challenged the RTC’s ruling on the question of
ownership for the purpose of compensating for the latter’s failure to counter such ruling. The RTC had
held that, as a corporation, petitioner had no right to acquire the property which was alienable public
land.
Hence, this Petition.8
Issues
Petitioner submits the following issues for our consideration:
“1. The Honorable Court of Appeals had clearly erred in not holding that *r+espondent’s occupation or
possession of the property in question was merely through the tolerance or permission of the herein
[p]etitioner;
“*2.+ The Honorable Court of Appeals had likewise erred in holding that the ejectment case should have
been a forcible entry case where prior physical possession is indispensable; and
“*3.+ The Honorable Court of Appeals had also erred when it ruled that the herein *r+espondent’s
possession or occupation of the said property is in the nature of an exercise of ownership which should
put the herein *p+etitioner on guard.”9
The Court’s Ruling
The Petition has no merit.
First Issue:
Alleged Occupation by Tolerance
Petitioner faults the CA for not holding that the former merely tolerated respondent’s occupation of the
subject property. By raising this issue, petitioner is in effect asking this Court to reassess factual findings.
As a general rule, this kind of reassessment cannot be done through a petition for review on certiorari
under Rule 45 of the Rules of Court, because this Court is not a trier of facts; it reviews only questions of
law.10 Petitioner has not given us ample reasons to depart from the general rule.
On the basis of the facts found by the CA and the RTC, we find that petitioner failed to substantiate its
case for unlawful detainer. Admittedly, no express contract existed between the parties. Not shown
either was the corporation’s alleged tolerance of respondent’s possession.
While possession by tolerance may initially be lawful, it ceases to be so upon the owner’s demand that
the possessor by tolerance vacate the property.11 To justify an action for unlawful detainer, the
permission or tolerance must have been present at the beginning of the possession.12 Otherwise, if the
possession was unlawful from the start, an action for unlawful detainer would be an improper remedy.
Sarona v. Villegas13 elucidates thus:
“A close assessment of the law and the concept of the word ‘tolerance’ confirms our view heretofore
expressed that such tolerance must be present right from the start of possession sought to be
recovered, to categorize a cause of action as one of unlawful detainer not of forcible entry. Indeed, to
hold otherwise would espouse a dangerous doctrine. And for two reasons. First. Forcible entry into the
land is an open challenge to the right of the possessor. Violation of that right authorizes the speedy
redress—in the inferior court—provided for in the rules. If one year from the forcible entry is allowed to
lapse before suit is filed, then the remedy ceases to be speedy; and the possessor is deemed to have
waived his right to seek relief in the inferior court. Second, if a forcible entry action in the inferior court
is allowed after the lapse of a number of years, then the result may well be that no action for forcible
entry can really prescribe. No matter how long such defendant is in physical possession, plaintiff will
merely make a demand, bring suit in the inferior court—upon a plea of tolerance to prevent prescription
to set in—and summarily throw him out of the land. Such a conclusion is unreasonable. Especially if we
bear in mind the postulates that proceedings of forcible entry and unlawful detainer are summary in
nature, and that the one year time bar to suit is but in pursuance of the summary nature of the
action.”14
In this case, the Complaint and the other pleadings do not recite any averment of fact that would
substantiate the claim of petitioner that it permitted or tolerated the occupation of the property by
Respondent Cruz. The Complaint contains only bare allegations that 1) respondent immediately
occupied the subject property after its sale to her, an action merely tolerated by petitioner;15 and 2) her
allegedly illegal occupation of the premises was by mere tolerance.16
These allegations contradict, rather than support, petitioner’s theory that its cause of action is for
unlawful detainer. First, these arguments advance the view that respondent’s occupation of the
property was unlawful at its inception. Second, they counter the essential requirement in unlawful
detainer cases that petitioner’s supposed act of sufferance or tolerance must be present right from the
start of a possession that is later sought to be recovered.17
As the bare allegation of petitioner’s tolerance of respondent’s occupation of the premises has not been
proven, the possession should be deemed illegal from the beginning. Thus, the CA correctly ruled that
the ejectment case should have been for forcible entry—an action that had already prescribed,
however, when the Complaint was filed on May 12, 1999. The prescriptive period of one year for
forcible entry cases is reckoned from the date of respondent’s actual entry into the land, which in this
case was on April 24, 1998.
Second Issue:
Nature of the Case
Much of the difficulty in the present controversy stems from the legal characterization of the ejectment
Complaint filed by petitioner. Specifically, was it for unlawful detainer or for forcible entry?
The answer is given in Section 1 of Rule 70 of the Rules of Court, which we reproduce as follows:
“SECTION 1. Who may institute proceedings, and when.—Subject to the provisions of the next
succeeding section, a person deprived of the possession of any land or building by force, intimidation,
threat, strategy, or stealth, or a lessor, vendor, vendee, or other person against whom the possession of
any land or building is unlawfully withheld after the expiration or termination of the right to hold
possession, by virtue of any contract, express or implied, or the legal representatives or assigns of any
such lessor, vendor, vendee, or other person, may, at any time within one (1) year after such unlawful
deprivation or withholding of possession, bring an action in the proper Municipal Trial Court against the
person or persons unlawfully withholding or depriving of possession, or any person or persons claiming
under them, for the restitution of such possession, together with damages and costs.”
While both causes of action deal only with the sole issue of physical or de facto possession,18 the two
cases are really separate and distinct, as explained below:
“x x x. In forcible entry, one is deprived of physical possession of land or building by means of force,
intimidation, threat, strategy, or stealth. In unlawful detainer, one unlawfully withholds possession
thereof after the expiration or termination of his right to hold possession under any contract, express or
implied. In forcible entry, the possession is illegal from the beginning and the basic inquiry centers on
who has the prior possession de facto. In unlawful detainer, the possession was originally lawful but
became unlawful by the expiration or termination of the right to possess, hence the issue of rightful
possession is decisive for, in such action, the defendant is in actual possession and the plaintiff’s cause
of action is the termination of the defendant’s right to continue in possession.
“What determines the cause of action is the nature of defendant’s entry into the land. If the entry is
illegal, then the action which may be filed against the intruder within one year therefrom is forcible
entry. If, on the other hand, the entry is legal but the possession thereafter became illegal, the case is
one of unlawful detainer which must be filed within one year from the date of the last demand.”19
It is axiomatic that what determines the nature of an action as well as which court has jurisdiction over it
are the allegations in the complaint20 and the character of the relief sought.21
In its Complaint, petitioner alleged that, having acquired the subject property from Barbara Galino on
December 5, 1996,22 it was the true and absolute owner23 thereof; that Galino had sold the property
to Respondent Cruz on April 24, 1998;24 that after the sale, the latter immediately occupied the
property, an action that was merely tolerated by petitioner;25 and that, in a letter given to respondent
on April 12, 1999,26 petitioner had demanded that the former vacate the property, but that she refused
to do so.27 Petitioner thereupon prayed for judgment ordering her to vacate the property and to pay
reasonable rentals for the use of the premises, attorney’s fees and the costs of the suit.28
The above allegations appeared to show the elements of unlawful detainer. They also conferred
initiatory jurisdiction on the MTCC, because the case was filed a month after the last demand to
vacate—hence, within the one-year prescriptive period.
However, what was actually proven by petitioner was that possession by respondent had been illegal
from the beginning. While the Complaint was crafted to be an unlawful detainer suit, petitioner’s real
cause of action was for forcible entry, which had already prescribed. Consequently, the MTCC had no
more jurisdiction over the action.
The appellate court, therefore, did not err when it ruled that petitioner’s Complaint for unlawful
detainer was a mere subterfuge or a disguised substitute action for forcible entry, which had al- ready
prescribed. To repeat, to maintain a viable action for forcible entry, plaintiff must have been in prior
physical possession of the property; this is an essential element of the suit.29
Third Issue:
Alleged Acts of Ownership
Petitioner next questions the CA’s pronouncement that respondent’s occupation of the property was an
exercise of a right flowing from a claim of ownership. It submits that the appellate court should not have
passed upon the issue of ownership, because the only question for resolution in an ejectment suit is that
of possession de facto.
Clearly, each of the parties claimed the right to possess the disputed property because of alleged
ownership of it. Hence, no error could have been imputed to the appellate court when it passed upon
the issue of ownership only for the purpose of resolving the issue of possession de facto.30 The CA’s
holding is moreover in accord with jurisprudence and the law.
Execution of a Deed of Sale Not Sufficient as Delivery
In a contract of sale, the buyer acquires the thing sold only upon its delivery “in any of the ways
specified in Articles 1497 to 1501, or in any other manner signifying an agreement that the possession is
transferred from the vendor to the vendee.”31 With respect to incorporeal property, Article 1498 lays
down the general rule: the execution of a public instrument shall be equivalent to the delivery of the
thing that is the object of the contract if, from the deed, the contrary does not appear or cannot be
clearly inferred.
However, ownership is transferred not by contract but by tradition or delivery.32 Nowhere in the Civil
Code is it provided that the execution of a Deed of Sale is a conclusive presumption of delivery of
possession of a piece of real estate.33
This Court has held that the execution of a public instrument gives rise only to a prima facie
presumption of delivery. Such presumption is destroyed when the delivery is not effected because of a
legal impediment.34 Pasagui v. Villablanca35 had earlier ruled that such constructive or symbolic
delivery, being merely presumptive, was deemed negated by the failure of the vendee to take actual
possession of the land sold.
It is undisputed that petitioner did not occupy the property from the time it was allegedly sold to it on
December 5, 1996 or at any time thereafter. Nonetheless, it maintains that Galino’s continued stay in
the premises from the time of the sale up to the time respondent’s occupation of the same on April 24,
1998, was possession held on its behalf and had the effect of delivery under the law.36
Both the RTC and the CA disagreed. According to the RTC, petitioner did not gain control and possession
of the property, because Galino had continued to exercise ownership rights over the realty. That is, she
had remained in possession, continued to declare it as her property for tax purposes and sold it to
respondent in 1998.
For its part, the CA found it highly unbelievable that petitioner—which claims to be the owner of the
disputed property—would tolerate possession of the property by respondent from April 24, 1998 up to
October 16, 1998. How could it have been so tolerant despite its knowledge that the property had been
sold to her, and that it was by virtue of that sale that she had undertaken major repairs and
improvements on it?
Petitioner should have likewise been put on guard by respondent’s declaration of the property for tax
purposes on April 23, 1998,37 as annotated in the tax certificate filed seven months later.38 Verily, the
tax declaration represented an adverse claim over the unregistered property and was inimical to the
right of petitioner.
Indeed, the above circumstances derogated its claim of control and possession of the property.
Order of Preference in Double Sale of Immovable Property
The ownership of immovable property sold to two different buyers at different times is governed by
Article 1544 of the Civil Code, which reads as follows:
“Article 1544. x x x
“Should it be immovable property, the ownership shall belong to the person acquiring it who in good
faith first recorded it in the Registry of Property.
“Should there be no inscription, the ownership shall pertain to the person who in good faith was first in
possession; and, in the absence thereof, to the person who presents the oldest title, provided there is
good faith.”
Galino allegedly sold the property in question to petitioner on December 5, 1996 and, subsequently, to
respondent on April 24, 1998. Petitioner thus argues that being the first buyer, it has a better right to
own the realty. However, it has not been able to establish that its Deed of Sale was recorded in the
Registry of Deeds of Olongapo City.39 Its claim of an unattested and unverified notation on its Deed of
Absolute Sale40 is not equivalent to registration. It admits that, indeed, the sale has not been recorded
in the Registry of Deeds.41
In the absence of the required inscription, the law gives preferential right to the buyer who in good faith
is first in possession. In determining the question of who is first in possession, certain basic parameters
have been established by jurisprudence.
First, the possession mentioned in Article 1544 includes not only material but also symbolic
possession.42 Second, possessors in good faith are those who are not aware of any flaw in their title or
mode of acquisition.43 Third, buyers of real property that is in the possession of persons other than the
seller must be wary—they must investigate the rights of the possessors.44 Fourth, good faith is always
presumed; upon those who allege bad faith on the part of the possessors rests the burden of proof.45
Earlier, we ruled that the subject property had not been delivered to petitioner; hence, it did not acquire
possession either materially or symbolically. As between the two buyers, therefore, respondent was first
in actual possession of the property.
Petitioner has not proven that respondent was aware that her mode of acquiring the property was
defective at the time she acquired it from Galino. At the time, the property—which was public land—
had not been registered in the name of Galino; thus, respondent relied on the tax declarations thereon.
As shown, the former’s name appeared on the tax declarations for the property until its sale to the
latter in 1998. Galino was in fact occupying the realty when respondent took over possession. Thus,
there was no circumstance that could have placed the latter upon inquiry or required her to further
investigate petitioner’s right of ownership.
Disqualification from Ownership of Alienable Public Land
Private corporations are disqualified from acquiring lands of the public domain, as provided under
Section 3 of Article XII of the Constitution, which we quote:
“Sec. 3. Lands of the public domain are classified into agricultural, forest or timber, mineral lands, and
national parks. Agricultural lands of the public domain may be further classified by law according to the
uses to which they may be devoted. Alienable lands of the public domain shall be limited to agricultural
lands. Private corporations or associations may not hold such alienable lands of the public domain
except by lease, for a period not exceeding twenty-five years, and not to exceed one thousand hectares
in area. Citizens of the Philippines may not lease not more than five hundred hectares, or acquire not
more than twelve hectares thereof by purchase, homestead, or grant. x x x.” (Italics supplied)
While corporations cannot acquire land of the public domain, they can however acquire private land.46
Hence, the next issue that needs to be resolved is the determination of whether the disputed property is
private land or of the public domain.
According to the certification by the City Planning and Development Office of Olongapo City, the
contested property in this case is alienable and disposable public land.47 It was for this reason that
respondent filed a miscellaneous sales application to acquire it.48
On the other hand, petitioner has not presented proof that, at the time it purchased the property from
Galino, the property had ceased to be of the public domain and was already private land. The
established rule is that alienable and disposable land of the public domain held and occupied by a
possessor—personally or through predecessors-in-interest, openly, continuously, and exclusively for 30
years—is ipso jure converted to private property by the mere lapse of time.49
In view of the foregoing, we affirm the appellate court’s ruling that respondent is entitled to possession
de facto. This determination, however, is only provisional in nature.50 Well-settled is the rule that an
award of possession de facto over a piece of property does not constitute res judicata as to the issue of
its ownership.51
WHEREFORE, this Petition is DENIED and the assailed Decision AFFIRMED. Costs against petitioner.
SO ORDERED. [Ten Forty Realty and Development Corp. vs. Cruz, 410 SCRA 484(2003)]

G.R. No. 129760. December 29, 1998.*
RICARDO CHENG, petitioner, vs. RAMON B. GENATO and ERNESTO R. DA JOSE & SOCORRO B. DA
JOSE, respondents.
Civil Law; Sales; Obligations; The breach contemplated in Article 1191 of the New Civil Code is the
obligor’s failure to comply with an obligation already extant, not a failure of a condition to render
binding that obligation.—In a Contract to Sell, the payment of the purchase price is a positive suspensive
condition, the failure of which is not a breach, casual or serious, but a situation that prevents the
obligation of the vendor to convey title from acquiring an obligatory force. It is one where the
happening of the event gives rise to an obligation. Thus, for its non-fulfillment there will be no contract
to speak of, the obligor having failed to perform the suspensive condition which enforces a juridical
relation. In fact with this circumstance, there can be no rescission of an obligation that is still
nonexistent, the suspensive condition not having occurred as yet. Emphasis should be made that the
breach contemplated in Article 1191 of the New Civil Code is the obligor’s failure to comply with an
obligation already extant, not a failure of a condition to render binding that obligation.
Same; Same; Contracts; When a contract is subject to a suspensive condition, its birth or effectivity can
take place only if and when the event which constitutes the condition happens or is fulfilled. If the
suspensive condition does not take place, the parties would stand as if the conditional obligation had
never existed.—Even assuming in gratia argumenti that the Da Jose spouses defaulted, as claimed by
Genato, in their Contract to Sell, the execution by Genato of the affidavit to annul the contract is not
even called for. For with or without the aforesaid affidavit their non-payment to complete the full
downpayment of the purchase price ipso facto avoids their contract to sell, it being subjected to a
suspensive condition. When a contract is subject to a suspensive condition, its birth or effectivity can
take place only if and when the event which constitutes the condition happens or is fulfilled. If the
suspensive condition does not take place, the parties would stand as if the conditional obligation had
never existed.
Same; Same; Same; The act of a party in treating a contract as cancelled should be made known to the
other.—Nevertheless, this being so Genato is not relieved from the giving of a notice, verbal or written,
to the Da Jose spouses for his decision to rescind their contract. In many cases, even though we upheld
the validity of a stipulation in a contract to sell authorizing automatic rescission for a violation of its
terms and conditions, at least a written notice must be sent to the defaulter informing him of the same.
The act of a party in treating a contract as cancelled should be made known to the other. For such act is
always provisional. It is always subject to scrutiny and review by the courts in case the alleged defaulter
brings the matter to the proper courts.
Same; Same; Same; Appeals; An issue which was not raised during the trial in the court below cannot be
raised for the first time on appeal.—Settled is the rule that an issue which was not raised during the trial
in the court below cannot be raised for the first time on appeal. Issues of fact and arguments not
adequately brought to the attention of the trial court need not be and ordinarily will not be considered
by a reviewing court as they cannot be raised for the first time on appeal. In fact, both courts below
correctly held that the receipt which was the result of their agreement, is a contract to sell. This was, in
fact Cheng’s contention in his pleadings before said courts. This patent twist only operates against
Cheng’s posture which is indicative of the weakness of his claim.
Same; Same; Same; When the requisites of a valid contract of sale are lacking in said receipt, therefore
the “sale” is neither valid nor enforceable.—But even if we are to assume that the receipt, Exh. “D,” is to
be treated as a conditional contract of sale, it did not acquire any obligatory force since it was subject to
the suspensive condition that the earlier contract to sell between Genato and the Da Jose spouses
should first be cancelled or rescinded—a condition never met, as Genato, to his credit, upon realizing his
error, redeemed himself by respecting and maintaining his earlier contract with the Da Jose spouses. In
fact, a careful reading of the receipt, Exh. “D,” alone would not even show that a conditional contract of
sale has been entered by Genato and Cheng. When the requisites of a valid contract of sale are lacking
in said receipt, therefore the “sale” is neither valid nor enforceable.
Same; Same; Same; The contract to be binding upon the obligee or the vendor depends upon the
fulfillment or non-fulfillment of an event.—To our mind, the trial court and the appellate court correctly
held that the agreement between Genato and Cheng is a contract to sell, which was, in fact, petitioner’s
contention in his pleadings before the said courts. Consequently, both agreements, between Genato
and the Da Jose spouses, on the one hand, and that of Genato and Cheng, on the other hand, actually,
involve two contracts to sell. The provisions of Art. 1544 of the Civil Code on double sales come to mind,
which read: “Article 1544. If the same thing should have been sold to different vendees, the ownership
shall be transferred to the person who may have first taken possession thereof in good faith, if it should
be movable property. Should it be immovable property, the ownership shall belong to the person
acquiring it who in good faith first recorded it in the Registry of Property. Should there be no inscription,
the ownership shall pertain to the person who in good faith was first in possession; and in the absence
thereof, to the person who presents the oldest title, provided there is good faith.” However, a
meticulous reading of the aforequoted provision shows that said law is not apropos to the instant case.
This provision connotes that the following circumstances must concur: “(a) The two (or more) sales
transactions in issue must pertain to exactly the same subject matter, and must be valid sales
transactions; (b) The two (or more) buyers at odds over the rightful ownership of the subject matter
must each represent conflicting interests; and (c) The two (or more) buyers at odds over the rightful
ownership of the subject matter must each have bought from the very same seller.” These situations
obviously are lacking in a contract to sell for neither a transfer of ownership nor a sales transaction has
been consummated. The contract to be binding upon the obligee or the vendor depends upon the
fulfillment or non-fulfillment of an event.
Same; Same; Same; Land Registration; Words and Phrases; “Registration,” as defined by Soler and
Castillo, means any entry made in the books of the registry, including both registration in its ordinary
and strict sense, and cancellation, annotation, and even marginal notes. In its strict acceptation, it is the
entry made in the registry which records solemnly and permanently the right of ownership and other
real rights.—“Registration,” as defined by Soler and Castillo, means any entry made in the books of the
registry, including both registration in its ordinary and strict sense, and cancellation, annotation, and
even marginal notes. In its strict acceptation, it is the entry made in the registry which records solemnly
and permanently the right of ownership and other real rights. We have ruled before that when a Deed
of Sale is inscribed in the registry of property on the original document itself, what was done with
respect to said entries or annotations and marginal notes amounted to a registration of the sale. In this
light, we see no reason why we should not give priority in right to the annotation made by the Da Jose
spouses with respect to their Contract to Sell dated September 6, 1989.
Same; Same; Damages; Damages were awarded by the appellate court on the basis of its finding that
petitioner “was in bad faith when he filed the suit for specific performance knowing fully well that his
agreement with Genato did not push through.”—Damages were awarded by the appellate court on the
basis of its finding that petitioner “was in bad faith when he filed the suit for specific performance
knowing fully well that his agreement with Genato did not push through.” Such bad faith, coupled with
his wrongful interference with the contractual relations between Genato and the Da Jose spouses,
which culminated in his filing of the present suit and thereby creating what the counsel for the
respondents describes as “a prolonged and economically unhealthy gridlock” on both the land itself and
the respondents’ rights provides ample basis for the damages awarded. Based on these overwhelming
evidence of bad faith on the part of herein petitioner Ricardo Cheng, we find that the award of damages
made by the appellate court is in order.
PETITION for review on certiorari of a decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
Francisco B. Bayona for petitioner.
Magsalin, Pobre, Lapid & Villanueva for R.B. Genato.
Benitez, Parlade, Africa, Herrera, Parlade & Panga Law Offices for Ernesto and Socorro Da Jose.
MARTINEZ, J.:

This petition for review on certiorari seeks to annul and set aside the Decision of the Court of Appeals
(CA)1 dated July 7, 1997 in CA-G.R. No. CV No. 44706 entitled “Ricardo Cheng, plaintiff-appellee, vs.
Ramon B. Genato, defendant-appellant, Ernesto R. Da Jose & Socorro B. Da Jose, Intervenors-
Appellants” which reversed the ruling of the Regional Trial Court, Branch 96 of Quezon City dated
January 18, 1994. The dispositive portion of the CA Decision reads:
“WHEREFORE, based on the foregoing, appealed decision is hereby REVERSED and SET ASIDE and
judgment is rendered ordering:
1. The dismissal of the complaint;
2. The cancellation of the annotations of the defendant-appellant’s Affidavit to Annul Contract to Sell
and plaintiff-appellee’s Notice of Adverse Claim in the subject TCT’s, namely: TCT No. T-76.196 (M) and
TCT No. T-76.197 (M);
3. Payment by the intervenors-appellants of the remaining balance of the purchase price pursuant to
their agreement with the defendant-appellant to suspend encashment of the three post-dated checks
issued since 1989;
4. Ordering the execution by the defendant-appellant Genato of the Deed of Absolute Sale over the
subject two lots covered by TCT No. T-76.196 (M) and TCT No. T-76.197 (M) in favor of intervenors-
appellants Spouses Da Jose;
5. The return by defendant-appellant Genato of the P50,000.00 paid to him by the plaintiff-appellee
Cheng; and
6. Payment by plaintiff-appellee Cheng of moral damages to herein intervenors-appellants Da Jose of
P100,000.00, exemplary damages of P50,000.00, attorney’s fees of P50,000.00, and costs of suit; and to
defendant-appellant, of P100,000.00 in exemplary damages, P50,000.00 in attorney’s fees. The amounts
payable to the defendant-appellant may be compensated by plaintiff-appellee with the amount ordered
under the immediately foregoing paragraph which defendant-appellant has to pay the plaintiff-appellee.
SO ORDERED.”2
The antecedents of the case are as follows:
Respondent Ramon B. Genato (Genato) is the owner of two parcels of land located at Paradise Farms,
San Jose del Monte, Bulacan covered by TCT No. T-76.196 (M)3 and TCT No. T-76.197 (M)4 with an
aggregate area of 35,821 square meters, more or less.
On September 6, 1989, respondent Genato entered into an agreement with respondent-spouses
Ernesto R. Da Jose and Socorro B. Da Jose (Da Jose spouses) over the abovementioned two parcels of
land. The agreement culminated in the execution of a contract to sell for which the purchase price was
P80.00 per square meter. The contract was in a public instrument and was duly annotated at the back of
the two certificates of title on the same day. Clauses 1 and 3 thereof provide:
“1. That the purchase price shall be EIGHTY (P80.00) PESOS, Philippine Currency per square meter, of
which the amount of FIFTY THOUSAND (P50,000.00) PESOS shall be paid by the VENDEE to the VENDOR
as partial down payment at the time of execution of this Contract to Sell.
x x x x x x x x x
“3. That the VENDEE, Thirty (30) DAYS after the execution of this contract, and only after having
satisfactorily verified and confirmed the truth and authenticity of documents, and that no restrictions,
limitations, and developments imposed on and/or affecting the property subject of this contract shall be
detrimental to his interest, the VENDEE shall pay to the VENDOR, NINE HUNDRED FIFTY THOUSAND
(P950,000.00) PESOS, Philippine Currency, representing the full payment of the agreed Down Payment,
after which complete possession of the property shall be given to the VENDEE to enable him to prepare
the premises and any development therein.”5
On October 4, 1989, the Da Jose spouses, not having finished verifying the titles mentioned in Clause 3
as afore-quoted, asked for and was granted by respondent Genato an extension of another 30 days—or
until November 5, 1989. However, according to Genato, the extension was granted on condition that a
new set of documents is made seven (7) days from October 4, 1989.6 This was denied by the Da Jose
spouses.
Pending the effectivity of the aforesaid extension period, and without due notice to the Da Jose spouses,
Genato executed an Affidavit to Annul the Contract to Sell,7 on October 13, 1989. Moreover, no
annotation of the said affidavit at the back of his titles was made right away. The affidavit contained,
inter alia, the following paragraphs;
“x x x x x x x x x
“That it was agreed between the parties that the agreed downpayment of P950,000.00 shall be paid
thirty (30) days after the execution of the Contract, that is on or before October 6, 1989;
“The supposed VENDEES failed to pay the said full downpayment even up to this writing, a breach of
contract;
“That this affidavit is being executed to Annul the aforesaid Contract to Sell for the vendee having
committed a breach of contract for not having complied with the obligation as provided in the Contract
to Sell”8;
On October 24, 1989, herein petitioner Ricardo Cheng
(Cheng) went to Genato’s residence and expressed interest in buying the subject properties. On that
occasion, Genato showed to Ricardo Cheng copies of his transfer certificates of title and the annotations
at the back thereof of his contract to sell with the Da Jose spouses. Genato also showed him the
aforementioned Affidavit to Annul the Contract to Sell which has not been annotated at the back of the
titles.
Despite these, Cheng went ahead and issued a check for P50,000.00 upon the assurance by Genato that
the previous contract with the Da Jose spouses will be annulled for which Genato issued a handwritten
receipt (Exh. “D”), written in this wise:
“10/24/89

Received from Ricardo Cheng
the Sum of Fifty Thousand Only (P50,000.-)
as partial for T-76.196 (M)
T-76.197 (M) area 35,821 Sq.m.
Paradise Farm, Gaya-Gaya, San Jose Del Monte Bulacan
P70/m2
plus C.G.T. etc.
(SGD.) Ramon B. Genato

Check # 470393
10/24/89”9
On October 25, 1989, Genato deposited Cheng’s check. On the same day, Cheng called up Genato
reminding him to register the affidavit to annul the contract to sell.10
The following day, or on October 26, 1989, acting on Cheng’s request, Genato caused the registration of
the Affidavit to Annul the Contract to Sell in the Registry of Deeds, Meycauayan, Bulacan as primary
entry No. 262702.11
While the Da Jose spouses were at the Office of the Registry of Deeds of Meycauayan, Bulacan on
October 27, 1989, they met Genato by coincidence. It was only then that the Da Jose spouses discovered
about the affidavit to annul their contract. The latter were shocked at the disclosure and protested
against the rescission of their contract. After being reminded that he (Genato) had given them (Da Jose
spouses) an additional 30-day period to finish their verification of his titles, that the period was still in
effect, and that they were willing and able to pay the balance of the agreed down payment, later on in
the day, Genato decided to continue the Contract he had with them. The agreement to continue with
their contract was formalized in a conforme letter dated October 27, 1989.
Thereafter, Ramon Genato advised Ricardo Cheng of his decision to continue his contract with the Da
Jose spouses and the return of Cheng’s P50,000.00 check. Consequently, on October 30, 1989, Cheng’s
lawyer sent a letter12 to Genato demanding compliance with their agreement to sell the property to
him stating that the contract to sell between him and Genato was already perfected and threatening
legal action.
On November 2, 1989, Genato sent a letter13 to Cheng (Exh. “6”) enclosing a BPI Cashier’s Check for
P50,000.00 and expressed regret for his inability to “consummate his transaction” with him. After having
received the letter of Genato on November 4, 1989, Cheng, however, returned the said check to the
former via RCPI telegram14 dated November 6, 1989, reiterating that “our contract to sell your property
had already been perfected.”
Meanwhile, also on November 2, 1989, Cheng executed an affidavit of adverse claim15 and had it
annotated on the subject TCT’s.
On the same day, consistent with the decision of Genato and the Da Jose spouses to continue with their
Contract to Sell of September 6, 1989, the Da Jose spouses paid Genato the complete down payment of
P950,000.00 and delivered to him three (3) postdated checks (all dated May 6, 1990, the stipulated due
date) in the total amount of P1,865,680.00 to cover full payment of the balance of the agreed purchase
price. However, due to the filing of the pendency of this case, the three (3) postdated checks have not
been encashed.
On December 8, 1989, Cheng instituted a complaint16 for specific performance to compel Genato to
execute a deed of sale to him of the subject properties plus damages and prayer for preliminary
attachment. In his complaint, Cheng averred that the P50,000.00 check he gave was a partial payment
to the total agreed purchase price of the subject properties and considered as an earnest money for
which Genato acceded. Thus, their contract was already perfected.
In Answer17 thereto, Genato alleged that the agreement was only a simple receipt of an option-bid
deposit, and never stated that it was a partial payment, nor is it an earnest money and that it was
subject to the condition that the prior contract with the Da Jose spouses be first cancelled.
The Da Jose spouses, in their Answer in Intervention,18 asserted that they have a superior right to the
property as first buyers. They alleged that the unilateral cancellation of the Contract to Sell was without
effect and void. They also cited Cheng’s bad faith as a buyer being duly informed by Genato of the
existing annotated Contract to Sell on the titles.
After trial on the merits, the lower court ruled that the receipt issued by Genato to Cheng unerringly
meant a sale and not just a priority or an option to buy. It cannot be true that the transaction was
subjected to some condition or reservation, like the priority in favor of the Da Jose spouses as first buyer
because, if it were otherwise, the receipt would have provided such material condition or reservation,
especially as it was Genato himself who had made the receipt in his own hand. It also opined that there
was a valid rescission of the
Contract to Sell by virtue of the Affidavit to Annul the Contract to Sell. Time was of the essence in the
execution of the agreement between Genato and Cheng, and under this circumstance demand,
extrajudicial or judicial, is not necessary. It falls under the exception to the rule provided in Article
116919 of the Civil Code. The right of Genato to unilaterally rescind the contract is said to be under
Article 119120 of the Civil Code. Additionally, after reference was made to the substance of the
agreement between Genato and the Da Jose spouses, the lower court also concluded that Cheng should
be preferred over the intervenors-Da Jose spouses in the purchase of the subject properties. Thus, on
January 18, 1994 the trial court rendered its decision the decretal portion of which reads:
WHEREFORE, judgment is hereby rendered:
1. Declaring the contract to sell dated September 6, 1989 executed between defendant Ramon Genato,
as vendor, and intervenors Spouses Ernesto and Socorro Da Jose, as vendees, resolved and rescinded in
accordance with Art. 1191, Civil Code, by virtue of defendant’s affidavit to annul contract to sell dated
October 13, 1989 and as the consequence of intervenors’ failure to execute within seven (7) days from
October 4, 1989 another contract to sell pursuant to their mutual agreement with the defendant;
2. Ordering defendant to return to the intervenors the sum of P1,000,000.00, plus interest at the legal
rate from November 2, 1989 until full payment;
3. Directing defendant to return to the intervenors the three (3) postdated checks immediately upon
finality of this judgment;
4. Commanding defendant to execute with and in favor of the plaintiff Ricardo Cheng, as vendee, a deed
of conveyance and sale of the real properties described and covered in Transfer Certificates of Title Nos.
T-76.196 (M) and T-76.197 (M) of the Registry of Deeds of Bulacan, Meycauayan Branch, at the rate of
P70.00/square meter, less the amount of P50,000.00 already paid to defendant, which is considered as
part of the purchase price, with the plaintiff being liable for payment of the capital gains taxes and other
expenses of the transfer pursuant to the agreement to sell dated October 24, 1989; and
5. Ordering defendant to pay the plaintiff and the intervenors as follows:
a/ P50,000.00, as nominal damages, to plaintiff;
b/ P50,000.00, as nominal damages, to intervenors;
c/ P20,000.00, as and for attorney’s fees, to plaintiff;
d/ P20,000.00 as and for attorney’s fees, to intervenors; and
e/ Cost of the suit.
x x x x x x x x x”
Not satisfied with the aforesaid decision, herein respondents Ramon Genato and Da Jose spouses
appealed to the court a quo which reversed such judgment and ruled that the prior contract to sell in
favor of the Da Jose spouses was not validly rescinded; that the subsequent contract to sell between
Genato and Cheng, embodied in the handwritten receipt, was without force and effect due to the failure
to rescind the prior contract; and that Cheng should pay damages to the respondents herein being
found to be in bad faith.
Hence this petition.21
This petition for review, assails the Court of Appeals’ Decision on the following grounds: (1) that the Da
Jose spouses’ Contract to Sell has been validly rescinded or resolved; (2) that Ricardo Cheng’s own
contract with Genato was not just a contract to sell but one of conditional contract of sale which gave
him better rights, thus precluding the application of the rule on double sales under Article 1544, Civil
Code; and (3) that, in any case, it was error to hold him liable for damages.
The petition must be denied for failure to show that the Court of Appeals committed a reversible error
which would warrant a contrary ruling.
No reversible error can be ascribed to the ruling of the Court of Appeals that there was no valid and
effective rescission or resolution of the Da Jose spouses’ Contract to Sell, contrary to petitioner’s
contentions and the trial court’s erroneous ruling.
In a Contract to Sell, the payment of the purchase price is a positive suspensive condition, the failure of
which is not a breach, casual or serious, but a situation that prevents the obligation of the vendor to
convey title from acquiring an obligatory force.22 It is one where the happening of the event gives rise
to an obligation. Thus, for its non-fulfillment there will be no contract to speak of, the obligor having
failed to perform the suspensive condition which enforces a juridical relation. In fact with this
circumstance, there can be no rescission of an obligation that is still non-existent, the suspensive
condition not having occurred as yet.23 Emphasis should be made that the breach contemplated in
Article 1191 of the New Civil Code is the obligor’s failure to comply with an obligation already extant,
not a failure of a condition to render binding that obligation.24
Obviously, the foregoing jurisprudence cannot be made to apply to the situation in the instant case
because no default can be ascribed to the Da Jose spouses since the 30-day extension period has not yet
expired. The Da Jose spouses’ contention that no further condition was agreed when they were granted
the 30-days extension period from October 7, 1989 in connection with clause 3 of their contract to sell
dated September 6, 1989 should be upheld for the following reasons, to wit: firstly, If this were not true,
Genato could not have been persuaded to continue his contract with them and later on agree to accept
the full settlement of the purchase price knowing fully well that he himself imposed such sine qua non
condition in order for the extension to be valid; secondly, Genato could have immediately annotated his
affidavit to annul the contract to sell on his title when it was executed on October 13, 1989 and not only
on October 26, 1989 after Cheng reminded him of the annotation; thirdly, Genato could have sent at
least a notice of such fact, there being no stipulation authorizing him for automatic rescission, so as to
finally clear the encumbrance on his titles and make it available to other would-be buyers. It likewise
settles the holding of the trial court that Genato “needed money urgently.”
Even assuming in gratia argumenti that the Da Jose spouses defaulted, as claimed by Genato, in their
Contract to Sell, the execution by Genato of the affidavit to annul the contract is not even called for. For
with or without the aforesaid affidavit their non-payment to complete the full downpayment of the
purchase price ipso facto avoids their contract to sell, it being subjected to a suspensive condition.
When a contract is subject to a suspensive condition, its birth or effectivity can take place only if and
when the event which constitutes the condition happens or is fulfilled.25 If the suspensive condition
does not take place, the parties would stand as if the conditional obligation had never existed.26
Nevertheless, this being so Genato is not relieved from the giving of a notice, verbal or written, to the
Da Jose spouses for his decision to rescind their contract. In many cases,27 even though we upheld the
validity of a stipulation in a contract to sell authorizing automatic rescission for a violation of its terms
and conditions, at least a written notice must be sent to the defaulter informing him of the same. The
act of a party in treating a contract as cancelled should be made known to the other.28 For such act is
always provisional. It is always subject to scrutiny and review by the courts in case the alleged defaulter
brings the matter to the proper courts. In University of the Philippines vs. De Los Angeles,29 this Court
stressed and we quote:
In other words, the party who deems the contract violated may consider it resolved or rescinded, and
act accordingly, without previous court action, but it proceeds as its own risk. For it is only the final
judgment of the corresponding court that will conclusively and finally settle whether the action taken
was or was not correct in law. But the law definitely does not require that the contracting party who
believes itself injured must first file suit and wait for a judgment before taking extrajudicial steps to
protect its interest. Otherwise, the party injured by the other’s breach will have to passively sit and
watch its damages accumulate during the pendency of the suit until the final judgment of rescission is
rendered when the law itself requires that he should exercise due diligence to minimize its own
damages (Civil Code, Article 2203).
This rule validates, both in equity and justice, contracts such as the one at bar, in order to avoid and
prevent the defaulting party from assuming the offer as still in effect due to the obligee’s tolerance for
such non-fulfillment. Resultantly, litigations of this sort shall be prevented and the relations among
would-be parties may be preserved. Thus, Ricardo Cheng’s contention that the Contract to Sell between
Genato and the Da Jose spouses was rescinded or resolved due to Genato’s unilateral rescission finds no
support in this case.
Anent the issue on the nature of the agreement between Cheng and Genato, the records of this case are
replete with admissions30 that Cheng believed it to be one of a Contract to Sell and not one of
Conditional Contract of Sale which he, in a transparent turn-around, now pleads in this Petition. This
ambivalent stance of Cheng is even noted by the appellate court, thus:
“At the outset, this Court notes that plaintiff-appellee was inconsistent in characterizing the contract he
allegedly entered into. In his complaint,31 Cheng alleged that the P50,000.00 down payment was
earnest money. And next, his testimony32 was offered to prove that the transaction between him and
Genato on October 24, 1989 was actually a perfected contract to sell.”33
Settled is the rule that an issue which was not raised during the trial in the court below cannot be raised
for the first time on appeal.34 Issues of fact and arguments not adequately brought to the attention of
the trial court need not be and ordinarily will not be considered by a reviewing court as they cannot be
raised for the first time on appeal.35 In fact, both courts below correctly held that the receipt which was
the result of their agreement, is a contract to sell. This was, in fact Cheng’s contention in his pleadings
before said courts. This patent twist only operates against Cheng’s posture which is indicative of the
weakness of his claim.
But even if we are to assume that the receipt, Exh. “D,” is to be treated as a conditional contract of sale,
it did not acquire any obligatory force since it was subject to the suspensive condition that the earlier
contract to sell between Genato and the Da Jose spouses should first be cancelled or rescinded—a
condition never met, as Genato, to his credit, upon realizing his error, redeemed himself by respecting
and maintaining his earlier contract with the Da Jose spouses. In fact, a careful reading of the receipt,
Exh. “D,” alone would not even show that a conditional contract of sale has been entered by Genato and
Cheng. When the requisites of a valid contract of sale are lacking in said receipt, therefore the “sale” is
neither valid nor enforceable.36
To support his now new theory that the transaction was a conditional contract of sale, petitioner
invokes the case of Coronel vs. Court of Appeals,37 as the law that should govern their Petition. We do
not agree. Apparently, the factual milieu in Coronel is not on all fours with those in the case at bar.
In Coronel, this Court found that the petitioners therein clearly intended to transfer title to the buyer
which petitioner themselves admitted in their pleading. The agreement of the parties therein was
definitively outlined in the “Receipt of Down Payment” both as to property, the purchase price, the
delivery of the seller of the property and the manner of the transfer of title subject to the specific
condition that upon the transfer in their names of the subject property the Coronels will execute the
deed of absolute sale.
Whereas, in the instant case, even by a careful perusal of the receipt, Exh. “D,” alone such kind of
circumstances cannot be ascertained without however resorting to the exceptions of the Rule on Parol
Evidence.
To our mind, the trial court and the appellate court correctly held that the agreement between Genato
and Cheng is a contract to sell, which was, in fact, petitioner’s contention in his pleadings before the said
courts. Consequently, both agreements, between Genato and the Da Jose spouses, on the one hand,
and that of Genato and Cheng, on the other hand, actually involve two contracts to sell. The provisions
of Art. 1544 of the Civil Code on double sales come to mind, which read:
“Article 1544. If the same thing should have been sold to different vendees, the ownership shall be
transferred to the person who may have first taken possession thereof in good faith, if it should be
movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in good
faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was first in
possession; and in the absence thereof, to the person who presents the oldest title, provided there is
good faith”
However, a meticulous reading of the aforequoted provision shows that said law is not apropos to the
instant case. This provision connotes that the following circumstances must concur:
“(a) The two (or more) sales transactions in issue must pertain to exactly the same subject matter, and
must be valid sales transactions;
(b) The two (or more) buyers at odds over the rightful ownership of the subject matter must each
represent conflicting interests; and
(c) The two (or more) buyers at odds over the rightful ownership of the subject matter must each have
bought from the very same seller.”
These situations obviously are lacking in a contract to sell for neither a transfer of ownership nor a sales
transaction has been consummated. The contract to be binding upon the obligee or the vendor depends
upon the fulfillment or non-fulfillment of an event.
Notwithstanding this contrary finding with the appellate court, we are of the view that the governing
principle of Article 1544, Civil Code, should apply in this situation. Jurisprudence38 teaches us that the
governing principle is PRIMUS TEMPORE, PORTIOR JURE (first in time, stronger in right). For not only was
the contract between herein respondents first in time; it was also registered long before petitioner’s
intrusion as a second buyer. This principle only applies when the special rules provided in the aforecited
article of the Civil Code do not apply or fit the specific circumstances mandated under said law or by
jurisprudence interpreting the article.
The rule exacted by Article 1544 of the Civil Code for the second buyer to be able to displace the first
buyer are:
(1) that the second buyer must show that he acted in good faith (i.e. in ignorance of the first sale and of
the first buyer’s rights) from the time of acquisition until title is transferred to him by registration or
failing registration, by delivery of possession;39
(2) the second buyer must show continuing good faith and innocence or lack of knowledge of the first
sale until his contract ripens into full ownership through prior registration as provided by law.40
Thus, in the case at bar, the knowledge gained by the Da Jose spouses, as first buyers, of the new
agreement between Cheng and Genato will not defeat their rights as first buyers except where Cheng,
as second buyer, registers or annotates his transaction or agreement on the title of the subject
properties in good faith ahead of the Da Jose spouses. Moreover, although the Da Jose spouses, as first
buyers, knew of the second transaction it will not bar them from availing of their rights granted by law,
among them, to register first their agreement as against the second buyer.
In contrast, knowledge gained by Cheng of the first transaction between the Da Jose spouses and
Genato defeats his rights even if he is first to register the second transaction, since such knowledge
taints his prior registration with bad faith.
“Registration,” as defined by Soler and Castillo, means any entry made in the books of the registry,
including both registration in its ordinary and strict sense, and cancellation, annotation, and even
marginal notes.41 In its strict acceptation, it is the entry made in the registry which records solemnly
and permanently the right of ownership and other real rights.42 We have ruled43 before that when a
Deed of Sale is inscribed in the registry of property on the original document itself, what was done with
respect to said entries or annotations and marginal notes amounted to a registration of the sale. In this
light, we see no reason why we should not give priority in right the annotation made by the Da Jose
spouses with respect to their Contract to Sell dated September 6, 1989.
Moreover, registration alone in such cases without good faith is not sufficient. Good faith must concur
with registration for such prior right to be enforceable. In the instant case, the annotation made by the
Da Jose spouses on the titles of Genato of their “Contract To Sell” more than satisfies this requirement.
Whereas in the case of Genato’s agreement with Cheng such is unavailing. For even before the receipt,
Exh. “D,” was issued to Cheng information of such pre-existing agreement has been brought to his
knowledge which did not deter him from pursuing his agreement with Genato. We give credence to the
factual finding of the appellate court that “Cheng himself admitted that it was he who sought Genato in
order to inquire about the property and offered to buy the same.”44 And since Cheng was fully aware,
or could have been if he had chosen to inquire, of the rights of the Da Jose spouses under the Contract
to Sell duly annotated on the transfer certificates of titles of Genato, it now becomes unnecessary to
further elaborate in detail the fact that he is indeed in bad faith in entering into such agreement. As we
have held in Leung Yee vs. F.L. Strong Machinery Co.:45
“One who purchases real estate with knowledge of a defect x x x of title in his vendor cannot claim that
he has acquired title thereto in good faith as against x x x x an interest therein; and the same rule must
be applied to one who has knowledge of facts which should have put him upon such inquiry and
investigation as might be necessary to acquaint him with the defects in the title of his vendor. A
purchaser cannot close his eyes to facts which should put a reasonable man upon his guard, and then
claim that he acted in good faith under the belief that there was no defect in the title of the vendor. His
mere refusal to believe that such defect exists, or his willful closing of his eyes to the possibility of the
existence of a defect in his vendor’s title, will not make him an innocent purchaser for value, if it
afterwards develops that the title was in fact defective, and it appears that he had such notice of the
defect as would have led to its discovery had he acted with that measure of precaution which may
reasonably be required of a prudent man in a like situation. Good faith, or lack of it, is in its last analysis
a question of intention; but in ascertaining the intention by which one is actuated on a given occasion,
we are necessarily controlled by the evidence as to the conduct and outward acts by which alone the
inward motive may, with safety, be determined. So it is that ‘the honesty of intention,’ ‘the honest
lawful intent,’ which constitutes good faith implies a ‘freedom from knowledge and circumstances which
ought to put a person on inquiry,’ and so it is that proof of such knowledge overcomes the presumption
of good faith in which the courts always indulge in the absence of the proof to the contrary. Good faith,
or the want of it, is not a visible, tangible fact that can be seen or touched, but rather a state or
condition of mind which can only be judge of by actual or fancied tokens or signs.” (Wilder vs. Gilman,
55 Vt. 504, 505; Cf. Cardenas vs. Miller, 108 Cal., 250; Breaux-Renoudet, Cypress Lumber Co. vs. Shadel,
52 La. Ann., 2094-2098; Pinkerton Bros. Co. vs. Bromely, 119 Mich., 8, 10, 17.) [Emphasis ours]
Damages were awarded by the appellate court on the basis of its finding that petitioner “was in bad
faith when he filed the suit for specific performance knowing fully well that his agreement with Genato
did not push through.”46 Such bad faith, coupled with his wrongful interference with the contractual
relations between Genato and the Da Jose spouses, which culminated in his filing of the present suit and
thereby creating what the counsel for the respondents describes as “a prolonged and economically
unhealthy gridlock”47 on both the land itself and the respondents’ rights provides ample basis for the
damages awarded. Based on these overwhelming evidence of bad faith on the part of herein petitioner
Ricardo Cheng, we find that the award of damages made by the appellate court is in order.
WHEREFORE, premises considered, the instant petition for review is DENIED and the assailed decision is
hereby AFFIRMED in toto.
SO ORDERED.
Bellosillo (Chairman), Puno and Mendoza, JJ., concur.
Petition denied, judgment affirmed in toto.
Notes.—In contracts to sell, ownership is retained by the seller and is not to pass until the full payment
of the price. (Heirs of Pedro Escanlar vs. Court of Appeals, 281 SCRA 176 [1997])
In a contract of sale, the non-payment of the price is a resolutory condition which extinguishes the
transaction that, for a time, existed and discharges the obligations created thereunder. (Id.)
Where all the essential requisites of a contract are present, the result is a valid contract, and where the
parties introduce restrictions or modalities, the lack of which will not affect the validity of the contract
but only its effectivity. (Id.)
In a contract to sell, by agreement the ownership is reserved in the vendor and is not to pass until the
full payment of the price. (People’s Industrial and Commercial Corporation vs. Court of Appeals, 281
SCRA 206 [1997])
In a contract of sale, the vendor has lost and cannot recover ownership until and unless the contract is
resolved or rescinded. (Id.)
A deed of sale is considered absolute in nature where there is neither a stipulation in the deed that title
to the property sold is reserved in the seller until the full payment of the price, nor one giving the
vendor the right to unilaterally resolve the contract the moment the buyer fails to pay within a fixed
period. (Id.) [Cheng vs. Genato, 300 SCRA 722(1998)]

G.R. No. 115788. September 17, 1998.*
SPS. SONYA & ISMAEL MATHAY, JR., petitioners, vs. HON. COURT OF APPEALS, SPS. TEODULFO &
SYLVIA ATANGAN, SPS. AGUSTINA & AMOR POBLETE, SPS. EDUARDO & FELICISIMA TIRONA,
respondents.
Land Titles; Sales; Purchasers in Good Faith; Words and Phrases; Evidence; Burden of Proof; “Purchaser
in Good Faith,” Defined; He who asserts the status of a purchaser in good faith and for value, has the
burden of proving such assertion.—A purchaser in good faith and for value is defined as “one who buys
property of another, without notice that some other person has a right to, or interest in, such property
and pays a full and fair price for the same at the time of such purchase, or before he has notice of the
claims or interest of some other person in the property.” As a rule, he who asserts the status of a
purchaser in good faith and for value, has the burden of proving such assertion. This onus probandi
cannot be discharged by mere invocation of the legal presumption of good faith, i.e., “that everyone is
presumed to act in good faith.”
Same; Same; Same; As is the common practice in the real estate industry, an ocular inspection of the
premises involved is a safeguard a cautious and prudent purchaser usually takes, and should he find out
that the land he intends to buy is occupied by anybody else other than the seller who is not in actual
possession, it would then be incumbent upon the purchaser to verify the extent of the occupant’s
possessory rights.—Here, petitioners cannot be categorized as purchasers in good faith. Prior to the
fencing of subject land, neither they (Mathays) nor their predecessors-in-interest (Banayo and Pugay)
ever possessed the same. In fact, at the time the said property was sold to petitioners, the private
respondents were not only in actual possession of the same but also built their houses thereon,
cultivated it and were in full enjoyment of the produce and fruits gathered therefrom. Although it is a
recognized principle that a person dealing on a registered land need not go beyond its certificate of title,
it is also a firmly settled rule that where there are circumstances which would put a party on guard and
prompt him to investigate or inspect the property being sold to him, such as the presence of
occupants/tenants thereon, it is, of course, expected from the purchaser of a valued piece of land to
inquire first into the status or nature of possession of the occupants, i.e., whether or not the occupants
possess the land en concepto de dueño , in concept of owner. As is the common practice in the real
estate industry, an ocular inspection of the premises involved is a safeguard a cautious and prudent
purchaser usually takes. Should he find out that the land he intends to buy is occupied by anybody else
other than the seller who, as in this case, is not in actual possession, it would then be incumbent upon
the purchaser to verify the extent of the occupant’s possessory rights. The failure of a prospective buyer
to take such precautionary steps would mean negligence on his part and would thereby preclude him
from claiming or invoking the rights of a “purchaser in good faith.”
Same; Same; Same; No one can transfer a greater right to another than he himself has—the spring
cannot rise higher than its source.—The aforesaid ruling of the Court of Appeals accords with the Latin
maxim: nemo potest plus juris ad alium transferre quam ipse habet. “No one can transfer a greater right
to another than he himself has.” Thus, in Calalang vs. Register of Deeds of Quezon City, this Court held:
“Needless to state, all subsequent certificates of title including petitioner’s titles are void because of the
legal truism that the spring cannot rise higher than its source. The law must protect and prefer the
lawful owner of registered title over the transferee of a vendor bereft of any transmissible rights.”
Same; Same; Same; Double Sales; A certificate is not conclusive evidence of title if it is shown that the
same land had already been registered and an earlier certificate for the same is in existence.—But “a
certificate is not conclusive evidence of title if it is shown that the same land had already been
registered and an earlier certificate for the same is in existence.” In the case at bar, as borne out by
pertinent records, the private respondents obtained their rights and title from TCT No. T-85866, which
was registered on August 9, 1976 under the name of Heirs of Onofre Batallones and Patronillo Quimio.
On the part of petitioners, their supposed title originated from a spurious title of Pedro Banayo and
Pablo Pugay illegally registered on February 28, 1980.
Same; Same; Same; Same; Land Registration; On the assumption that there was regularity in the
registration leading to the eventual issuance of two transfer certificates of title, the better approach is
to trace the original certificates from which the certificates of title in dispute were derived, and should
there be only one common original certificate of title, the transfer certificate issued on an earlier date
along the line must prevail, absent any anomaly or irregularity tainting the process of registration.—
Where two transfer certificates of title have been issued on different dates, to two different persons, for
the same parcel of land even if both are presumed to be title holders in good faith, it does not
necessarily follow that he who holds the earlier title should prevail. On the assumption that there was
regularity in the registration leading to the eventual issuance of subject transfer certificates of title, the
better approach is to trace the original certificates from which the certificates of title in dispute were
derived. Should there be only one common original certificate of title, as in this case under
consideration, the transfer certificate issued on an earlier date along the line must prevail, absent any
anomaly or irregularity tainting the process of registration.
PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.
Elmor P. Orajay for petitioners.
Tinoco, Tinoco & Associates collaborating counsel for petitioners.
Franco L. Loyola for private respondents.
559

VOL. 295, SEPTEMBER 17, 1998
559
Mathay vs. Court of Appeals
PURISIMA, J.:

At bar is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court, seeking to set
aside the Decision1 of the Court of Appeals2 dated November 18, 1993 in CA-G.R. CV No. 37902,
reversing the Decision3 dated March 30, 1992 in Civil Case Nos. TM-175, 180 and 206 of Branch 23,4
Regional Trial Court of Trece Martires City, Province of Cavite.
The antecedent facts which gave rise to private respondents’ complaints are summarized in the Decision
of the lower court, as follows:
“Civil Case No. TM-175 entitled “Spouses Teodulfo T. Atangan and Silvia [sic] L. Atangan vs. Spouses
Sonya Mathay and Ismael Mathay, Jr., and the Register of Deeds of Cavite,” involves (2) *sic+ parcels of
land situated in Tanza, Cavite, covered by Transfer Certificate of Title Nos. T-195350 covering Lot No.
2186-A, issued by the Office of the Register of Deeds of Cavite in the name of Spouses Teodulfo T.
Atangan and Silvia [sic] L. Atangan, and TCT No. T-195351, covering Lot No. 2186-C, issued in the name
of Silvia [sic] L. Atangan and Teodulfo T. Atangan, on July 24, 1985.
PLAINTIFFS allege that:
1) they are the registered owners of two (2) parcels of land situated in Tanza, Cavite having purchased
the same from Spouses Tomas Lucido and Eustaquia Villanueva as evidenced by a Deed of Sale; 2) they
were issued TCT Nos. T-195350 and T-195351; 3) the vendors, spouses Tomas Lucido and Eustaquia
Villanueva were also issued TCT Nos. T-192527 and T-192529 by the Register of Deeds of Cavite, which
were cancelled in favor of the plaintiffs; 4) vendors’ titles which were transferred to plaintiffs were
obtained by virtue of the decision in Civil Case No. NC-709 entitled Tomas Lucido vs.
_______________

1 Rollo, pp. 34-80.
2 Fourth Division composed of Associate Justices Corona Ibay-Somera (ponente), Nathanael O. De Pano,
Jr. (Chairman) and Asaali S. Isnani (member).
3 “Annex A,” CA Original Rollo.
4 Presided by Judge Ramon Añonuevo.
560

560
SUPREME COURT REPORTS ANNOTATED
Mathay vs. Court of Appeals
Juana Onate Batallones and Petronilla C. Quimio, Director of Lands, and Registers (sic) of Deeds of
Cavite; 5) the heirs of Onofre Batallones and Norberto Quimio are the vendees of the said lands from
the Bureau of Lands as evidenced by a Certification issued by Adelwisa P. Onga, (sic) Record Officer of
the District Land Office of Trece Martires City; 6) the sale of the said parcels of land from the Bureau of
Lands in favor of the heirs of Batallones and Quimio was also evidenced by a Deed of Conveyance duly
issued by Bureau of Lands; 7) from the time they obtained titles of the two parcels of land [they] have
taken possession and paid the corresponding realty property taxes; 8) defendants have enclosed a
portion of said property with a fence and occupied 23,800 square meters without the consent and will
of plaintiffs; 9) plaintiffs have learned that defendants as vendees have also issued title covering the
same land in the name of the plaintiffs under TCT No. T-113047; 10) the titles issued to defendants was
(sic) the product of forgery because it was based on an alleged TCT No. T-3444 in favor of Pedro Banayo
and Pablo Pugay of Trece Martires City who have no right whatsoever on the real estate in question; 11)
upon investigation, it was certified by the Bureau of Lands that the said titles were falsified and forged
because alleged Deed No. V-12918 was issued to one Jack C. Callado for Lot 18, Block 56, Tala Estate
situated in Caloocan City and there was no record in the Bureau of Lands that Deed No. V-12918 was
issued for Lot 2886, S.C. Malabon Estate, Cavite in favor of Pedro Banayo and Pablo Pugay from whom
defendants have allegedly acquired title over the said property; 12) considering that the title of the
defendants have no basis in law and fact and that the same was illegally, unlawfully and maliciously
issued by the Register of Deeds on the basis of forged and falsified and none [sic] existing documents as
basis for the issuance thereof, the same may be cancelled and defendants have no right to take
possession of the real properties thereon including the portion pertaining to the herein plaintiffs
consisting of 23,800 square meters, more or less; 13) in view of bad faith, illegal and unlawful actuations
of the defendants in obtaining titles over the property in question thru forged and falsified documents,
plaintiffs suffered sleepless nights, anxiety, mental anguish for which they are entitled to claim for moral
damages in the sum of P100,000.00; 14) despite repeated demands from the plaintiffs for the
defendnats (sic) to desist from enclosing the titled property with a fence, the latter without any lawful
right insisted and actually closed their property with a fence, causing irreparable damage and prejudice
to the plaintiffs; 15) in view of the illegal, unlawful, mali-
561

VOL. 295, SEPTEMBER 17, 1998
561
Mathay vs. Court of Appeals
cious and bad faith of the defendants and in disregard of the rights of the plaintiffs, the latter are
constrained to hire the services of counsel for which they agreed to pay the sum of P50,000.00 in
addition to the appearance fee of P500.00 every hearing of this case.
x x x x x x x x x
Involved in Civil Case No. TM-180 entitled Sps. Agustina Poblete and Amor Poblete vs. Sps. Sonya
Mathay and Ismael Mathay, Jr., and the Register of Deeds of Cavite for Annulment of Titles and
Recovery of Possession, is a parcel of land situated in Tanza, Cavite, covered by Transfer Certificate of
Title Nos. T-192532 registered in the name of Juana Batallones and Gaudencio Quimio which was
allegedly sold to the herein plaintiff, as per “Deed of Conditional Sale” dated December 28, 1987.
PLAINTIFFS allege that:
1) Plaintiffs are the registered owners of a parcel of land situated in Tanza, Cavite having purchased the
same from Juana Batallones and Gaudencio Quimio for themselves and on behalf of their co-heirs as
evidenced by Deed of Sale;
2) Plaintiffs-predecessors-in-interest were duly issued Certificate of Title No. T-192532;
3) said vendees whose titles aforesaid was transferred in favor of the plaintiffs have obtained the title by
virtue of the decision by then Court of First Instance of Naic, Cavite in Civil Case No. NC-709 entitled
Tomas Lucido versus Juana Onate Batallones and Petronilla Q. Quimio, Director of Lands, the Register of
Deeds of Cavite;
4) the heirs of Onofre Batallones and Modesta Quimio are the vendees of the land from the Bureau of
Lands as evidenced by a Certification issued by Adelwisa P. Ong, Record Officer of the District Land
Office of Trece Martires City;
5) the sale of the said parcel of land from the Bureau of Lands in favor of the heirs of Batallones and
Quimio was also evidenced by a Deed of Conveyance duly issued by the Bureau of Lands;
6) plaintiffs have taken possession thereof;
7) defendants have enclosed a portion of said property with a fence and occupied 114,987 square
meters thereof without the consent and against the will of plaintiffs;
562

562
SUPREME COURT REPORTS ANNOTATED
Mathay vs. Court of Appeals
8) plaintiffs have learned that defendants as vendees have been also issued Transfer Certificate of Title
covering the same land titled in the name of the plaintiffs under TCT No. T-112047;
9) the title issued to defendants was the product of forgery because it was based on an alleged TCT No.
T-111070 in favor of Pedro Banayo and Pablo Pugay of Trece Martires City who have no right
whatsoever on the real estate in question;
10) upon investigation it was certified by the Bureau of Lands that the said title was falsified and forged
because alleged Deed No. V-12918 was issued to one Juana C. Collado for Lot 18, Block 56, Tala Estate
situated in Caloocan City and that there was (sic) no records in the Bureau of Lands that Deed No. 12918
was issued Lot 2886, S.C. Malabon Estate, Cavite in favor of Pedro Banayo and Pablo Pugay to whom
defendants have allegedly acquired title over the said property;
11) considering that the title of the defendants have (sic) no basis in law and in fact and that the same
was illegally, unlawfully and maliciously issued by the Register of Deeds on the basis of forged and
falsified and none [sic] existing documents as basis for issuance thereof, the same may be cancelled and
defendants have no right to take possession of the real property thereon including the portion
pertaining to the herein plaintiffs consisting of 114,987 square meters more or less, said title creates
cloud on the title of plaintiffs and by their predecessors-in-interest and as such plaintiffs could not deal
on said property and complete transactions thereto, thereby irreparable damage (sic);
12) as a result of the illegal, unlawful, unjust and malicious actuations of the defendants, plaintiffs were
deprived of the use of the said parcel of land unlawfully and illegally occupied by them and they failed to
introduce the necessary improvements thereon and for which they suffered damages in the amount of
not less than P50,000.00;
13) in view of the bad faith, illegal and unlawful actuations of the defendants in obtaining title over the
property [, plaintiffs] suffered from sleepless nights, anxiety, mental anguish for while (sic) they are also
entitled to claim for moral damages in the sum of P100,000.00;
14) despite repeated demands from the plaintiffs for the defendants to desist from enclosing the titled
property with a fence, the latter without any lawful right insisted and actually enclosed
563

VOL. 295, SEPTEMBER 17, 1998
563
Mathay vs. Court of Appeals
their property with a fence, causing irreparable damage and prejudice to the plaintiffs;
15) in view of the illegal, unlawful, malicious and bad faith of defendants and disregard of the right of
the plaintiffs, the latter are constrained to hire the services of counsel for which they agreed to pay the
sum of P50,000.00 in addition to appearance of P500.00 every hearing of this case;5
x x x x x x x x x
In Civil Case No. TM-206 entitled Spouses Eduardo and Felicisima Tirona, et al. vs. Spouses Sonia (sic)
Mathay, et al., for “Quieting of Title, Annulment of Title and Recovery of Possession with Damage,” etc.
PLAINTIFFS, allege that:
3) on December 31, 1985, Spouses Bonifacio Motas and Juliana Motas bought a parcel of land situated
at (sic) Tanza, Cavite known as Lot 2186-B of Psu-04-01892, containing an area of 18,943 square meters
covered by Transfer of (sic) Certificate of Title No. T-192530 of the Registry of Deeds of Cavite from
David Quimio as evidenced by a Deed of Absolute Sale;
4) Spouses Bonifacio Motas and Juliana Motas issued TCT No. T-203730 by the Register of Deeds of
Cavite;
5) Vendors David Quimio, Sr., et al., are the previous registered owners of said parcel of land as
evidenced by TCT No. T-192530;
6) Vendors David Quimio, Sr., whose title was transferred to Motas have obtained rights and interest
thereon from their predecessors who were vendees from the Bureau of Lands which was confirmed in
the Decision of then Court of First Instance of Cavite in Civil Case No. 809 entitled Tomas Lucido versus
Juana Batallones and Petronilla Quimio, et al., issued on January 30, 1981;
7) said parcel of land was subdivided under Psu-04-01763 into eight lots as evidenced by Sub-division
Plan; (sic)
_______________

5 As Answer to the Complaint, defendant Spouses Mathay interposed exactly the same affirmative
defenses they put up in Civil Case No. TM-175.
564

564
SUPREME COURT REPORTS ANNOTATED
Mathay vs. Court of Appeals
8) plaintiffs bought the subdivided lots from Motas in good faith, and issued Transfer Certificate of Titles
by the Office of the Register of Deeds of Cavite, as follows:

NAME
LOT
TCT NO.
AREA
1.
Sps. Eduardo &
2186-D-6
203728
3,000 sq. m.

Felicisima Tirona
2186-D-1
203723
741 sq. m.
2.
Soledad Motas & Sps.
2186-D-8
206078
3,409 sq. m.

Ignacio San Jose &




Lucila San Jose
2186-D-8
206078
1,591 sq. m.
3.
Anania Cervania
2186-D-3
203725
2,500 sq. m.
4.
Ricardo Malabanan
2186-D-4
203726
2,500 sq. m.
5.
Plocerfina Tanyag
2186-D-2
203724
700 sq. m.
6.
Ruperta Bartolome
2186-D-5B
220606
550 sq. m.


2186-D-5C
220607
700 sq. m.


2186-D-5D
220608
700 sq. m.


2186-D-A
220605
550 sq. m.
9) plaintiffs are the one (sic) paying the corresponding real property taxes thereon and were issued
corresponding tax declaration by the Office of the Provincial Assessor of Cavite;
10) plaintiffs have come to know that defendants Spouses Sonia (sic) Mathay and Ismael Mathay, Jr.
have enclosed among others said real properties of the plaintiffs with a fence and took physical
possession thereof without the knowledge and consent of the plaintiffs;
11) plaintiffs have learned also that defendants have also issued Transfer Certificate of Title covering
among others the same land titled in the name of the plaintiffs under Transfer Certificate of Title No. T-
113047;
12) the title issued to defendants was the product of forgery because it was based on an alleged
Transfer of Certificate of Title No. 3444 in favor of Pedro Banayo and Pablo Pugay of Trece Martires City
who have no right whatsoever on the real estate in question and who have been in prior physical
possession thereof, as such said title is void-ab-initio;
13) upon investigation, it was certified by the Bureau of Lands that the said titles were based on falsified
and forged documents because alleged Deed No. V-12918 which was the basis for the issuance thereof,
was issued to one Jack C. Gallado for Lot 18, Block 56, Tala Estate situated in Caloocan City and that
there was no
565

VOL. 295, SEPTEMBER 17, 1998
565
Mathay vs. Court of Appeals
records in the Bureau of Lands that Deed No. V-12918 was issued for Lot 2886, S.C. Malabon Estate,
Cavite in favor of Pedro Banayo and Pablo Pugay to whom defendants have allegedly acquired title over
the said property;
14) the title of the defendants have no basis in law and in fact and that the same was illegally, unlawfully
and maliciously issued by the Register of Deeds of Cavite on the basis of forged and falsified and none
[sic] existing documents;
15) said Transfer Certificate of Titles were illegally and unlawfully issued without basis in favor of
defendants Mathay and their predecessors-in-interest, creating a cloud on the titles of the plaintiffs and
as such may be declared null and void;
16) plaintiffs have the right to exclude defendants Mathays from their enjoyment of their property and
considering that said defendants have been duly informed of the defect and nullity of their title yet they
insisted and continue to insist in the enjoyment of the right from a void title;
17) as a result of the illegal, unlawful, unjust and malicious actuations of the defendants, plaintiffs were
deprived of the use of the said parcel of lands unlawfully and illegally occupied by defendants Mathay as
they failed to introduce the necessary improvements thereon and for which they suffered damages in
the amount of not less than P50,000.00 and the amount of P500.00 a month for each lot as reasonable
compensation for the use of their lands;
18) in view of the bad faith, illegal and unlawful actuations of the defendants in obtaining titles over the
property in question thru forged and falsified documents, plaintiffs suffered from sleepless nights,
anxiety, mental anguish for which they are also entitled to claim for moral damages in the sum of
P150,000.00;
19) in view of the illegal, unlawful, malicious and bad faith of the defendants and in disregard of the
right of the plaintiffs, the latter are constrained to hire the services of counsel for which they agreed to
pay the sum of P50,000.00 in addition to an appearance fee of P1,000.00 every hearing.”6
x x x x x x x x x
_______________

6 As Answer to the Complaint, defendant Spouses Mathay interposed exactly the same affirmative
defenses they put up in Civil Cases No. TM-175 and TM-180.
566

566
SUPREME COURT REPORTS ANNOTATED
Mathay vs. Court of Appeals
After trial on the merits, the lower court decided for defendant spouses Sonya Mathay and Ismael
Mathay, Jr., and against the plaintiffs in the three consolidated cases; disposing, thus:
“WHEREFORE, foregoing considered, (sic) judgment is hereby rendered in favor of the defendants:
a) declaring Contract of Sale 3397 in favor of Tomas Lucido, the Assignment of Sale Certificate No. 3397
issued by Tomas Lucido in favor of Onofre Batallones and Norberto Quimio, the Deed of Conveyance in
favor of Onofre Batallones and Norberto Quimio and Transfer Certificate of Title No. 85866 in the name
of Onofre Batallones and Norberto Quimio, as null and void;
b) declaring Transfer Certificates of Title Nos. T-195350, T-195351, T-192527, T-192529, T-192528, T-
192532, T-252996, T-252997, T-252998, T-252999, T-253000, T-253001, T-253002, T-253003, T-253004,
T-253005, T-253037, T-206078, T-203724, T-220506, T-220607, T-220608, T-220605, T-203728, T-
203726, T-203730, T-203723 and T-203725, as null and void, and directing the Register of Deeds of
Cavite Province to cancel them;
c) ordering Spouses Teodulfo Atangan & Sylvia Atangan, Onofre Batallones, Norerto (sic) Quimio,
Spouses Tomas Lucido and Juana Batallones, Agustin Poblete, Juancho Albert Poblete, Spouses Bonifacio
Motas and Juliana Motas, Soledad Mateo, Ricardo Malabanan, Flocerfina Bartolome, Spouses Eugenio
Bartolome and Ruperto Bartolome, Spouses Eduardo Tirona and Felicisima Tirona and Anania Gervania
(sic) to surrender to the Office of the Register of Deeds of Cavite their owner’s copy of their Transfer of
Certificates of Title covering portions of Lot 2186;
d) declaring TCT No. T-11304 [sic]7 valid and the defendants to have superior rights to the property in
question and to be the true and lawful owners of the same;
e) ordering plaintiffs jointly and severally liable to pay defendants attorney’s fees of P50,000.00 and to
pay the costs;
f) denying all other claims of the parties for lack of basis in law and/or evidence.
SO ORDERED.”
_______________

7 Should be TCT No. T-113047.
567

VOL. 295, SEPTEMBER 17, 1998
567
Mathay vs. Court of Appeals
On appeal, the Court of Appeals culled from the records on hand the following facts,8 to wit:
“Plaintiff-appellants and defendants-appellees are all holders of Transfer Certificates of Title which all
appear duly issued by the Register of Deeds of Cavite.
Plaintiffs derived their titles as follows:
The land claimed by the parties is known as Lot 2186 of the Sta. Cruz de Malabon Estate originally
consisting of 174,914 sq. meters and previously covered by a survey in the name of plaintiffs
predecessor-in-interest Heirs of Onofre Batallones and Heirs of Patronillo Quimio and Tomas Lucido
evidenced by Psd 04-010692 (Exh. A).9 The Heirs of Batallones and Patronillo Quimio were issued TCT
No. 85866 on August 9, 1976 (Exh. C).10 On July 13, 1976, the Director of Lands transmitted to the
Register of Deeds of Cavite the Deed of Conveyance and for issuance of corresponding TCT to the Heirs
of Onofre Batallones and Norberto Quimio represented by Juana S. Batallones and Patronillo Quimio
(Exh. K).11 The original vendee of said lot from the Bureau of Land was Tomas Lucido who was issued
contract of Sale 3397 dated March 16, 1936 (Exh. M).12 Lucido assigned his rights over said parcel of
land to Onofre Batallones and Norberto Quimio on October 17, 1944 evidenced by assignment of Sale
Certificate No. 3397 (Exh. N).13 In an [O]rder dated June 18, 1976, said assignment was approved by the
Director of Lands (Exh. O).14 On July 1, 1976 the then Department of Natural Resources through Jose A.
Janalo, Assistant Secretary issued Sales Certificate No. 3397, Deed No. T-11692 to Heirs of Batallones
and Quimio (Exh. Q).15 On June 18, 1976, the Bureau of Lands forwarded
_______________

8 CA Decision, pp. 18-25; Rollo, pp. 52-59.
9 Records, p. 193.
10 Records, p. 194.
11 Records, p. 203.
12 Records, p. 206.
13 Records, p. 208.
14 Records, p. 210; See also “Exh. P,” p. 211.
15 Records, p. 212.
568

568
SUPREME COURT REPORTS ANNOTATED
Mathay vs. Court of Appeals
to the Department of Natural Resources for signature the Deeds of Conveyance in favor of Heirs of
Batallones and Quimio (Exh. S).16
After the Heirs of Batallones and Quimio were duly issued TCT No. 8586617 on August 9, 1976, Tomas
Lucido filed Civil Case No. NC 709 before the then Court of First Instance of Cavite, Branch 1, Naic, Cavite
(Exh. GG)18 which ended in a Decision by said court based on a Compromise Agreement duly executed
by Juana Onate Batallones representing the heirs of Onofre Batallones and Patronillo Onate Quimio,
representing the heirs of Norberto Quimio and pursuant thereto 35,000 sq. meters on the southern
portion was given to Tomas Lucido married to Eustaquia Villanueva while the remaining portion of Lot
2186 pertained and belonged to the defendants Heirs of Batallones and Heirs of Norberto Quimio (Exh.
Y).19 Pursuant to the Approved Compromise Agreement in the said decision (Exh. Y), a deed of partition
was executed by Juana Batallones, et al., and Tomas Lucido whereby the land covered by TCT No. T-
85866 of the Register of Deeds was subdivided into six (6) lots known as Lots 2186-A, 2186-B, 2186-C,
2186-D, 2186-E and 2186-F, pursuant to approved technical descriptions and subdivision plan Psd-04-
10692, and that lots 2186-A containing an area of 9,100 sq. meters and lot 2186-C containing an area of
24,700 were assigned to Tomas Lucido while the rest of the lots assigned to Juana Batallones et al., (Exh.
FF).20 After securing clearance from the Department of Agrarian Reform (Exh. PP-1)21 and payment of
required fees and compliance with the requirements of registration the Register of Deeds of Cavite,
Trece Martirez (sic) City issued the corresponding Transfer Certificates of Title to the Heirs of Batallones
and Quimio and Tomas Lucido, as follows:
_______________

16 Records, p. 222.
17 “Exh. C,” Records, p. 194.
18 Records, pp. 275-82.
19 Records, pp. 247-49.
20 Records, pp. 270-74.
21 Records, pp. 321-23.
569

VOL. 295, SEPTEMBER 17, 1998
569
Mathay vs. Court of Appeals
Lot 2186-A
TCT No. 192527
Lucido, Tomas (sic)
Exh. E, V-222
Lot 2186-B
TCT No. 192528
Exh. AAA23
Lot 2186-C
TCT No. 192529
Tomas Lucido
Exh. D, V-324
Lot 2186-D
TCT No. 192530

Lot 2186-E
TCT No. 192531
Exh. AAA-1
Lot 2186-F
TCT No. 192532
Exh. G25
Tomas Lucido married to Eustaquia Villanueva who was the registered owner of lot 2186-A, TCT No.
192527 (Exh. E; V-2)26 2186-A sold to plaintiffs Teodulfo P. Atangan married to Sylvia Atangan27
evidenced by a Deed of Absolute Sale [e]xecuted on July 12, 1985 (Exh. U-1).28 and another Deed of
Sale for Lot 2186-C (Exh. U)29 Plaintiffs Atangan were duly issued TCT Nos. T-195350 for lot 2186-A and
TCT No. T-195351 for Lot 2186-C (Exhs. V-1 and V, respectively).30 Said plaintiffs paid the corresponding
taxes thereon (Exhs. U-6, U-7)31 and they were duly issued Tax Declaration No. 11677 and Tax
Declaration No. 11679 (Exhs. U-4, U-3, respectively).32
Juana Batallones, et al., sold lot 2186-F to plaintiffs Agustina Poblete, married to Amor Poblete, Juancho
Albert A. Poblete, and Juliana Motas married to Bonifacio Motas33 evidenced by a deed of absolute sale
executed on June 8, 1988 (Exh. XX).34 Said parcel of
_______________

22 Records, p. 196.
23 Records, p. 197.
24 Records, p. 243.
25 Records, p. 198.
26 Records, p. 196.
27 Spouses Atangan are the plaintiffs in the first case: Civil Case No. TM-175.
28 Records, pp. 230-31.
29 Records, pp. 228-29.
30 Records, pp. 239-40.
31 Records, pp. 337-38.
32 Records, pp. 234-35.
33 The Pobletes and the Motases are the plaintiffs in the second case: Civil Case No. TM-180.
34 Records, pp. 381-82.
570

570
SUPREME COURT REPORTS ANNOTATED
Mathay vs. Court of Appeals
land was subdivided under Sub. plan Psd-04-0106-92, and, as a result the following Certificate of Titles
were issued to the following plaintiffs:
Lot 2186-F-1
TCT No. T-252996
Agustina Poblete
Exh. SS35
Lot 2186-F-2
TCT No. T-252997
- do -
Exh. SS-136
Lot 2186-F-3
TCT No. T-252998
- do -
Exh. SS-237
Lot 2186-F-4
TCT No. T-252999
- do -
Exh. SS-338
Lot 2186-F-5
TCT No. T-253000
Juancho Albert Poblete
Exh. SS-439
Lot 2186-F-6
TCT No. T-213001
- do -
Exh. SS-540
Lot 2186-F-7
TCT No. T-253002
Juancho Albert Poblete
Exh. SS-641
Lot 2186-F-8
TCT No. T-253003
Juliana Motas
Exh. SS-742
Lot 2186-F-9
TCT No. T-253004
- do -
Exh. SS-843
Lot 2186-F-10
TCT No. T-253005
- do -
Exh. SS-944
Lot 2186-F-11
TCT No. T-253007
- do -
Exh. SS-1045
_______________

35 Records, p. 332.
36 Records, p. 333.
37 Records, p. 334.
38 Records, p. 335.
39 Records, p. 336.
40 Records, p. 337.
41 Records, p. 338.
42 Records, p. 339.
43 Records, p. 342.
44 Records, p. 340.
45 Records, p. 341.
571

VOL. 295, SEPTEMBER 17, 1998
571
Mathay vs. Court of Appeals
David Quimio, owners of Lot 2186-D, TCT No. 19530 sold the same to plaintiff Juliana Motas married to
Bonifacio Motas evidenced by a notarized deed of absolute sale dated December 31, 1985 (Exh. VV).46
Said lot contained an area of 18,943 sq. meters more or less. She was issued TCT No. T-201592 by the
Register of Deed (sic) of Cavite. Plaintiffs Motas caused said lot to be subdivided under Psd-017063 and
sold the same to plaintiffs Tirona, et al., in Civil Case No. TM-206 and corresponding Transfer Certificates
of Titles were issued to the said plaintiffs as follows:
NAME
LOT
TCT NO.
AREA
1. Sps. Eduardo &
2186-D-6
203728
3,000 sq. m.
Felicisima Tirona
2186-D-1
203723
741 sq. m.
2. Soledad Mateo (sic) &
2186-D-8
206078
3,409 sq. m.
Sps. Ignacio San Jose



& Lucila San Jose
2186-D-8
206078
1,591 sq. m.
3. Anania Cervania
2186-D-3
203725
2,500 sq. m.
4. Ricardo Malabanan
2186-D-4
203726
2,500 sq. m.
5. Plocerfina Tanyag
2186-D-2
203724
700 sq. m.
6. Ruperta Bartolome
2186-D-5B
220606
550 sq. m.

2186-D-5C
220607
700 sq. m.

2186-D-5D
220608
700 sq. m.

2186-D-A
220605
550 sq. m.
1. Sps. Eduardo R. Tirona

Exh. SS-1147



Exh. SS-12

2. Soledad Motas & Sps. Ignacio

Exh. NN-148

San Jose & Lucila San Jose

Exh. SS-13

3. Anania Servnia (sic)

Exh. SS-2049



Exh. SS-19

4. Ricardo Malabanan

Exh. NN-450

5. Plocerfina Tanyag

Exh. NN-351

6. Ruperta Malabanan

Exh. NN-652

_______________

46 Records, p. 378.
47 Records, pp. 343-44.
48 Records, pp. 345, 305.
49 Records, pp. 358-59.
50 Records, p. 357.
51 Records, p. 309.
52 Records, pp. 311-14.
572

572
SUPREME COURT REPORTS ANNOTATED
Mathay vs. Court of Appeals


Exh. NN-7



Exh. NN-8



Exh. NN-9

7. Plaintiff Juliana Motas &

Lot No. 2186-D

Bonifacio Motas

TCT No. 203730



Exh. VV-153

Said plaintiffs were duly issued corresponding Tax Declaration and have paid the realty taxes54 thereon
and they were in actual possession of the contested parcels of land until the same were fenced by
defendants Mathay’s men over their objection and upon inquires, they discovered that the defendants
Mathay were issued TCT No. T-113047 covering same parcel of land (Exh. 2)55 based on a Deed of
Absolute [S]ale executed allegedly on 21 May 1980 by Pedro Banayo and Pablo Pugay (Exh. 3)56 and
notarized by Manalad Santera (Exh. 3-A).57
Defendants-appellees Spouses Sonya Mathay and Ismael Mathay, Jr. claimed that the land described as
Lot 2186 of the Sta. Cruz de Malabon Estate, situated in Tanza, Cavite, containing an area of 174,917
square meters covered by TCT No. T-111070 (Exh. 8),58 registered in the name of Pedro Banayo and
Pablo Pugay on February 28, 1980 was purchased by the defendants from Pedro Pugay on May 31, 1980
(Exhs. 3, 3-A),59 and TCT No. T-113047 (Exh. 2)60 was issued in their favor on June 3, 1980 by the Office
of the Register of Deeds of Cavite Province, declared for taxation purposed (sic) (Exhs. 4, 5)61 and
corresponding taxes paid (Exhs. 18, 19, 20, 21, 22).62
_______________

53 Records, p. 380.
54 “Exhs. NN-1,” Records, p. 304; “NN-2-B,” Records, p. 307; “NN-2-C,” Records, p. 308.
55 Records, p. 456.
56 Records, p. 450.
57 Records, p. 451.
58 Records, p. 456.
59 Records, pp. 450-51.
60 Records, p. 449.
61 Records, pp. 453-54.
62 Records, pp. 468-72.
573

VOL. 295, SEPTEMBER 17, 1998
573
Mathay vs. Court of Appeals
It appears that Director of Lands Ramon N. Casanova, under the Deed No. V-12918 and Sales Certificate
No. 2454 in consideration of P8,958.00 sold to Pedro Banayo and Pablo Pugay Lot 2186 of the Sta. Cruz
de Malabon Estate, friar Lands Estate, situated in the Municipality of Tanza, Province of Cavite,
containing an area of 17 hectares, 49 ares and 17 centares of the subdivision plan A-21 approved by the
Court of Land Registration on the 4th day of February, 1911 (Exh. 15)63 with the technical description of
the land (Exh. 15-A)64 and on February 21, 1980, a letter addressed to the Register of Deeds for
issuance of title to Pedro Banayo and Pablo Pugay (Exh. 16)65 which was cancelled by TCT No. 113047
issued in the name of Spouses Sonya Mathay and Ismael Mathay, Jr., (Exh. 2),66 and that according to
the old Sales Register Book kept in the office, Lot 2186 of the Sta. Cruz de Malabon Estate, Cavite, is
registered in the name of Pedro Banayo and Pablo Pugay (Exh. 17-A).67 It appears also that Pugay and
Banayo were assignees of the subject lot under Assignment of Sale Certificate No. 3397,68 of the Bureau
of Lands, with Tomas Lucido as assignor.”
x x x x x x x x x
On November 18, 1993, the Court of Appeals came out with a judgment of reversal, the dispositive
portion of which, reads:
“WHEREFORE, premises considered, judgment is rendered in favor of plaintiffs-appellants in the above-
entitled three cases against defendants-appellees. The consolidated decision of the Regional Trial Court,
Branch 23, Trece Martirez (sic) City in Civil Case No. TM-175, Civil Case No. TM-180 and Civil Case No.
TM-206 is reversed and set aside. The defendants-appellees Register of Deeds of Cavite, Trece Martirez
(sic) City is ordered to cancel Transfer Certificate of Title No. 113047 covering Lot 2186 of Sta. Cruz de
Malabon Estate in the name of Spouses Ismael and Sonya Mathay. Spouses Ismael and Sonya Mathay
are ordered to vacate Lot 2186,
_______________

63 Records, p. 465.
64 Records, p. 466.
65 Records, p. 466.
66 Records, p. 449.
67 Records, p. 467.
68 Records, p. 299.
574

574
SUPREME COURT REPORTS ANNOTATED
Mathay vs. Court of Appeals
Sta. Cruz de Malabon Estate, Cavite in favor of the plaintiffs-appellants.
SO ORDERED.”
With the denial of their motion for reconsideration, the spouses Sonya Mathay and Ismael Mathay, Jr.
found their way to this Court via the present Petition; theorizing, that:
I.

WITH DUE RESPECT, THE COURT OF APPEALS ERRED IN SETTING ASIDE THE GENUINE TRANSFER
CERTIFICATE OF TITLE NO. 113047 OF SPS. SONYA & ISMAEL MATHAY, JR., WHO ACQUIRED THE SAID
TORRENS TITLE AS BUYERS IN GOOD FAITH, SINCE THE DOCUMENTS NECESSARY FOR THE TRANSFER,
EVEN PRIOR TO THE SALE, WERE ALL DULY FILED AND CLEARED WITH THE RE REGISTER OF DEEDS,
ASSESSOR’S OFFICE, B.I.R., AND OTHER GOVERNMENT ENTITIES. MOREOVER, THE LAW STATED IN
“DINO VS. COURT OF APPEALS,” G.R. NO. 95921, SHOULD BE UPHELD, IN CASE OF BASELESS ASSERTION
OF ALLEGED FORGERY BY THE RESPONDENTS;
II.

WITH DUE RESPECT, THE COURT OF APPEALS ERRED IN NOT RECOGNIZING THE 1980 TITLE OF SPS.
SONYA & ISMAEL MATHAY, JR. OVER AND ABOVE THE LATER 1986-88 ALLEGED TITLES OF
RESPONDENTS-ATANGAN, ET AL., WHICH IS CLEARLY CONTRARY TO THE APPLICABLE LAW ON THE
MATTER, NAMELY: ART. 1544 OF THE CIVIL CODE OF THE PHILIPPINES;
III.

WITH DUE RESPECT, THE COURT OF APPEALS ERRED IN NOT CONSIDERING THAT THE DEED OF SALE
EXECUTED BY VENDORS—BANAYO & PUGAY IN FAVOR OF VENDEES—SPS. SONYA & ISMAEL MATHAY,
JR. IS DULY NOTARIZED IN SO FAR AS THE VENDORS AND VENDEES ARE CONCERNED AND THAT,
FURTHERMORE, THE COURT OF APPEALS ERRED IN NOT CONSIDERING THE VALIDITY OF THE
PETITIONERS’ DOCUMENTS, WHICH WERE ALL DULY EXECUTED.
575

VOL. 295, SEPTEMBER 17, 1998
575
Mathay vs. Court of Appeals
The petitioners, spouses Sonya Mathay and Ismael Mathay, Jr., claim to be buyers in good faith,
reasoning out that TCT No. T-111070, the derivative title of their TCT No. T-113047, appeared to be free
from any encumbrance. They argue that a person dealing on a registered land may safely rely on the
correctness of the covering certificate of title and is not required to go beyond the certificate of title to
determine the condition of the property.
A purchaser in good faith and for value is defined as “one who buys property of another, without notice
that some other person has a right to, or interest in, such property and pays a full and fair price for the
same at the time of such purchase, or before he has notice of the claims or interest of some other
person in the property.”69 As a rule, he who asserts the status of a purchaser in good faith and for
value, has the burden of proving such assertion. This onus probandi cannot be discharged by mere
invocation of the legal presumption of good faith, i.e., “that everyone is presumed to act in good
faith.”70
Here, petitioners cannot be categorized as purchasers in good faith. Prior to the fencing of subject land,
neither they (Mathays) nor their predecessors-in-interest (Banayo and Pugay) ever possessed the same.
In fact, at the time the said property was sold to petitioners, the private respondents were not only in
actual possession of the same but also built their houses thereon, cultivated it and were in full
enjoyment of the produce and fruits gathered therefrom. Although it is a recognized principle that a
person dealing on a registered land need not go beyond its certificate of title, it is also a firmly settled
rule that where there are circumstances which would put a party on guard and prompt him to
investigate or inspect the property being sold to him, such as the presence of occupants/tenants
thereon, it is, of course, expected from the purchaser of a valued piece of land to inquire first into the
status or nature of possession of the occupants, i.e., whether or not the occupants possess the land en
concepto de dueño , in con-
_______________

69 Sandoval vs. Court of Appeals, 260 SCRA 283 [1996].
70 Baltazar vs. Court of Appeals, 168 SCRA 354, 357 [1988].
576

576
SUPREME COURT REPORTS ANNOTATED
Mathay vs. Court of Appeals
cept of owner. As is the common practice in the real estate industry, an ocular inspection of the
premises involved is a safeguard a cautious and prudent purchaser usually takes. Should he find out that
the land he intends to buy is occupied by anybody else other than the seller who, as in this case, is not in
actual possession, it would then be incumbent upon the purchaser to verify the extent of the occupant’s
possessory rights. The failure of a prospective buyer to take such precautionary steps would mean
negligence on his part and would thereby preclude him from claiming or invoking the rights of a
“purchaser in good faith.”
So also, before the fence around subject property was erected, private respondents communicated their
objection to the fencing of the area by petitioners but they were ignored by the petitioners, who
continued enclosing the premises under controversy in the presence of armed men employed by them
(petitioners).
Consequently, not being “innocent purchasers for value,” within legal contemplation, petitioners’
reliance on Article 1544 of the New Civil Code is misplaced. Such stance of theirs lacks legal and factual
basis. The fundamental premise of preferential rights under the law is good faith.71
Viewed in proper perspective, we uphold the finding by the Court of Appeals that the petitioners cannot
invoke Art. 1544 of the Civil Code in view of the questionable documents from which their title
emanated. As the Court of Appeals ratiocinated:
“We think the applicable rule as stated in Baltazar v. Court of Appeals, No. L-78728, December 8, 1988,
168 SCRA 334, is that as between two persons both of whom are in good faith and both innocent of any
negligence, the law must protect and prefer the lawful holder of registered title over the transferee of a
vendor bereft of any transmissible rights. Under the foregoing principle derived from the above case
law, the Mathays have no rights as against plaintiffs-
_______________

71 Tanedo vs. Court of Appeals, 252 SCRA 80 [1996]; Paylago vs. Jarabe, 131 Phil. 354.
577

VOL. 295, SEPTEMBER 17, 1998
577
Mathay vs. Court of Appeals
appellants, their recourse is against their vendors Banayo and Pugay.”72
The aforesaid ruling of the Court of Appeals accords with the Latin maxim: nemo potest plus juris ad
alium transferre quam ipse habet. “No one can transfer a greater right to another than he himself has.”
Thus, in Calalang vs. Register of Deeds of Quezon City,73 this Court held:
“Needless to state, all subsequent certificates of title including petitioner’s titles are void because of the
legal truism that the spring cannot rise higher than its source. The law must protect and prefer the
lawful owner of registered title over the transferee of a vendor bereft of any transmissible rights.”
In sum, “defective titles cannot be upheld against the unblemished titles of the private respondents.”74
Petitioners further submit that requiring them to inquire beyond the face of the torrens title defeats the
primordial objective of the torrens system, which is that a person dealing on registered land has the
right to rely on the torrens title.
But “a certificate is not conclusive evidence of title if it is shown that the same land had already been
registered and an earlier certificate for the same is in existence.”75 In the case at bar, as borne out by
pertinent records, the private respondents obtained their rights and title from TCT No. T-85866, which
was registered on August 9, 1976 under the name of Heirs of Onofre Batallones and Patronillo Quimio.
On the part of petitioners, their supposed title originated from a spurious title of Pedro Banayo and
Pablo Pugay illegally registered on February 28, 1980.
_______________

72 CA Decision, pp. 41-42; Rollo, pp. 75-76.
73 231 SCRA 88 [1994].
74 Lorenzana Food Corporation vs. Court of Appeals, 231 SCRA 713 [1994].
75 Heirs of Luis J. Gonzaga vs. Court of Appeals, 261 SCRA 327 [1996].
578

578
SUPREME COURT REPORTS ANNOTATED
Mathay vs. Court of Appeals
So also, where two transfer certificates of title have been issued on different dates, to two different
persons, for the same parcel of land even if both are presumed to be title holders in good faith, it does
not necessarily follow that he who holds the earlier title should prevail. On the assumption that there
was regularity in the registration leading to the eventual issuance of subject transfer certificates of title,
the better approach is to trace the original certificates from which the certificates of title in dispute
were derived. Should there be only one common original certificate of title, as in this case under
consideration, the transfer certificate issued on an earlier date along the line must prevail, absent any
anomaly or irregularity tainting the process of registration.
In light of the attendant facts and circumstances, there is therefore a need to refer to the background or
history of the land under controversy. As conceded by petitioners, their TCT No. T-113047 was derived
from TCT No. 111070 under the names of Pedro Banayo and Pablo Pugay. Hence, the necessity of
looking into and determining the legitimacy of the title of the two, Banayo and Pugay.
In an effort to support their claim of ownership over subject Lot 2186, Pedro Banayo and Pablo Pugay
presented two theories. First, they theorize that on October 17, 1970, under Assignment of Sale
Certificate No. 3397,76 Tomas Lucido assigned and transferred to them all his interests in the contested
land. Their second theory is that subject real property was sold to them by then Director of Lands
Ramon N. Casanova, under Deed No. V-12918 and Sales Certificate No. 2454.77
After a careful examination of germane records, however, we are of the conclusion, and so find, that the
aforestated theories of Pedro Banayo and Pablo Pugay are without any factual and legal basis.
_______________

76 “Exh. LL,” Records, p. 299.
77 “Exh. 15,” Records, p. 465.
579

VOL. 295, SEPTEMBER 17, 1998
579
Mathay vs. Court of Appeals
The assignment of Sales Certificate No. 3397 allegedly executed by Tomas Lucido in favor of Pedro
Banayo and Pablo Pugay was not signed by the said Tomas Lucido. Neither does it bear the signature of
the latter. Worse, the same Tomas Lucido testified on the witness stand,78 that he does not know Pedro
Banayo and Pablo Pugay, and he never received P50,000.00 from them. What is more, Tomas Lucido
reiterated that he really sold the land in question to the herein private respondents, spouses Teodulfo
Atangan and Sylvia Atangan, the plaintiffs in Civil Case No. TM-175, as shown by the two Deeds of Sale79
he executed in favor of the said spouses Teodulfo Atangan and Sylvia Atangan.
To reinforce their aforesaid second theory, Banayo and Pugay declared that, for and in consideration of
Eight Thousand Nine Hundred Fifty Eight (P8,958.00) Pesos, former Director of Lands Ramon Casanova
issued Deed No. V-12918 with Sales Certificate No. 2454, which Deed was the basis of the issuance to
them of TCT No. T-111070 by the Register of Deeds of the Province of Cavite.
But Mr. Marcelino Freiras, Chief of Reservation and Special Land Grant Section of the Bureau of Lands,
stressed that the signature of former Lands Director Ramon Casanova on the said Deed No. V-12918
with Sales Certificate No. 2454, was forged. According to him (Freiras), having worked with him for the
past thirty (30) years, he is familiar with the signature of Director Casanova.80
Then, too, in a letter81 addressed to Atty. Franco Loyola, counsel for private respondents, the same Mr.
Freiras informed that, as indicated by the entries in the Deed of Conveyance Book,82 Deed V-12918 was
issued on October 10, 1979, for Lot No. 18, Block 16, Tala Estate, Caloocan City, in the
_______________

78 TSN of August 28, 1990, pp. 3-11.
79 “Exhs. T and U,” Records, pp. 225-29.
80 TSN, April 21, 1989, pp. 27-28.
81 “Exh. UU-1,” Records, p. 375.
82 “Exhs. RR and RR-1,” Records, pp. 330-31.
580

580
SUPREME COURT REPORTS ANNOTATED
Mathay vs. Court of Appeals
name of one Zaida C. Calado, and not for the subject land, identified as Lot 2186 of Sta. Cruz de Malabon
Estate, Cavite City, originally registered under the names of the Heirs of Onofre Batallones and Patronillo
Quimio. In another letter83 sent in answer to the query of Juana Motas, one of the plaintiffs in Civil Case
No. TM-180, Alicia V. Dayrit, Office Caretaker of Land Management Division of the Bureau of Lands,
corroborated what Mr. Freiras disclosed, as aforementioned. In her said letter, Alicia V. Dayrit revealed
to Mrs. Motas that there is really no record of any Deed No. V-12918 issued for Lot 2186 of Sta. Cruz de
Malabon Estate, Cavite City, in favor of Pedro Banayo and Pablo Pugay, and that what appears in the
Registry Book of Deeds of Conveyance is Deed of Conveyance No. V-11692 issued on July 1, 1976 in
favor of Onofre Batallones and Norberto Quimio by the then Secretary of Natural Resources, which
Deed pertains to Lot 2186 of Sta. Cruz de Malabon Estate. The aforesaid revelations were corroborated
in open court by witness Freiras.84 Further, the Court detected discrepancies in the entries of the
documents above mentioned. Pedro Banayo and Pablo Pugay contended that by virtue of Sales
Certificate No. 2454, the then Director of Lands Ramon Casanova issued Deed V-12918, on February 18,
1980.85 However, after a meticulous examination of the evidence on record, the Court noticed that
former Director Ramon Casanova issued another Deed V-12918 but, bearing Sales Certificate No. 3397
and dated February 19, 1980.86 It should be remembered that Pedro Banayo and Pablo Pugay declared
that the issuance of TCT No. T-111070 in their favor was based on the said two documents, both bearing
the signature of Director Casanova.
The foregoing observations jibe with the revelation of Freiras that the alleged signatures of former
Lands Director Ra-
_______________

83 “Exh. I,” Records, p. 201.
84 Mr. Freiras testified on the following dates: January 30, 1989; February 15, 1989; and April 21, 1989.
85 “Exh. 15,” Records, p. 465.
86 “Exh. LL-1”; Records, p. 42; p. 301.
581

VOL. 295, SEPTEMBER 17, 1998
581
Mathay vs. Court of Appeals
mon Casanova appearing on the said documents in question were forged. Also strengthened thereby is
the testimony of Mrs. Adelwisa O. Ong, former Record Officer and now Acting Administrative Officer of
the Bureau of Lands in Cavite, that subject land was patented under Deed No. V-11692, registered under
the name of the Heirs of Onofre Batallones and Norberto Quimio, and the name of Tomas Lucido was
mentioned in the Old Sales Register Book as he was the approved vendee of the same.87
Besides, it is too evident to be overlooked that the number of the Sales Certificate of the second Deed V-
12918 (bearing Sales Certificate No. 3397) is the same number of the Sales Certificate appearing in the
Assignment of Sale allegedly executed by Tomas Lucido in favor of Pedro Banayo and Pablo Pugay. This
fact alone, which this Court cannot ignore, is fatal to the cause of Pedro Banayo and Pablo Pugay.
Furthermore, the circumstances surrounding the execution of the Deed of Absolute Sale88 by Pedro
Banayo and Pablo Pugay in favor of the spouses Sonya Mathay and Ismael Mathay, Jr. beclouded the
issuance of TCT No. 113047.89 Records disclose that the said Deed of Absolute Sale did not comply with
legal formalities and was not duly notarized. Atty. Mapalad Santera, who signed the document as Notary
Public, had no commission as Notary Public for the Province of Cavite, at the time subject document was
supposedly notarized,90 and the residence certificates of vendors Banayo and Pugay appeared to be of
dubious source.91
To bolster their submission that their title is genuine and authentic, private respondents introduced
several documentary evidence. They also presented officials concerned and the
_______________

87 TSN, January 30, 1989, p. 34.
88 “Exh. A,” Records, p. 450.
89 “Exh. 2,” Records, p. 449.
90 “Exhs. CCC-1 to CCC-4,” Records, pp. 496-99.
91 “Exhs. EE and EE-1,” Records, pp. 268-69.
582

582
SUPREME COURT REPORTS ANNOTATED
Mathay vs. Court of Appeals
caretakers of the said documents, who all testified for the private respondents.
On the other hand, the petitioners, spouses Sonya Mathay and Ismael Mathay, Jr., who claim to be
buyers in good faith, utterly failed to discharge the burden of proving the sustainability of their posture.
Worse for them, as above discussed, the title of Pedro Banayo and Pablo Pugay relied upon by
petitioners has been shown by preponderance of evidence to be the product of forgery.
All things studiedly considered, we are of the irresistible conclusion that the respondent Court of
Appeals did not err in reversing the appealed decision of the trial court.
WHEREFORE, the Petition is DISMISSED for lack of merit, and the Decision of the Court of Appeals in CA-
GR CV No. 37902 AFFIRMED in toto. No pronouncement as to costs.
SO ORDERED. [Mathay vs. Court of Appeals, 295 SCRA 556(1998)]