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COURSE OUTLINE

SESSION 1
LTD
ARELLANO UNIVERSITY SCHOOL OF LAW

PART IV

G.R. No. 132161

January 17, 2005

CONSOLIDATED RURAL BANK (CAGAYAN VALLEY), INC., petitioner,


vs.
THE HONORABLE COURT OF APPEALS and HEIRS OF TEODORO DELA CRUZ, respondents.
DECISION
TINGA, J.:
Petitioner Consolidated Rural Bank, Inc. of Cagayan Valley filed the instant Petition for Certiorari1 under
Rule 45 of the Revised Rules of Court, seeking the review of the Decision2 of the Court of Appeals Twelfth
Division in CA-G.R. CV No. 33662, promulgated on 27 May 1997, which reversed the judgment3 of the lower
court in favor of petitioner; and the Resolution4 of the Court of Appeals, promulgated on 5 January 1998,
which reiterated its Decision insofar as respondents Heirs of Teodoro dela Cruz (the Heirs) are concerned.
From the record, the following are the established facts:
Rizal, Anselmo, Gregorio, Filomeno and Domingo, all surnamed Madrid (hereafter the Madrid brothers),
were the registered owners of Lot No. 7036-A of plan Psd-10188, Cadastral Survey 211, situated in San
Mateo, Isabela per Transfer Certificate of Title (TCT) No. T-8121 issued by the Register of Deeds of Isabela
in September 1956.5
On 23 and 24 October 1956, Lot No. 7036-A was subdivided into several lots under subdivision plan Psd50390. One of the resulting subdivision lots was Lot No. 7036-A-7 with an area of Five Thousand Nine
Hundred Fifty-Eight (5,958) square meters.6
On 15 August 1957, Rizal Madrid sold part of his share identified as Lot No. 7036-A-7, to Aleja Gamiao
(hereafter Gamiao) and Felisa Dayag (hereafter, Dayag) by virtue of a Deed of Sale,7 to which his brothers
Anselmo, Gregorio, Filomeno and Domingo offered no objection as evidenced by their Joint Affidavit dated
14 August 1957.8 The deed of sale was not registered with the Office of the Register of Deeds of Isabela.
However, Gamiao and Dayag declared the property for taxation purposes in their names on March 1964
under Tax Declaration No. 7981.9
On 28 May 1964, Gamiao and Dayag sold the southern half of Lot No. 7036-A-7, denominated as Lot No.
7036-A-7-B, to Teodoro dela Cruz,10 and the northern half, identified as Lot No. 7036-A-7-A,11 to Restituto
Hernandez.12 Thereupon, Teodoro dela Cruz and Restituto Hernandez took possession of and cultivated the
portions of the property respectively sold to them.13
Later, on 28 December 1986, Restituto Hernandez donated the northern half to his daughter, Evangeline
Hernandez-del Rosario.14 The children of Teodoro dela Cruz continued possession of the southern half after
their fathers death on 7 June 1970.
In a Deed of Sale15 dated 15 June 1976, the Madrid brothers conveyed all their rights and interests over Lot
No. 7036-A-7 to Pacifico Marquez (hereafter, Marquez), which the former confirmed16 on 28 February
1983.17 The deed of sale was registered with the Office of the Register of Deeds of Isabela on 2 March
1982.18

Subsequently, Marquez subdivided Lot No. 7036-A-7 into eight (8) lots, namely: Lot Nos. 7036-A-7-A to
7036-A-7-H, for which TCT Nos. T-149375 to T-149382 were issued to him on 29 March 1984.19 On the
same date, Marquez and his spouse, Mercedita Mariana, mortgaged Lots Nos. 7036-A-7-A to 7036-A-7-D to
the Consolidated Rural Bank, Inc. of Cagayan Valley (hereafter, CRB) to secure a loan of One Hundred
Thousand Pesos (P100,000.00).20 These deeds of real estate mortgage were registered with the Office of
the Register of Deeds on 2 April 1984.
On 6 February 1985, Marquez mortgaged Lot No. 7036-A-7-E likewise to the Rural Bank of Cauayan (RBC)
to secure a loan of Ten Thousand Pesos (P10,000.00).21
As Marquez defaulted in the payment of his loan, CRB caused the foreclosure of the mortgages in its favor
and the lots were sold to it as the highest bidder on 25 April 1986.22
On 31 October 1985, Marquez sold Lot No. 7036-A-7-G to Romeo Calixto (Calixto).23
Claiming to be null and void the issuance of TCT Nos. T-149375 to T-149382; the foreclosure sale of Lot
Nos. 7036-A-7-A to 7036-A-7-D; the mortgage to RBC; and the sale to Calixto, the Heirs-now respondents
herein-represented by Edronel dela Cruz, filed a case24 for reconveyance and damages the southern portion
of Lot No. 7036-A (hereafter, the subject property) against Marquez, Calixto, RBC and CRB in December
1986.
Evangeline del Rosario, the successor-in-interest of Restituto Hernandez, filed with leave of court a
Complaint in Intervention25 wherein she claimed the northern portion of Lot No. 7036-A-7.
In the Answer to the Amended Complaint,26 Marquez, as defendant, alleged that apart from being the first
registrant, he was a buyer in good faith and for value. He also argued that the sale executed by Rizal Madrid
to Gamiao and Dayag was not binding upon him, it being unregistered. For his part, Calixto manifested that
he had no interest in the subject property as he ceased to be the owner thereof, the same having been
reacquired by defendant Marquez.27
CRB, as defendant, and co-defendant RBC insisted that they were mortgagees in good faith and that they
had the right to rely on the titles of Marquez which were free from any lien or encumbrance.28
After trial, the Regional Trial Court, Branch 19 of Cauayan, Isabela (hereafter, RTC) handed down a decision
in favor of the defendants, disposing as follows:
WHEREFORE, in view of the foregoing considerations, judgment is hereby rendered:
1. Dismissing the amended complaint and the complaint in intervention;
2. Declaring Pacifico V. Marquez the lawful owner of Lots 7036-A-7 now Lots 7036-A-7-A to 7036A-7-H, inclusive, covered by TCT Nos. T-149375 to T-149382, inclusive;
3. Declaring the mortgage of Lots 7036-A-7-A, 7036-A-7-B, 7036-A-7-C and 7036-A-7-D in favor of
the defendant Consolidated Rural Bank (Cagayan Valley) and of Lot 7036-A-7-E in favor of
defendant Rural Bank of Cauayan by Pacifico V. Marquez valid;
4. Dismissing the counterclaim of Pacifico V. Marquez; and
5. Declaring the Heirs of Teodoro dela Cruz the lawful owners of the lots covered by TCT Nos. T33119, T-33220 and T-7583.
No pronouncement as to costs.
SO ORDERED.29

In support of its decision, the RTC made the following findings:


With respect to issues numbers 1-3, the Court therefore holds that the sale of Lot 7036-A-7 made by Rizal
Madrid to Aleja Gamiao and Felisa Dayag and the subsequent conveyances to the plaintiffs and intervenors
are all valid and the Madrid brothers are bound by said contracts by virtue of the confirmation made by them
on August 14, 1957 (Exh. B).
Are the defendants Pacifico V. Marquez and Romeo B. Calixto buyers in good faith and for value of Lot
7036-A-7?
It must be borne in mind that good faith is always presumed and he who imputes bad faith has the burden of
proving the same (Art. 527, Civil Code). The Court has carefully scrutinized the evidence presented but finds
nothing to show that Marquez was aware of the plaintiffs and intervenors claim of ownership over this
lot. TCT No. T-8121 covering said property, before the issuance of Marquez title, reveals nothing about the
plaintiffs and intervenors right thereto for it is an admitted fact that the conveyances in their favor are
not registered.
The Court is therefore confronted with two sales over the same property. Article 1544 of the Civil Code
provides:
"ART. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred
to the person who may have first taken possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first
recorded it in the Registry of Property. x x x " (Underscoring supplied).
From the foregoing provisions and in the absence of proof that Marquez has actual or constructive
knowledge of plaintiffs and intervenors claim, the Court has to rule that as the vendee who first
registered his sale, Marquez ownership over Lot 7036-A-7 must be upheld.30
The Heirs interposed an appeal with the Court of Appeals. In their Appellants Brief,31 they ascribed the
following errors to the RTC: (1) it erred in finding that Marquez was a buyer in good faith; (2) it erred in
validating the mortgage of the properties to RBC and CRB; and (3) it erred in not reconveying Lot No. 7036A-7-B to them.32
Intervenor Evangeline del Rosario filed a separate appeal with the Court of Appeals. It was, however,
dismissed in a Resolution dated 20 September 1993 for her failure to pay docket fees. Thus, she lost her
standing as an appellant.33
On 27 May 1997, the Court of Appeals rendered its assailed Decision34 reversing the RTCs judgment. The
dispositive portion reads:
WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE. Accordingly, judgment is
hereby rendered as follows:
1. Declaring the heirs of Teodoro dela Cruz the lawful owners of the southern half portion and
Evangeline Hernandez-del Rosario the northern half portion of Lot No. 7036-A-7, now covered by
TCT Nos. T-149375 to T-149382, inclusive;
2. Declaring null and void the deed of sale dated June 15, 1976 between Pacifico V. Marquez and
the Madrid brothers covering said Lot 7036-A-7;
3. Declaring null and void the mortgage made by defendant Pacifico V. Marquez of Lot Nos. 7036A-7-A, 7036-A-7-B, 7036-A-7-C and 7036-A-7-D in favor of the defendant Consolidated Rural Bank
and of Lot 7036-A-7-E in favor of defendant Rural Bank of Cauayan; and

4. Ordering Pacifico V. Marquez to reconvey Lot 7036-A-7 to the heirs of Teodoro dela Cruz and
Evangeline Hernandez-del Rosario.
No pronouncement as to costs.
SO ORDERED.35
In upholding the claim of the Heirs, the Court of Appeals held that Marquez failed to prove that he was a
purchaser in good faith and for value. It noted that while Marquez was the first registrant, there was no
showing that the registration of the deed of sale in his favor was coupled with good faith. Marquez admitted
having knowledge that the subject property was "being taken" by the Heirs at the time of the sale.36 The
Heirs were also in possession of the land at the time. According to the Decision, these circumstances along
with the subject propertys attractive locationit was situated along the National Highway and was across
a gasoline stationshould have put Marquez on inquiry as to its status. Instead, Marquez closed his eyes to
these matters and failed to exercise the ordinary care expected of a buyer of real estate.37
Anent the mortgagees RBC and CRB, the Court of Appeals found that they merely relied on the certificates
of title of the mortgaged properties. They did not ascertain the status and condition thereof according to
standard banking practice. For failure to observe the ordinary banking procedure, the Court of Appeals
considered them to have acted in bad faith and on that basis declared null and void the mortgages made by
Marquez in their favor.38
Dissatisfied, CRB filed a Motion for Reconsideration39 pointing out, among others, that the Decision
promulgated on 27 May 1997 failed to establish good faith on the part of the Heirs. Absent proof of
possession in good faith, CRB avers, the Heirs cannot claim ownership over the subject property.
In a Resolution40 dated 5 January 1998, the Court of Appeals stressed its disbelief in CRBs allegation that
it did not merely rely on the certificates of title of the properties and that it conducted credit investigation and
standard ocular inspection. But recalling that intervenor Evangeline del Rosario had lost her standing as an
appellant, the Court of Appeals accordingly modified its previous Decision, as follows:
WHEREFORE, the decision dated May 27, 1997, is hereby MODIFIED to read as follows:
WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE insofar as plaintiffsappellants are concerned. Accordingly, judgment is hereby rendered as follows:
1. Declaring the Heirs of Teodoro dela Cruz the lawful owners of the southern half portion of Lot No.
7036-A-7;
2. Declaring null and void the deed of sale dated June 15, 1976 between Pacifico V. Marquez and
the Madrid brothers insofar as the southern half portion of Lot NO. (sic) 7036-A-7 is concerned;
3. Declaring the mortgage made by defendant Pacifico V. Marquez in favor of defendant
Consolidated Rural Bank (Cagayan Valley) and defendant Rural Bank of Cauayan as null and void
insofar as the southern half portion of Lot No. 7036-A-7 is concerned;
4. Ordering defendant Pacifico V. Marquez to reconvey the southern portion of Lot No. 7036-A-7 to
the Heirs of Teodoro dela Cruz.
No pronouncement as to costs.
SO ORDERED.41
Hence, the instant CRB petition. However, both Marquez and RBC elected not to challenge the Decision of
the appellate court.

Petitioner CRB, in essence, alleges that the Court of Appeals committed serious error of law in upholding the
Heirs ownership claim over the subject property considering that there was no finding that they acted in
good faith in taking possession thereof nor was there proof that the first buyers, Gamiao and Dayag, ever
took possession of the subject property. CRB also makes issue of the fact that the sale to Gamiao and
Dayag was confirmed a day ahead of the actual sale, clearly evincing bad faith, it adds. Further, CRB
asserts Marquezs right over the property being its registered owner.
The petition is devoid of merit. However, the dismissal of the petition is justified by reasons different from
those employed by the Court of Appeals.
Like the lower court, the appellate court resolved the present controversy by applying the rule on double sale
provided in Article 1544 of the Civil Code. They, however, arrived at different conclusions. The RTC made
CRB and the other defendants win, while the Court of Appeals decided the case in favor of the Heirs.
Article 1544 of the Civil Code reads, thus:
ART. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred
to the person who may have first taken possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first
recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was first in
possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good
faith.
The provision is not applicable in the present case. It contemplates a case of double or multiple sales by a
single vendor. More specifically, it covers a situation where a single vendor sold one and the same
immovable property to two or more buyers.42 According to a noted civil law author, it is necessary that the
conveyance must have been made by a party who has an existing right in the thing and the power to
dispose of it.43 It cannot be invoked where the two different contracts of sale are made by two different
persons, one of them not being the owner of the property sold.44 And even if the sale was made by the same
person, if the second sale was made when such person was no longer the owner of the property, because it
had been acquired by the first purchaser in full dominion, the second purchaser cannot acquire any right.45
In the case at bar, the subject property was not transferred to several purchasers by a single vendor. In the
first deed of sale, the vendors were Gamiao and Dayag whose right to the subject property originated from
their acquisition thereof from Rizal Madrid with the conformity of all the other Madrid brothers in 1957,
followed by their declaration of the property in its entirety for taxation purposes in their names. On the other
hand, the vendors in the other or later deed were the Madrid brothers but at that time they were no longer
the owners since they had long before disposed of the property in favor of Gamiao and Dayag.
Citing Manresa, the Court of Appeals in 1936 had occasion to explain the proper application of Article 1473
of the Old Civil Code (now Article 1544 of the New Civil Code) in the case of Carpio v. Exevea,46 thus:
In order that tradition may be considered performed, it is necessary that the requisites which it implies must
have been fulfilled, and one of the indispensable requisites, according to the most exact Roman concept, is
that the conveyor had the right and the will to convey the thing. The intention to transfer is not sufficient; it
only constitutes the will. It is, furthermore, necessary that the conveyor could juridically perform that act; that
he had the right to do so, since a right which he did not possess could not be vested by him in the
transferee.
This is what Article 1473 has failed to express: the necessity for the preexistence of the right on the part of
the conveyor. But even if the article does not express it, it would be understood, in our opinion, that that
circumstance constitutes one of the assumptions upon which the article is based.
This construction is not repugnant to the text of Article 1473, and not only is it not contrary to it, but it
explains and justifies the same. (Vol. 10, 4th ed., p. 159)47

In that case, the property was transferred to the first purchaser in 1908 by its original owner, Juan Millante.
Thereafter, it was sold to plaintiff Carpio in June 1929. Both conveyances were unregistered. On the same
date that the property was sold to the plaintiff, Juan Millante sold the same to defendant Exevea. This time,
the sale was registered in the Registry of Deeds. But despite the fact of registration in defendants favor,
the Court of Appeals found for the plaintiff and refused to apply the provisions of Art. 1473 of the Old Civil
Code, reasoning that "on the date of the execution of the document, Exhibit 1, Juan Millante did not and
could not have any right whatsoever to the parcel of land in question."48
Citing a portion of a judgment dated 24 November 1894 of the Supreme Court of Spain, the Court of
Appeals elucidated further:
Article 1473 of the Civil Code presupposes the right of the vendor to dispose of the thing sold, and does not
limit or alter in this respect the provisions of the Mortgage Law in force, which upholds the principle that
registration does not validate acts or contracts which are void, and that although acts and contracts
executed by persons who, in the Registry, appear to be entitled to do so are not invalidated once recorded,
even if afterwards the right of such vendor is annulled or resolved by virtue of a previous unrecorded title,
nevertheless this refers only to third parties.49
In a situation where not all the requisites are present which would warrant the application of Art. 1544, the
principle of prior tempore, potior jure or simply "he who is first in time is preferred in right,"50 should apply.51
The only essential requisite of this rule is priority in time; in other words, the only one who can invoke this is
the first vendee. Undisputedly, he is a purchaser in good faith because at the time he bought the real
property, there was still no sale to a second vendee.52 In the instant case, the sale to the Heirs by Gamiao
and Dayag, who first bought it from Rizal Madrid, was anterior to the sale by the Madrid brothers to
Marquez. The Heirs also had possessed the subject property first in time. Thus, applying the principle, the
Heirs, without a scintilla of doubt, have a superior right to the subject property.
Moreover, it is an established principle that no one can give what one does not havenemo dat quod non
habet. Accordingly, one can sell only what one owns or is authorized to sell, and the buyer can acquire no
more than what the seller can transfer legally.53 In this case, since the Madrid brothers were no longer the
owners of the subject property at the time of the sale to Marquez, the latter did not acquire any right to it.
In any event, assuming arguendo that Article 1544 applies to the present case, the claim of Marquez still
cannot prevail over the right of the Heirs since according to the evidence he was not a purchaser and
registrant in good faith.
Following Article 1544, in the double sale of an immovable, the rules of preference are:
(a) the first registrant in good faith;
(b) should there be no entry, the first in possession in good faith; and
(c) in the absence thereof, the buyer who presents the oldest title in good faith. 54
Prior registration of the subject property does not by itself confer ownership or a better right over the
property. Article 1544 requires that before the second buyer can obtain priority over the first, he must show
that he acted in good faith throughout (i.e., in ignorance of the first sale and of the first buyers
rights)from the time of acquisition until the title is transferred to him by registration or failing registration, by
delivery of possession.55
In the instant case, the actions of Marquez have not satisfied the requirement of good faith from the time of
the purchase of the subject property to the time of registration. Found by the Court of Appeals, Marquez
knew at the time of the sale that the subject property was being claimed or "taken" by the Heirs. This was a
detail which could indicate a defect in the vendors title which he failed to inquire into. Marquez also
admitted that he did not take possession of the property and at the time he testified he did not even know
who was in possession. Thus, he testified on direct examination in the RTC as follows:
ATTY. CALIXTO

Q Can you tell us the circumstances to your buying the land in question?
A In 1976 the Madrid brothers confessed to me their problems about their lots in San Mateo that
they were being taken by Teodoro dela Cruz and Atty. Teofilo A. Leonin; that they have to pay the
lawyers fee of P10,000.00 otherwise Atty. Leonin will confiscate the land. So they begged me to
buy their properties, some of it. So that on June 3, 1976, they came to Cabagan where I was and
gave them P14,000.00, I think. We have talked that they will execute the deed of sale.
Q Why is it, doctor, that you have already this deed of sale, Exh. 14, why did you find it necessary
to have this Deed of Confirmation of a Prior Sale, Exh. 15?
A Because as I said a while ago that the first deed of sale was submitted to the Register of Deeds
by Romeo Badua so that I said that because when I became a Municipal Health Officer in San
Mateo, Isabela, I heard so many rumors, so many things about the land and so I requested them to
execute a deed of confirmation.56
...
ATTY. CALIXTOQ At present, who is in possession on the Riceland portion of the lot in question?
A I can not say because the people working on that are changing from time to time.
Q Why, have you not taken over the cultivation of the land in question?
A Well, the Dela Cruzes are prohibiting that we will occupy the place.
Q So, you do not have any possession?
A None, sir.57
One who purchases real property which is in actual possession of others should, at least, make some
inquiry concerning the rights of those in possession. The actual possession by people other than the vendor
should, at least, put the purchaser upon inquiry. He can scarcely, in the absence of such inquiry, be regarded
as a bona fide purchaser as against such possessions.58 The rule of caveat emptor requires the purchaser
to be aware of the supposed title of the vendor and one who buys without checking the vendors title takes
all the risks and losses consequent to such failure.59
It is further perplexing that Marquez did not fight for the possession of the property if it were true that he had
a better right to it. In our opinion, there were circumstances at the time of the sale, and even at the time of
registration, which would reasonably require a purchaser of real property to investigate to determine whether
defects existed in his vendors title. Instead, Marquez willfully closed his eyes to the possibility of the
existence of these flaws. For failure to exercise the measure of precaution which may be required of a
prudent man in a like situation, he cannot be called a purchaser in good faith.60
As this Court explained in the case of Spouses Mathay v. Court of Appeals:61
Although it is a recognized principle that a person dealing on a registered land need not go beyond its
certificate of title, it is also a firmly settled rule that where there are circumstances which would put a party
on guard and prompt him to investigate or inspect the property being sold to him, such as the presence of
occupants/tenants thereon, it is, of course, expected from the purchaser of a valued piece of land to inquire
first into the status or nature of possession of the occupants, i.e., whether or not the occupants possess the
land en concepto de dueo, 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 occupants possessory rights. The failure of a prospective buyer to take such precautionary steps
would mean negligence on his part and would thereby preclude him from claiming or invoking the rights of a
"purchaser in good faith."62
This rule equally applies to mortgagees of real property. In the case of Crisostomo v. Court of Appeals,63 the
Court held:
It is a well-settled rule that a purchaser or mortgagee cannot close his eyes to facts which should put a
reasonable man upon his guard, and then claim that he acted in good faith under the belief that there was
no defect in the title of the vendor or mortgagor. His mere refusal to believe that such defect exists, or his
willful closing of his eyes to the possibility of the existence of a defect in the vendors or mortgagors title,
will not make him an innocent purchaser or mortgagee for value, if it afterwards develops that the title was in
fact defective, and it appears that he had such notice of the defects as would have led to its discovery had
he acted with the measure of a prudent man in a like situation.64
Banks, their business being impressed with public interest, are expected to exercise more care and
prudence than private individuals in their dealings, even those involving registered lands. Hence, for merely
relying on the certificates of title and for its failure to ascertain the status of the mortgaged properties as is
the standard procedure in its operations, we agree with the Court of Appeals that CRB is a mortgagee in bad
faith.
In this connection, Marquezs obstention of title to the property and the subsequent transfer thereof to CRB
cannot help the latters cause. In a situation where a party has actual knowledge of the claimants actual,
open and notorious possession of the disputed property at the time of registration, as in this case, the actual
notice and knowledge are equivalent to registration, because to hold otherwise would be to tolerate fraud
and the Torrens system cannot be used to shield fraud. 65
While certificates of title are indefeasible, unassailable and binding against the whole world, they merely
confirm or record title already existing and vested. They cannot be used to protect a usurper from the true
owner, nor can they be used for the perpetration of fraud; neither do they permit one to enrich himself at the
expense of others.66
We also find that the Court of Appeals did not err in awarding the subject property to the Heirs absent proof
of good faith in their possession of the subject property and without any showing of possession thereof by
Gamiao and Dayag.
As correctly argued by the Heirs in their Comment,67 the requirement of good faith in the possession of the
property finds no application in cases where there is no second sale.68 In the case at bar, Teodoro dela Cruz
took possession of the property in 1964 long before the sale to Marquez transpired in 1976 and a
considerable length of timeeighteen (18) years in factbefore the Heirs had knowledge of the registration
of said sale in 1982. As Article 526 of the Civil Code aptly provides, "(H)e is deemed a possessor in good
faith who is not aware that there exists in his title or mode of acquisition any flaw which invalidates it." Thus,
there was no need for the appellate court to consider the issue of good faith or bad faith with regard to
Teodoro dela Cruzs possession of the subject property.
Likewise, we are of the opinion that it is not necessary that there should be any finding of possession by
Gamiao and Dayag of the subject property. It should be recalled that the regularity of the sale to Gamiao and
Dayag was never contested by Marquez.69 In fact the RTC upheld the validity of this sale, holding that the
Madrid brothers are bound by the sale by virtue of their confirmation thereof in the Joint Affidavit dated 14
August 1957. That this was executed a day ahead of the actual sale on 15 August 1957 does not diminish its
integrity as it was made before there was even any shadow of controversy regarding the ownership of the
subject property.
Moreover, as this Court declared in the case of Heirs of Simplicio Santiago v. Heirs of Mariano E. Santiago ,
70
tax declarations "are good indicia of possession in the concept of an owner, for no one in his right mind
would be paying taxes for a property that is not in his actual or constructive possession."71
WHEREFORE, the Petition is DENIED. The dispositive portion of the Court of Appeals Decision, as
modified by its Resolution dated 5 January 1998, is AFFIRMED. Costs against petitioner.

SO ORDERED.
Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ., concur.
Footnotes
1

Dated 26 February 1998; Filed on 12 March 1998; Rollo, pp. 9-41 with annexes.

Penned by Justice Artemio G. Tuquero, concurred in by Justices Artemon D. Luna and Hector L.
Hofilea; Rollo, pp. 23-30.
3

Dated 10 May 1991; Written by Honorable Artemio R. Alivia, Regional Trial Judge; Rollo, pp. 98109.
4

Penned by Justice Artemio G. Tuquero, concurred in by Justices Artemon D. Luna and Hector L.
Hofilea; Rollo, pp. 33-34.
5

Rollo, p. 23.

Ibid.

Exhibit A.

Rollo, pp. 23 and 103; RTC Decision, p. 6; Exhibit B, RTC Records, p. 6; In this Joint Affidavit
executed before Apolonio S. Padua, Justice of Peace, Anselmo, Gregorio, Filomeno and Domingo,
all surnamed Madrid, under oath, declared that " we have no objection of the alienation, as it is a
part of the exclusive share of our brother the vendor still unsegregated; that as such we hereunto
confirm the said sale in favor of Aleja Gamiao and Felisa Dayag."
9

Exhibit C; Rollo, p. 103; RTC Decision, p. 6.

10

Rollo, p. 24; Exhibit I-2.

11

Ibid; Exhibit I-1.

12

Exhibits D and E; Rollo, p. 103; RTC Decision, p. 6.

13

Rollo, pp. 24 and 103; RTC Decision, p. 6.

14

Ibid; Exhibit F.

15

Exhibit 14.

16

Exhibit 15.

17

Rollo, pp. 24 and 104.

18

Ibid.

19

Exhibits K, K-1 to K-7, Exhibits 6-13.

20

Rollo, pp. 24 and 105; CA Records, p. 54.

21

Rollo, pp. 24 and 105.

22

Ibid; CA Records, p. 55.

23

Rollo, p. 24.

24

Complaint dated 15 December 1986, RTC Records, pp. 1-8 with Annexes; Amended Complaint
dated 24 December 1986, RTC Records, pp. 14-18.
25

Dated 24 January 1987; RTC Records, pp. 33-40 with annexes.

26

Dated 4 March 1987, Id. at 53-57.

27

Rollo, pp. 100-101; Id. at 3-4.

28

Id. at 100; Id. at 3.

29

Id. at 25 and 109; Id. at 12.

30

Id. at 106-107; Id. at 9-10.

31

CA Records, pp. 45-79.

32

Rollo, p. 26; Id. at 49-50.

33

Id. at 33.

34

Id. at 23-30.

35

Id. at 29-30.

36

Id. at 27; TSN, pp. 35-36, 21 September 1989.

37

Id. at 27-28.

38

Id. at 29.

39

Filed on 17 June 1997; See Rollo, p. 9.

40

Rollo, pp. 33-34.

41

Id. at 34.

42

C. Villanueva, Philippine Law on Sales 100 (1995).

43

A. TOLENTINO, COMMENTARIES AND JURISPRUDENCE ON THE CIVIL CODE OF THE


PHILIPPINES, VOLUME V 96 (1999), citing 10 Manresa 170, 171.
44

Id., citing Olsen v. Yearsley, 11 Phil. 178, Carpio v. Exevea, (C.A.) 38 Off. Gaz. 1356 and Cruzado
v. Bustos, 34 Phil. 17.
45

Id., citing Bautista v. Sioson, 39 Phil. 615; Lichauco v. Berenger, 39 Phil. 643; Salvaro v. Cabana,
129 SCRA 656.
46

No. 43354, (CA) 38 Off. Gaz. 1356 (1936). This case is cited in the following books to
demonstrate that Art. 1544 (then Art. 1473 of the Old Civil Code) cannot be invoked if the sale is

10

made by two different vendors: A. Padilla, Civil Law, Civil Code Annotated 878 (1953); E. Paras,
Civil Code of the Philippines Annotated Vol. V, 12th ED. 166-167 (1990); A. Tolentino,
Commentaries and Jurisprudence on the Civil Code of the Philippines, Vol. V 96 (1999); C.
Villanueva, Philippine Law on SAles 100 (1995).
47

Id. at 1357.

48

Id. at 1358.

49

Supra note 47.

50

Blacks Law Dictionary 6th Ed. 1194 (1990).

51

Supra note 42.

52

D. Jurado, Civil Law Reviewer 19th Ed. 879 (1999).

53

Tangalin v. Court of Appeals, 422 Phil. 358, 365 (2001).

54

A. Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines, Vol. V 96
(1999); Martinez v. Court of Appeals, G.R. No. 123547 , 21 May 2001, 358 SCRA 38, 50; Bayoca v.
Nogales, G.R. No. 138201 , 12 September 2000, 340 SCRA 154, 165-166, citing J.C. Vitug,
Compendium of Civil Law and Jurisprudence, pp. 604-605; Balatbat v. Court of Appeals, 329 Phil.
858, 872 (1996). Citation omitted.
55

Uraca v. CA, 344 Phil. 253, 265 (1997).

56

TSN, pp. 34-35, 21 September 1989.

57

Id. at 38-39, 21 September 1989.

58

Republic v. Hon. Court of Appeals, No. L-42856, 27 January 1981, 102 SCRA 331, 344, citing
Conspecto v. Fruto, 31 Phil. 144, 149.
59

Caram, Jr. v. Laureta, No. L-28740, 24 February 1981, 103 SCRA 7, 16.

60

Voluntad v. Sps. Dizon, 372 Phil. 82, 91 (1999).

61

356 Phil. 870 (1998).

62

Id. at 892.

63

274 Phil. 1134 (1991).

64

Id. at 1142-1143, citations omitted.

65

Lavides v. Pre, 419 Phil. 665, 671-672 (2001).

66

Bayoca v. Nogales, G.R. No. 138201 , 12 September 2000, 340 SCRA 154, 169.

67

Rollo, pp. 63-77.

68

Id. at 71.

11

69

Id. at 105.

70

G.R. No. 151440, 17 June 2003, 404 SCRA 193.

71

Id. at 199; See also Larena v. Mapili, G.R. No. 146341 , 7 August 2003, 408 SCRA 484, 491.

1. Registration in relation to Tradition


Cases:
G.R. No. L-45742

April 12, 1939

TIBURCIO MAMUYAC, petitioner-appellant,


vs.
PEDRO ABENA (alias Indong), respondent-appellee.
Nicanor Tavora for petitioner.
Pedro C. Quinto for respondent.
LAUREL, J.:
This is a petition for writ of certiorari to review the decision of the Court of Appeals promulgated on July 30,
1937 in CA-G. R. No. 43446.
Gregoria Pimentel was the owner of the two parcels of land which she sold and conveyed on June 1, 1926,
to Pedro Abena, the respondent-appellee herein. On January 27, 1927, Gregoria Pimentel again sold and
conveyed the same parcels to Tiburcio Mamuyac, the petitioner-appellant herein. The document of sale,
Exhibit 1, in favor of Abena was duly inscribed in the registry of property of the province on January 31,
1927, and from April, 1927, said parcels of land were declared for taxation in the name said Abena. The
document executed in favor of the petitioner on January 27, 1927, was neither inscribed in the registry of
property nor were the parcels of the land declared for taxation in the name of the latter.
To determine the conflict, petitioner-appellant instituted an action in the Court of First Instance of La Union
against the respondent-appellee for the recovery of the two controverted parcels of land. After hearing, the
trial court rendered judgment in favor of the defendant, respondent-appellee here. From this judgment, the
petitioner-appellant appealed to the Court of Appeals. This latter court, with one member dissenting, affirmed
the decision of the Court of First Instance of La Union. The dispositive part of the majority decision of the
appellate court is:
De cualquier modo que se considere la cuestion, ya bajo la teoria de la parte demandante sobre la
posesion, ya bajo el articulo 1473 del Codigo Civil que tiene exacta aplicacion al caso de autos, el
juzgado no incurrio en ningun error al dictar sentencia a favor del demandado, la cual confirmamos
en todas sus partes, con las costas en esta instancia al apelante.
Plaintiff, petitioner-appellant here, elevated the case to this court by writ of certiorari as adverted to in the
beginning of this opinion.
The first assignment of error of the petitioner-appellant challenges the findings of fact of the Court of
Appeals. This cannot be done.
The appellate jurisdiction of the Supreme Court in cases brought to it from the Court of Appeals is
limited to reviewing and revising the errors of law incurred by the latter, the findings of fact of said
Court of Appeals being final as to the former. (Guico vs. Mayuga and Heirs of Mayuga [1936], 35
Off. Gaz., 861.)

12

Review of judgments and decrees of the Court of Appeals is limited to "cases in which only errors
or questions of law are involved." (Sec 2, Commonwealth Act No. 3, amending section 138 of the
Administrative Code, in relation to sec. 2, Art. VIII, Constitution of the Philippines.) (Mateo vs.
Collector of Customs and Court of Appeals [1936], 35 Off. Gaz., 915.)
The petitioner-appellant under his under his second and third assignments of error contends that he has a
better right over the two parcels of land involved because of possession claimed by him in virtue of an
alleged private contract of mortgaged executed in his favor on January 4, 1935 (Exhibit B.) It is sufficient
answer to this contention that "in order that a mortgage may be deemed to be legally constituted, it is
undispensable that the instrument in which it appears be a public document and be recorded in the property
register. Therefore, a mortgage in legal form was not constituted by said private document." (Tuason vs.
Goduco, 23 Phil., 342, 347.) Even were we to accord validity to the mortgage, Exhibit B, article 1473 of the
Civil Code, invoked by him, applies only to the determination of presence between sale and sale:
El precepto que acaba de consignarse viene a determinar los casos de preferencia cuando una
misma cosa hubiere sido vendida a dos o mas personas, casos de los que ya se ocupo la ley 15,
tit. 32, lib. 3. del Codigo Romano, y la ley 50, tit. 5. part. 5. a (4 Bonel, Codigo Civil, p 483) and
the same cannot be availed of in case of conflict between a sale and a mortgage.
Es aplicable el precepto del articulo 1473 del Codigo Civil para resolver el resolver el pleito entre
el comprador de un inmueble y el acreedor del vendedor, con hipoteca sobre el mismo inmueble
vendido?
El Tribunal Supremo declaro no haber lugar al recurso.
Considerando que es inaplicable al caso el articulo 1473 del Codigo Civil, que se supone infringido
en el primer motivo del recurso, porque no se ha tratado en este pleito del caso a que se refiere
dicho articulo, ni el recurrente tenia inscrita la propiedad de la finca de que se trata cuando se
instruyo el expediente posesorio, ni poseia con la buena fe que exige el ultimo parrafo del articulo
citado, siendo, como era, conocedor de que la Godinez y de los gravamenes que sobre esta
pesaban, lo cual le coloca en condiciones que n son las del tercero a que hace referencia el
articulo 606 del citado Codigo, cuya infraccion se invoca en el segundo motivo, por no haberlo
aplicado, cuando realmente no lo es este caso. (Sentencia de 7 de julio 1896, 15 Codigo Civil,
Martinez Ruiz 2. a ed., 330, 332.)
Upon the other hand, even if we were to accept the contention of the petitioner-appellant that he had been in
possession of said properties by reason of the alleged contract of mortgage executed in his favor, on
January 4, 1925, and were to accord legal effect to the document of sale of January 27, 1927, which was not
recorded in the registry of property, still his right cannot prevail over that of Abena who had duly registered
his deed of sale. (Exhibit 1.)
The contention of the appellant that respondent's ownership and preference over the property over the
property in question is not complete because of lack of material delivery of the possession to him by the
vendor is not well taken, for the reason that the execution of the public document of sale in favor of the
respondent-appellee is equivalent to the delivery of the realty sold. (Sanchez vs. Ramos, 40, Phil., 614,
616.).
The petitioner is hereby dismissed with costs against the petitioner. So ordered.
Avancea, C.J., Villa-Real, Imperial, Concepcion and Moran, JJ., concur.

G.R. No. L-19545 April 18, 1975

13

PHILIPPINE SUBURBAN DEVELOPMENT CORPORATION, petitioner,


vs.
THE AUDITOR GENERAL, PEDRO M. GIMENEZ, respondent.
Magno L. Dajao for petitioner.
First Assistant Solicitor General Esmeraldo Umali and Solicitor Sumilang V. Bernardo for respondent.

ANTONIO, J.:+.wph!1
Appeal by certiorari from the decision dated December 11, 1961, of then Auditor General Pedro M.
Gimenez, disallowing the request of petitioner for the refund of real estate tax in the amount of P30,460.90
paid to the Provincial Treasurer of Bulacan.
The facts of the case are as follows:
On June 8, 1960, at a meeting with the Cabinet, the President of the Philippines, acting on the reports of the
Committee created to survey suitable lots for relocating squatters in Manila and suburbs, and of the Social
Welfare Administrator together with the recommendation of the Manager of the Government Service
Insurance System, approved in principle the acquisition by the People's Homesite and Housing Corporation
of the unoccupied portion of the Sapang Palay Estate in Sta. Maria, Bulacan for relocating the squatters who
desire to settle north of Manila, and of another area either in Las Pias or Paraaque, Rizal, or Bacoor,
Cavite for those who desire to settle south of Manila. The project was to be financed through the flotation of
bonds under the charter of the PHHC in the amount of P4.5 million, the same to be absorbed by the
Government Service Insurance System. The President, through the Executive Secretary, informed the
PHHC of such approval by letter bearing the same date (Annex "B").
On June 10, 1960, the Board of Directors of the PHHC passed Resolution No. 700 (Annex "C") authorizing
the purchase of the unoccupied portion of the Sapang Palay Estate at P0.45 per square meter "subject to
the following conditions precedent: t.hqw
1. That the confirmation by the OEC and the President of the purchase price of P0.45 per
sq. m. shall first be secured, pursuant to OEC Memorandum Circular No. 114, dated May
6, 1957.
2. That the portion of the estate to be acquired shall first be defined and delineated.
3. That the President of the Philippines shall first provide the PHHC with the necessary
funds to effect the purchase and development of this property from the proposed P4.5
million bond issue to be absorbed by the GSIS.
4. That the contract of sale shall first be approved by the Auditor General pursuant to
Executive Order dated February 3, 1959.
5. The vendor shall agree to the dismissal with prejudice of Civil Case No. Q-3332 C.F.I.
Quezon City, entitled "Phil. Suburban Dev. Corp. V. Ortiz, et al."
On July 13, 1960, the President authorized the floating of bonds under Republic Act Nos. 1000 and 1322 in
the amount of P7,500,000.00 to be absorbed by the GSIS, in order to finance the acquisition by the PHHC of
the entire Sapang Palay Estate at a price not to exceed P0.45 per sq. meter.
On December 29,1960, after an exchange of communications, Petitioner Philippine Suburban Development
Corporation, as owner of the unoccupied portion of the Sapang Palay Estate (specifically two parcels
covered by TCT Nos. T-23807 and T-23808), and the People's Homesite and Housing Corporation, entered
into a contract embodied in a public instrument entitled "Deed of Absolute Sale" (Annex "F") whereby the

14

former conveyed unto the latter the two parcels of land abovementioned, under the following terms and
conditions, among others: t.hqw
1. That for and in consideration of the sum of THREE MILLION THREE HUNDRED
EIGHTY-SIX THOUSAND TWO HUNDRED TWENTY THREE (P3,386,223.00) PESOS,
Philippine currency, to be paid by the VENDEE to the herein VENDOR in the manner
outlined hereinbelow, the VENDOR by these presents does hereby sell, transfer and
convey by way of absolute sale unto the VENDEE, its successors, administrators or
assigns, the above described two (2) parcels of land, together with all the improvements
existing thereon;
2. That the payment of the consideration mentioned in paragraph 1 above shall be made
as follows:
(a) The vendee is presently negotiating or securing from the GOVERNMENT SERVICE
INSURANCE SYSTEM, by virtue of a directive of the President of the Philippines, a loan
for the purchase of the above described two (2) parcels of land in anticipation of the
purchase by the said GOVERNMENT SERVICE INSURANCE SYSTEM of the bonds to
be floated by the National Government to enable the VENDEE to make this purchase, and
from whatever amount may be granted as loan by the GOVERNMENT SERVICE
INSURANCE SYSTEM to the VENDEE, ONE MILLION SEVEN HUNDRED TEN
THOUSAND (P1,710,000.00) PESOS shall be retained by the said VENDEE for the
purpose of paying and clearing the existing lien annotated at the back of the aforesaid
Transfer Certificates of Title Nos. T-23807 and T-23808, said payment to be made directly
to the MORTGAGEES and the difference shall be paid to the VENDOR, provided that this
first payment shall not be less than ONE MILLION SEVEN HUNDRED TEN THOUSAND
(P1,710,000.00) PESOS and the VENDOR is hereby constituted as Attorney-in-fact and
authorized to receive from, and the GOVERNMENT SERVICE INSURANCE SYSTEM is
directed to pay the balance of the loan direct to the herein VENDOR chargeable against
VENDEE's loan from the GOVERNMENT SERVICE INSURANCE SYSTEM; provided,
however, That should this amount be more than sufficient to cover the said mortgage lien,
the VENDEE shall pay the difference to the VENDOR; and provided, further, That the
VENDOR shall take charge of the preparation and registration of the documents
necessary in clearing the above referred to mortgage lien, with the understanding that the
expenses for preparation, notarization, registration, including documentary stamps, and
other expenses for the cancellation of said mortgage lien shall be for the account of the
VENDOR and shall be advanced by the VENDEE to the VENDOR;
(b) That out of the sum of P1,710,000.00 to be retained by the VENDEE mentioned in the
immediately preceding paragraph 2(a) for the purpose of discharging the said mortgage
lien, the VENDEE shall deduct and further retain or keep as a trust fund the amount of
FORTY THOUSAND (P40,000) PESOS, Philippine Currency, to answer for the remaining
Notice of Lis Pendens annotated at the back of Transfer Certificate of Title Nos. T-23807
and T-23808 until such lien shall have been discharged or cancelled, the VENDEE binding
itself to deliver forthwith the said amount of P40,000.00 unto the successful party involved
in said Notice of Lis Pendens;
(c) The remaining balance of the total consideration in the amount of ONE MILLION SIX
HUNDRED SEVENTY-SIX THOUSAND TWO HUNDRED TWENTY-THREE PESOS
(P1,676,223.00), Philippine Currency, or whatever amount is not paid by virtue of the first
payment mentioned in paragraph (a) above, shall be paid by the VENDEE unto the
VENDOR immediately upon the VENDEE's obtaining sufficient funds from proceeds of
bonds floated by the VENDEE or the Government for the purchase of the properties
subject of this transaction; provided, however, That full and complete payment of the
balance mentioned in this particular paragraph 2(c) shall be made or paid by the VENDEE
within a period of sixty (60) days from date of delivery of title by the VENDOR in the name
of the VENDEE; and provided, further, That this sixty (60) days period may be extended
for another period of sixty (60) days upon written request by the VENDEE at least five (5)
days prior to the expiration of the said sixty (60) days period. Should there be instituted
any legal action, however, for the collection of any amounts due from the VENDEE in

15

favor of the VENDOR, the VENDEE binds itself to pay unto the VENDOR a sum
equivalent to twenty-five (25%) per centum of the total balance due from the, VENDEE in
favor of the VENDOR as and by way of attorney's fees, and the costs of suit;
3. That the VENDOR hereby warrants to defend the title and ownership of the VENDEE to
the two (2) parcels of land above described from any claim or claims of third parties
whomsoever;
(4.) That all expenses for the preparation and notarization of this document shall be for the
account of the VENDOR; provided, however, That registration and issuance of certificates
of title in the name of the VENDEE shall be for the account of the VENDEE." (Annex "F")
The above document was not registered in the Office of the Register of Deeds until March 14, 1961, due to
the fact, petitioner claims, that the PHHC could not at once advance the money needed for registration
expenses. In the meantime, the Auditor General, to whom a copy of the contract had been submitted for
approval in conformity with Executive Order No. 290, expressed objections thereto and requested a reexamination of the contract, in view of the fact that from 1948 to December 20, 1960, the entire hacienda
was assessed at P131,590.00, and reassessed beginning December 21, 1960 in the greatly increased
amount of P4,898,110.00. Said objections were embodied in a letter to the President, dated January 9,
1961, but this notwithstanding, the President, through the Executive Secretary, approved the Deed of
Absolute Sale on February 1, 1961.
It appears that as early as the first week of June, 1960, prior to the signing of the deed by the parties, the
PHHC acquired possession of the property, with the consent of petitioner, to enable the said PHHC to
proceed immediately with the construction of roads in the new settlement and to resettle the squatters and
flood victims in Manila who were rendered homeless by the floods or ejected from the lots which they were
then occupying (Annexes "D" and "D-1").
On April 12, 1961, the Provincial Treasurer of Bulacan requested the PHHC to withhold the amount of
P30,099.79 from the purchase price to be paid by it to the Philippine Suburban Development Corporation.
Said amount represented the realty tax due on the property involved for the calendar year 1961 (Annex "G").
Petitioner, through the PHHC, paid under protest the abovementioned amount to the Provincial Treasurer of
Bulacan and thereafter, or on June 13, 1961, by letter, requested then Secretary of Finance Dominador
Aytona to order a refund of the amount so paid. Petitioner claimed that it ceased to be the owner of the land
in question upon the execution of the Deed of Absolute Sale on December 29, 1960. Upon recommendation
of the Provincial Treasurer of Bulacan, said request was denied by the Secretary of Finance in a letterdecision dated August 22, 1961. Pertinent portions of this decision are quoted hereunder: t.hqw
.... the records show that the deed of sale executed on December 29, 1960 ... was
approved by the President upon favorable recommendation of the Cabinet and the
Committee created for the purpose of surveying suitable lots which may be acquired for
relocating squatters in Manila on February 1, 1961 only and that said instrument of sale
was registered with the Register of Deeds on March 14, 1961.
That Corporation, as vendor, maintains that in view of the execution of the deed of sale on
December 29, 1960 it ceased to be the owner of the property involved and that
consequently it was under no obligation to pay the real property tax thereon effective
January 1, 1961. In support of its stand, that Corporation cites Article 1498 of the New
Civil Code of the Philippines which provides that "when the sale is made through a public
instrument, the execution thereof shall be equivalent to the delivery of the thing which is
the object of the contract, if from the deed the contrary does not appear or cannot clearly
be inferred" and Article 1496 of the same Code which states that "the ownership of the
thing sold is acquired by the vendee from the moment it is delivered to him in any of the
ways specified in Articles 1497 to 1501, or in any other manner signifying an agreement
that the possession is transferred from the vendor to the vendee." On the other hand, the
Provincial Treasurer contends that, as under the Land Registration Act (Act No. 496) the
Philippine Suburban Development Corporation is still the owner of the property until the

16

deed of sale covering the same has been actually registered, the vendor is still liable to
the payment of real property tax for the calendar year 1961.
It is now claimed in this appeal that the Auditor General erred in disallowing the refund of the real estate tax
in the amount of P30,460.90 because aside from the presumptive delivery of the property by the execution
of the deed of sale on December 29, 1960, the possession of the property was actually delivered to the
vendee prior to the sale, and, therefore, by the transmission of ownership to the vendee, petitioner has
ceased to be the owner of the property involved, and, consequently, under no obligation to pay the real
property tax for the year 1961.
Respondent, however, argues that the presumptive delivery of the property under Article 1498 of the Civil
Code does not apply because of the requirement in the contract that the sale shall first be approved by the
Auditor General, pursuant to the Executive Order dated February 3, 1959 and later by the President, and
that the petitioner should register the deed and secure a new title in the name of the vendee before the
government can be compelled to pay the balance of P1,676,223.00 of the purchase price. Respondent
further contends that since the property involved is a land registered under the Land Registration Act (Act
No. 496), until the deed of sale has been actually registered, the vendor remains as the owner of the said
property, and, therefore, liable for the payment of real property tax.
We find the petition meritorious.
I.
It cannot be denied that the President of the Philippines, on June 8, 1960, at his Cabinet meeting, approved
and authorized the purchase by the national government, through the PHHC, of the unoccupied portion of
the property of petitioner; that on June 10, 1960, the PHHC, acting pursuant to the aforecited approval of the
President, passed its Resolution No. 700 approving and authorizing the purchase of the unoccupied portion
of said property; and that after the PHHC took possession of the aforementioned property on the first week
of June, 1960 to use it as a resettlement area for squatters and flood victims from Manila and suburbs, the
President of the Philippines at his Cabinet meeting on June 13, 1960, approved and authorized the
purchase by the PHHC of the entire property consisting of 752.4940 hectares, instead of only the
unoccupied portion thereof as was previously authorized.
Considering the aforementioned approval and authorization by the President of the Philippines of the
specific transaction in question, and the fact that the contract here involved which is for a special purpose
to meet a special situation was entered into precisely to implement the Presidential directive, the prior
approval by the Auditor General envisioned by Administrative Order No. 290, dated February 3, 1959, would
therefore, not be necessary.
As We held in Federation of the United NAMARCO Distributors v. National Marketing Corporation, 1 the
approval by the Auditor General contemplated by Administrative Order No. 290 dated February 3, 1959,
refers to contracts in general, ordinarily entered into by government offices and government-owned or
controlled corporations, and not to a contract for a special purpose, to meet a special situation and entered
into in implementation of a Presidential directive to solve and emergency. In other words, where the contract
already bears the approval of the President, the action of the Auditor General would no longer be necessary
because under the said Administrative Order, the President has, at any rate, the final say.
II
Under the civil law, delivery (tradition) as a mode of transmission of ownership maybe actual (real tradition)
or constructive (constructive tradition). 2 When the sale of real property is made in a public instrument, the
execution thereof is equivalent to the delivery of the thing object of the contract, if from the deed the contrary
does not appear or cannot clearly be inferred. 3
In other words, there is symbolic delivery of the property subject of the sale by the execution of the public
instrument, unless from the express terms of the instrument, or by clear inference therefrom, this was not
the intention of the parties. Such would be the case, for instance, when a certain date is fixed for the
purchaser to take possession of the property subject of the conveyance, or where, in case of sale by
installments, it is stipulated that until the last installment is made, the title to the property should remain with

17

the vendor, or when the vendor reserves the right to use and enjoy the properties until the gathering of the
pending crops, 4 or where the vendor has no control over the thing sold at the moment of the sale, and,
therefore, its material delivery could not have been made. 5
In the case at bar, there is no question that the vendor had actually placed the vendee in possession and
control over the thing sold, even before the date of the sale. The condition that petitioner should first register
the deed of sale and secure a new title in the name of the vendee before the latter shall pay the balance of
the purchase price, did not preclude the transmission of ownership. In the absence of an express stipulation
to the contrary, the payment of the purchase price of the good is not a condition, precedent to the transfer of
title to the buyer, but title passes by the delivery of the goods. 6
III .
We fail to see the merit in respondent's insistence that, although possession was transferred to the vendee
and the deed of sale was executed in a public instrument on December 29, l960, the vendor still remains as
owner of the property until the deed of sale is actually registered with the Office of the Register of Deeds,
because the land sold is registered under the Torrens System. In a long line of cases already decided by this
Court, the constant doctrine has been that, as between the parties to a contract of sale, registration is not
necessary to make it valid and effective, for actual notice is equivalent to registration. 7 Indeed, Section 50 of
the Land Registration Act provides that, even without the act of registration, a deed purporting to convey or
affect registered land shall operate as a contract between the parties. The registration is intended to protect
the buyer against claims of third persons arising from subsequent alienations by the vendor, and is certainly
not necessary to give effect to the deed of sale, as between the parties to the contract. 8
The case of Vargas v. Tancioco, 9 cited by respondent, refers to a case involving conflicting rights over
registered property and those of innocent transferees who relied on the clean titles of the properties in
question. It is, therefore, not relevant to the case at bar.
In the case at bar, no rights of third persons are involved, much less is there any subsequent alienation of
the same property. It is undisputed that the property is in the possession of the vendee, even as early as the
first week of June, 1960, or six (6) months prior to the execution of the Deed of Absolute Sale on December
29, 1960. Since the delivery of possession, coupled with the execution of the Deed of Absolute Sale, had
consummated the sale and transferred the title to the purchaser, 10 We, therefore, hold that the payment of
the real estate tax after such transfer is the responsibility of the purchaser. However, in the case at bar, the
purchaser PHHC is a government entity not subject to real property tax. 11
WHEREFORE, the appealed decision is hereby reversed, and the real property tax paid under protest to the
Provincial Treasurer of Bulacan by petitioner Philippine Suburban Development Corporation, in the amount
of P30,460,90, is hereby ordered refunded. Without any pronouncement as to costs.
Makalintal, C.J., Fernando, Barredo and Aquino, JJ., concur.1wph1.t

Footnotest.hqw
1 4 SCRA 867, 885.
2 Tolentino, V Civil Code, pp. 41, 42.
3 Articles 1496, 1498, Civil Code of the Philippines.
4 [10 Manresa 156 (1950 Ed.); Aviles et al. v. Arcega, et al., 44 Phil., 924] .
5 Addison v. Felix, 38 Phil., 404; Masallo v. Cesar, 39 Phil., 134.
6 Ocejo Perez & Co. v. International Bank, 37 Phil., 631.

18

7 Obras Pias v. Deverra Ignacio, 17 Phil., 45; Gustilo v. Maravilla, 48 Phil., 442; Quimson
v. Suarez, 45 Phil., 901; Winkleman v. Veluz, 43 Phil., 609; Galasinao v. Austria, 97 Phil.,
82.
8 Galanza v. Nuesa, 95 Phil., 713; Sapto, et al. v. Fabiana, 103 Phil 683, 685.
9 67 Phil., 308.
10 Sapto, et al., v. Fabiana, supra..
11 Republic v. Aricheta, 2 SCRA 469. See also Sec. 7 of Rep. Act No. 1322 which states
that "All the projects of the People's Homesite and Housing Corporation financed under
this act shall be exempt from national and local taxes and fees of any kind."

2. Consulta

Sec 117, PD 1529

Section 117. Procedure. When the Register of Deeds is in doubt with regard to the proper step to be taken
or memorandum to be made in pursuance of any deed, mortgage or other instrument presented to him for
registration, or where any party in interest does not agree with the action taken by the Register of Deeds
with reference to any such instrument, the question shall be submitted to the Commissioner of Land
Registration by the Register of Deeds, or by the party in interest thru the Register of Deeds.
Where the instrument is denied registration, the Register of Deeds shall notify the interested party in writing,
setting forth the defects of the instrument or legal grounds relied upon, and advising him that if he is not
agreeable to such ruling, he may, without withdrawing the documents from the Registry, elevate the matter
by consulta within five days from receipt of notice of the denial of registration to the Commissioner of Land
Registration.
The Register of Deeds shall make a memorandum of the pending consulta on the certificate of title which
shall be canceled motu proprio by the Register of Deeds after final resolution or decision thereof, or before
resolution, if withdrawn by petitioner.
The Commissioner of Land Registration, considering the consulta and the records certified to him after
notice to the parties and hearing, shall enter an order prescribing the step to be taken or memorandum to be
made. His resolution or ruling in consultas shall be conclusive and binding upon all Registers of Deeds,
provided, that the party in interest who disagrees with the final resolution, ruling or order of the
Commissioner relative to consultas may appeal to the Court of Appeals within the period and in manner
provided in Republic Act No. 5434.
3. Ministerial Duty to Register
Cases:
G.R. No. L-45192

April 10, 1939

In re Consulta filed by Attorney VICENTE J. FRANCISCO on behalf of DOMINGO CABANTOG.


Sumulong, Lavides and Sumulong for appellant.
Vicente J. Francisco for appellee.
LAUREL, J.:
On January 21, 1936, the spouses Francisco Vicua and Maxima Caballes made an absolute sale of three
parcels of land, covered by transfer certificates of title Nos. 13395, 13396, and 13397, in favor of Domingo

19

Cabantog for the sum of P2,500. The deed of sale was presented for registration, and the senior clerk in the
office of the register of deeds of Laguna, in the absence of the latter official, made a notation thereon to the
effect that the same was presented at 12.15 o'clock on January 25, 1936, as per entry number 18624, vol. II
of the day book. On his return to duty on January 27, 1936, the register of deeds had the aforesaid notation
cancelled and substituted by the following:
18624. The inscription of the proceeding deed of sale is hereby suspended until after the
resolution to be rendered by the Supreme Court on the appeal intended to be presented by Maxima
Caballes against the decision of the Court of First Instance of Laguna in Civil Case No. 6600
instituted by Apolonia Coronado et al. vs. Maxima Caballes et al., in which the latter has been
condemned to pay to the plaintiff the amount of P1,000,000 (should be P100,000).
The undersigned is of the opinion that it is the duty of the register of deeds to aid the courts,
avoiding that their decisions may be effective due to transfers of properties made by the party
losing in a case after same have been handled down; and also to protect the interest of the winning
party by preventing the multiplicity of litigations.
Pending the appeal of Maxima Caballes to this court from the decision in civil case No. 6600 sentencing her
to pay Apolonia Coronado the sum of P100,000, the latter secured an attachment of the three parcels of
land sold by Maxima Caballes to Domingo Cabantog, which attachment was entered in the day book of the
register of deeds of Laguna on January 27, 1936. Against the refusal of the register of deeds to register the
deed of sale in favor of Domingo Cabantog, his counsel elevated a consulta to the judge of the Fourth
Branch of the Court of First Instance of Manila, through the Chief of the General Land Registration Office,
requesting answer to the following:
QUESTIONS
1. Is it not the ministerial duty of the register of deeds of Laguna, upon presentation to him of the
absolute deed of sale in favor of Domingo Cabantog of the three (3) parcels of land in question,
with the corresponding owners' duplicate certificates of title, to register said deed of sale, cancel
said outstanding certificates in the name of the vendors, and prepare and issue the proper transfer
certificates of title in the name of the vendee, the proper registration fees having been tendered and
accepted and there being no judicial order suspending such action?
2. Does the register of deeds of Laguna have the authority to deny issuance of the proper transfer
certificates of title in favor of the vendee on the ground alleged by him that, "it is the duty of the
register of deeds to aid the courts, avoiding that their decision may be effective (or ineffective) due
to transfers of properties made by the party losing in case after same have been handed down; and
also to protect the interest of the winning party by preventing the multiplicity of litigations', or should
the register of deeds leave this question to the determination of the proper court in case the same
is submitted to it for determination by any interested party?
A copy of the consulta having been served on the register of deeds, the latter filed his answer thereto
justifying his action upon the following grounds, among others:
La resolucion del que suscribe al suspender la inscripcion de la escritura de venta otorgada por
Maxima Caballes a favor del recurrente Domingo Cabantog y la negativa del mismo a expedir
nuevos certificados de titulo libre de gravamen a favor del comprador Domingo Cabantog, se basa
en que dicha escritura de venta es un traspaso hecho en fraude de la acreedora Apolonia
Coronado, demandante en la Causa Civil No. 6600 del Juzgado de Primera Instancia de Laguna,
en la cual la vendedora Maxima Caballes ha sido condenada a pagar a dicha Apolonia Coronado
la suma de P100,000. En apoyo de esta afirmacion, se hace constar que la sentencia dictada en
contra de dicha vendedora esta fechada el 14 de diciembre de 1935, mientras que la venta de que
aqui se trata y cuya inscripcion se pide por Domingo Cabantog ha sido otorgada por Maxima
Caballes el 21 de enero de 1936, o sea, mas de un mes despues de haber recaido el
pronunciamiento judicial de condena. Se hace constar igualmente que el valor de todos los bienes
inmuebles registrados a nombre de Maxima Caballes no puede llegar a cubrir la mitad siquiera del
importe de la sentencia dictada contra ella, pues los mismos apenas si valen P30,000
vendiendolos al precio corriente.

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El que suscribe cree sinceramente que es su deber denegar o al menos suspender la inscripcion
de traspasos fraudulentos, sobre todo cuando como en el presente caso le consta a el
personalmente que hay un pronunciamiento judicial condenatorio previo al otorgamiento de la
escritura cuya inscripcion se pide, mientras tanto o hasta que un tribunal competente pueda decidir
la naturaleza verdadera de dicho traspaso. Este es un paso prudente que evita no solamente el
perjuicio que se puede irrogar a los acreedores del vendedor sino tambien al gobierno por los
litigios que puedan entablar terceras personas que aleguen despues ser compradores inocentes.
Se evita asi mismo el que una sentencia judicial quede ineficaz por actos imprudentes y
precipitados sometidos por un Registrador de Titulos en la inscripcion de documentos de dudosa
legalidad.
The case came up to the oral hearing, at which attorney Vicente J. Francisco for Domingo Cabantog, Fiscal
Villanueva for the register of deeds, and Attorney Lorenzo Sumulong for Apolonia Coronado extensively
argued their respective sides of the controversy. After hearing, the Fourth Branch of the Court of First
Instance of Manila, His Honor, Judge Montemayor presiding, entered a resolution setting out the controlling
facts and closing with the following conclusion:
After carefully studying the case, the court agrees with Attorney Francisco and Fiscal Villanueva
that, without considering the merits of the contention of Apolonia Coronado as to the alleged fraud
in the transfer of the three parcels of land, strictly as a matter of procedure, the register of deeds
should have given due course to the registration of the deed of sale in favor of Cabantog. Without
doubting the good faith of the register of deeds and even commending his civic spirit and his desire
to help the courts, it is believed that in the present case the law did not expect, much less require
him to make use of his personal knowledge of the facts or of what he believed to be the intention of
the parties, in the performance of his official duties as register of deeds, namely the registration of
instruments presented to him for recording. The parties interested are supposed and expected by
the law to take the steps necessary to protect their own interests and take the necessary
precautions. The undersigned does not understand why long before the deed of sale presented for
registration, and even pending trial of civil case No. 6600, Apolonia did not take the steps
necessary to protect her interests and insure the satisfaction of the judgment which she expected
from the court. Again, if the defendant Maxima Caballes received copy of the decision in civil case
No. 6600 on January 17, 1936, it is reasonable to presume that Apolonia Coronado must have
received copy of the same about the same time, if not earlier, and yet we find that attachment of the
three parcels of land was not presented for recording or registration with the register of deeds until
January 27, 1936, that is, two days after the presentation of deed of sale. Moreover, there is no
evidence to show, as far as the present consulta is concerned, that Maxima Caballes is now
insolvent and that the deed of sale under consideration was really made in fraud of creditors. There
is no showing either that by authorizing and directing the register of deeds to admit the deed of sale
of registration in his office, Apolonia would be losing and be deprived of all under her remedies
against the said parcels of land. It should also be borne in mind that civil case No. 6600 of the
Court of First Instance is now pending appeal in the Supreme Court.
In view of the foregoing, this court rules that the register of deeds of the Province of Laguna should
have registered the deed executed by Maxima Caballes and Francisco Vicuna in favor of Domingo
Cabantog. It should be understood, however, that this ruling is without prejudice to any action that
may be taken be Apolonia Coronado in the proper court to guide or control the action of the register
of deeds with respect to the deed in question. Furthermore, this ruling does not in any manner
touch upon the nature, propriety or validity of the transfer of the three parcels of land to Cabantog.
Apolonia Coronado moved for reconsideration but was unsuccessful, and has appealed from the foregoing
resolution of the lower court, assigning various errors specified in her brief.
Consolidating the several errors assigned, the present appeal calls for a determination of the nature of the
function of a register of deeds with reference to the registration of a deed of sale of a registered land. Is that
function ministerial or discretional under the law? Section 57 of the Land Registration Act (No. 496) provides:
SEC. 57. An owner desiring to convey in fee his registered land or any portion thereof shall execute
a deed of conveyance, which the grantor or grantee may present to the register of deeds in the
province where the land lies. The grantor's duplicate certificate shall be produced and presented at
the fame time. The register of deeds shall thereupon, in accordance with the rules and instructions

21

of the court, make out in the registration book a new certificate of title to the grantee, and shall
prepare and deliver to him an owner's duplicate certificate. The register of deeds shall note upon
the original and duplicate certificates the date of transfer, the volume and page of the registration
book where the new certificate is registered, and a reference by number to last prior certificate. The
grantor's duplicate certificate shall be surrendered, and the word "canceled" stamped upon it. The
original certificate shall also be stamped `canceled'. The deed of conveyance shall be filed and
endorsed with the number and place of registration of the certificate of title of the land conveyed.
According to this provision of the law, upon presentation of a deed of conveyance of a registered land,
together with the grantor's duplicate certificate, the register of deeds shall (1) make out in the registration
book new certificate of title; (2) prepare and deliver to the grantee an owner's duplicate certificate of title; (3)
note upon the original and duplicate certificates the date of transfer, the volume and page of the registration
book where the new certificate is registered, and a reference by number to the last prior certificate; (4)
require the surrender of the grantor's duplicate certificate for purposes of cancellation; (5) cancel likewise
the original certificate and (6) file and endorse in the manner required the deed of conveyance presented for
registration. The duties enjoined upon the register of deed by the aforecited section of the Land Registration
Act are clearly ministerial and mandatory in character not only as is indicated by the auxiliary "shall" but by
the nature of such functions required to be performed by him. Upon the other hand, section 193 of the
Administrative Code, in referring to the "general functions of register of deeds" provides that "it is the duty of
a register of deeds to record in proper form all instruments relative to such lands, the recording whereof shall
be required or allowed by law." We have not overlooked reference to the case of Debrunner vs. Jaramillo (12
Phil., 316), in which it was said that the duties of a registrar of property when he is acting under the
Mortgage Law, are to a large extent judicial, as indicated in articles 18, 100 and 101 et seq. of that law, and
to the case of Betco vs. La Flor de Intal (43 Phil., 517), where it was said that "registers of deeds perform
both functions of an administrative character and functions which are at least of a quasi-judicial nature."
Notwithstanding divergence of facts between these cases and the present case, we have given weight to
what seem are logical inferences of counsel for the appellant in the application of general principles, but we
find that as plausible an argument to the contrary may be found in Standard Oil Co. of New York vs.
Jaramillo (44 Phil., 630); and Garcia Sanchez vs. Rosauro (40 Phil., 231); and Williams vs. Suer (49 Phil.,
534) with the same divergence of facts and the laws involved.
Limiting ourselves to the facts of the present case, we are of the opinion that it is the duty of the register of
deeds of Laguna under the law to register the deed executed by Maxima Caballes and Francisco Vicuna in
favor of Domingo Cabantog. If the register of deed is on doubt as to the propriety of recording any given
instrument, section 200 of the Administrative Code provides the procedure to be followed:
SEC. 200. Reference of doubtful matter to judge of fourth branch of Court of First Instance at
Manila. Where the register of deeds is in doubt with regard to the proper step to be taken or
memorandum to be made in pursuance of any deed, mortgage, or other instruments presented for
registration or where any party in interest does not agree with the register of deeds with reference
to any such matter, the question shall be referred to the judge of the Fourth Branch of the Court of
First Instance of the Ninth Judicial District either on the certificate of the register of deeds stating
the question upon which he is in doubt or upon the suggestion in writing of the party in interest; and
thereupon said judge, upon consideration of the matter as shown by the record certified to him, and
in case of registered lands, after notice to the parties and hearing, shall enter an order prescribing
the step to be taken or memorandum to be made.
The question of whether or not the conveyance was made for defraud creditors of the transferor should
better be left for determination by the proper court. There is as much danger in giving this authority to the
register of deeds without judicial intervention as there would be injustice in the suggested frustration of a
judicial victory for Apolonia Coronado.
The resolution of the lower court is confirmed with costs against the appellant. So ordered.
Avancea, C. J., Villa-Real, Imperial, Diaz, Concepcion, and Moran, JJ., concur.

G.R. No. L-3970

October 29, 1952

22

GURBAX SINGH PABLA & CO., GURBAX SINGH PABLA, BELA SINGH PABLA, OJAGAR SINGH,
DHARAM SINGH, TALOK SINGH and CIPRIANO TAN ENG KIAT, petitioners-appellees,
vs.
HERMOGENES REYES and TEODORA TANTOCO, respondents-appellants.
The facts are stated in the opinion of the Court.
Jose N. Buendia for appellants.
Eliseo Caunca for appellees.
LABRADOR, J.:
This is an appeal prosecuted by the respondents-appellants against an order of the Court of First Instance of
Manila dated November 29, 1949, compelling them to surrender owner's duplicates of Transfer Certificates
of Title Nos. 8071 and 8072, so that the contract of lease entered into between petitioners-appellees and the
owner of the land covered by said certificates of title be annotated thereon. John Tan Chin Eng is the owner
of the land covered by the above-mentioned certificates of title, and on July 23, 1948, he entered into a
contract (Exhibit A) with the petitioner-appellees, under the terms of which petitioners-appellees were to
construct thereon a three-story building of concrete and of strong materials valued at from P80,000 to
P90,000. The contract also provided that the building shall become the exclusive property of the owner of
the land, but that the petitioner-appellees were to occupy, hold, or possess it as lessees for a period of three
years and six months from its completion, without paying any rentals therefor, the sum spent in the
construction being considered as the rentals; that after the above period of three years and six months
petitioners-appellees were to continue occupying the said building for another two years at a monthly rental
of P2,000. This contract of lease was filed and registered in the office of the Register of Deeds of Manila on
August 10, 1948, under Primary Entry No. 3352, Volume 15. At the time that the contract was entered into
there was an existing mortgage over the land in favor of Jose Calvo and Carlos Calvo for the sum of
P110,000. This mortgage in favor of the Calvos was cancelled, and a new mortgage was executed by the
owner in favor of respondents-appellants herein, Honorable Hermogenes Reyes and his spouse Teodora
Tantoco, dated March 8, 1949, which was registered on the same date in the office of the Register of Deeds
of Manila under Primary Entry No. 5014. On May 14, 1949, the original contract of lease, Exhibit A, was
amended by Exh. C, by virtue of which the period under which the lessees were to hold any occupy the
property without rentals was extended to seven years and four months, and the rental for the additional two
years thereafter reduced to P1,148. This amended contract of lease, Exhibit C, was also registered in the
office of the Register of Deeds of Manila under Primary Entry No. 5014, Volume 16, on May 20, 1949.
On May 25, 1949, counsel for petitioners-appellees wrote respondents-appellants requesting them to allow
him to take the certificates of title to the office of the Register of Deeds of Manila for the annotation of the
contracts of lease entered into by the owner with them (Exhibit D), and on May 27, 1949, the son of
respondents-appellants acknowledged receipt of the said letter but informed counsel for the petitionerappellees that the request could not be granted without the written consent of the owner of the certificates of
title (Exhibit E). On June 16, 1949, respondents-appellants' son wrote the owner of the land (Exhibit M)
demanding the payment of the overdue interest on the mortgage with the following statement:
. . . For this reason, I wish to request that you come over to my office before 12:00 noon to pay the
said interest before we can deliver your Transfer Certificate of Title to Atty. Manuel P. Calanog who
will take charge of registering the lease contract between Mr. Singh Pabla and your goodself.
On June 3, 1949, the petitioners-appellees filed a motion in the Court of First Instance of Manila praying that
an order issue to the owner for the delivery of the owner's duplicates of transfer certificates of title Nos. 8071
and 8072 to the petitioners in order that the Register of Deeds of Manila may be able to make the annotation
thereon of the contract of lease, Exhibit A, and its amendment, Exhibit C. Against this petition Hermogenes
Reyes and Teodora Tantoco filed an opposition, alleging that they had no knowledge whatsoever of the
contract of lease, Exhibit A, or of its amendments, Exhibit C, and that the execution of the amendment,
Exhibit C, violated the express provision of the mortgage, to the effect that the owner could not sell, assign,
or encumber the mortgaged premises without the written consent of the mortgages. It is to be noted that with
respect to the original contract of lease, Exhibit A, no allegation is made in the opposition of the
respondents-appellants that they were not aware of the existence of the contract, Exhibit A, their only
allegation being that the only annotation on the certificates of title at the time they entered into the contract
of mortgage was the mortgage in favor of Jose Calvo and Carlos Calvo. It is also to be noted that
respondents-appellants do not deny an express allegation of paragraph 13 of the amended petition to the

23

effect that notice was given to the public by a big sign board placed on the premises while the building was
under construction that petitioners-appellees are the owners of the building. The amended petition further
states, without denial on the part of the respondents-appellants, that as early as October 9, 1948, the
Register of Deeds of Manila had demanded in writing from the owner of the land the submission of his
duplicate certificates of title Nos. 8071 and 8072 in order that the lease executed by him in favor of the
petitioners-appellees may be given due course. At the hearing of the motion no oral evidence was
submitted; only documentary evidence was presented.
Thereafter the Court of First Instance of Manila issued the order already mentioned above, directing
respondents to surrender the certificates of title to the Register of Deeds of Manila in order that petitionersappellees' contract of lease may be noted thereon. It expressly found that respondents-appellants had
knowledge of the lease contract, Exhibit A, but that respondents' deed of mortgage of March 8, 1949, has
priority over petitioner's amended contract of lease, Exhibit C. As regards the (supposed) prohibition
contained in the contract of mortgage, the court held that the prohibition gives a right of foreclosure; in other
words, that in spite of the prohibition the amended contract of lease, Exhibit C, may not be considered as
null and void.
In this court on appeal claim is made on behalf of the respondents-appellants that the court a quo erred in
holding that respondents-appellants had knowledge of the contract of lease, Exhibit A; that it erred in holding
that Tirso T. Reyes is the attorney-in-fact of the respondents-appellants; that it erred in ordering the
registration of the contract of lease, Exhibit A; and that it erred in not holding that the registration of the
contracts, Exhibits A and C, will prejudice the rights and interest of respondents-appellants.
It should be noted that all that the petitioners demand or pray for is the surrender of the titles to the Register
of Deeds so that their contracts of lease, Exhibits A and C, may be noted thereon. The only issue, therefore,
is whether petitioners have a right to have said deeds registered. It is not denied that the contracts have
been executed by the registered owner of the land, or that they have been lawfully executed, or that they
have all the qualities of registerable documents. Indeed, the owner is agreeable to the registration. The
objections interposed by respondents, who are mortgagees merely, that they had no knowledge of the
contract of lease, or that their mortgage has priority, or that they will be prejudiced, are beside the issue.
The purpose of registering an instrument is to give notice thereof to all persons (section 51, Act No. 496); it
is not intended by the proceedings for registration to seek to destroy or otherwise affect already registered
rights over the land, subsisting or existing at the time of the registration. The rights of these parties, who
have registered their rights, are not put in issue when an instrument is subsequently presented for
registration; nor are its effects on other instruments previously registered put in issue by the procedure of
registration. Thus, the objections raised by respondents-appellants that they had no knowledge of the
contract of lease, Exhibit A, before the property was mortgaged to them, or that the same violates their
contract of mortgage with the owner of the land these are not passed upon by the order for the
registration of petitioners-appellees' contract of lease. The objections, as well as the relative rights of all
parties who have registered their deeds, shall be decided in the proper suit or proceeding when the
opportune occasion arises; but they are not now in issue, nor may they be adjudicated upon, simply
because petitioners-appellees have applied for the registration of their contract of lease.
The impropriety and inconvenience of proceeding to determine completely and in advance all the possible
consequences of a document, upon all parties affected thereby, in the proceeding for its registration
becomes apparent when, as in this case, important and complicated questions of fact and of law were
presented by the respondents-appellants about their alleged lack of knowledge of the contracts of lease and
the invalidity thereof. The court a quo passed upon vital issues of fact upon the motion and the opposition
thereto, and upon the documents, letters, and receipts presented, without any other evidence than the
above. Yet the question of knowledge is mainly a question of fact and requires inquiry into many and
complicated circumstances, which can not be satisfactorily shown except by testimony.
On the other hand, the supposed invalidity of the contracts of lease is no valid objection to their registration,
because invalidity is no proof of their non-existence or a valid excuse for denying their registration. The law
on registration does not require that only valid instruments shall be registered. How can parties affected
thereby be supposed to know their invalidity before they become aware, actually or constructively, of their
existence or of their provisions? If the purpose of registration is merely to give notice, then questions
regarding the effect or invalidity of instruments are expected to be decided after, not before, registration. It

24

must follow as a necessary consequence that registration must first be allowed, and validity or effect litigated
afterwards.
The foregoing, however, must not be understood as an absolute and invariable rule of procedure, for parties
may, by mutual consent, submit issues for determination at the time of the proceeding to register a
document. But the court should only proceed therewith (determination of the issues) upon giving all the
parties concerned sufficient opportunity to present their respective sides and the evidence in support
thereof, and that if this can not be done, the determination of the issues should be reserved in a subsequent
proceeding and the registration of the document ordered.
In accordance with the above opinion, we find that the issues raised by respondents-appellants, namely, that
the contracts of lease, Exhibits A and C, are invalid because they violate the contracts of mortgage executed
in favor of the owner of the land, that Tirso T. Reyes is not the attorney-in-fact of the respondents-appellants,
and that the respondents-appellants had no knowledge of the execution of the contract of lease, Exhibits A
and C these issues were not properly investigated because respondents-appellants did not have the
opportunity to present evidence thereon and did not even present copy of their mortgage at the hearing, and
the trial court decided the questions without full and complete investigation. The ruling of the trial court on
the above issues should, therefore, be set aside and their determination reserved in a proper proceeding.
Wherefore, the opposition to the motion for the surrender of the certificates of title to the Register of Deeds
of Manila is overruled, and the order appealed from, in so far as it orders the surrender of the certificates of
title for the registration of the contracts of lease, is hereby affirmed, but the other rulings are reversed, and
the other issues raised by respondents-appellants reserved for determination in a proper proceeding. With
costs against the respondents-appellants.
Paras, C. J., Bengzon, Padilla, Montemayor and Jugo, JJ., concur.

PABLO, J., dissenting:


Los opositores Hermogenes Reyes y Teodora Tantoco son acreedores hipotecarios de los lotes con
certificados de transferencia de titulo Nos. 8071 y 8072 y, en virtud de una clausula de dicha hipoteca, el
dueno no puede vender, trasparar o gravar dichos lotes hipotecados sin el consentimiento por escrito de los
acreedores. El dueno, por tanto, no podia legalmente arrendar dichas fincas a los hoy mocionantes sin
dicho consentimiento. Si, en contravencion de dicho contrato, el dueno los arrendo a los mocionantes, dicho
arrendamiento no debe ser anotado, en proteccion de los arrendatarios que no obraron de buena fe, en los
certificados de transferencia de titulo Nos. 8071 y 8072. La inscripcion en la Oficina del Registrador de
Titulos de la hipoteca era una notificacion a todo el mundo de que el propietario no podia gravar, arrendar,
etc., los lotes, sin consentimiento de los acreedores hipotecarios.
Si los mocionantes hubieran obrado con la prudencia ordinaria de ver el titulo de dichos lotes en la Oficina
del Registrador de Titulos, habrian descubierto que el dueno no podia arrendarlos sin el consentimiento de
los acreedores hipotecarios. Es evidente que los mocionantes quieren subsanar la falta de precaucion con
que debian haber obrado antes de arrendar los lotes, en perjuicio de los acreedores hipotecarios.
Ordenar la anotacion del arrendamiento es proteger a los arrendatarios que no obraron de acuerdo con las
disposiciones legales y conculcar los derechos legitimos de los acreedores, debidamente inscritos.
El articulo 51 de la Ley No. 496 tiene aplicacion a los casos en que, sin intervencion de la otra parte o sin su
conocimiento, el interesado consigue inscribir escritura de traspaso, hipoteca, arrendamiento, embargo, etc.
an la Oficina del Registrador de Titulos. En tales casos, la inscripcion surtira el efecto de notificacion a todos
los que puedan tener reclamacion, y no en camos, como el presente, en que los acreedores ya se oponen
abiertamente a la anotacion pedida, despues de notificados de la presentacion de la mocion. Cuando hay
una oposicion que alega violacion de un derecho substancial, lo que procede es no ordenar la inscripcion
sino hacer que las partes presenten todas las pruebas en apoyo de su respectiva alegacion, o que litiguen
en el tribunal correspondiente, suspendiento toda accion sobre la mocion en que se pide la presentacion al
registrador del duplicado del certificado de transferencia de titulo para la anotacion.

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Siguiendo la teoria de la mayoria, la notificacion a los interesados solamente comenzara a tener lugar
despues que se haya inscrito el arrendamiento impugnado por orden de este Tribunal, y que desde esa
fecha pueden iniciar los pleitos que las partes quieran suscitar. Me parece que eso es ceremonia
innecessaria para este caso particular. Los acreedores ya han planteado su oposicion a la anotacion. Su
objecion esta fundada en los terminos precisos del contrato de hipoteca; parte de las pruebas ya se han
presentado; lo que procede, en mi opinion, es devolver el expediente al juzgado de origen dando a las
partes oportunidad de presentar todas sus pruebas y despues decidir si cabe o no la anotacion. Es hacer
perder el tiempo a las partes interesadas y a los juzgados obligarles a litigar despues que este Tribunal
haya ordenado la anotacion de dicho arrendamiento, y en el caso de que se decidiese que los mocionantes
no tienen derecho a anotar la escritura de arrendamiento, entonces se habra de ordenar la cancelacion de
la anotacion ya ordenada por este Tribunal. Habra algun juzgado inferior que se atreva a ordenar la
cancelacion de una anotacion ordenada por este Tribunal? Y para que fueron notificados los acreedores
de la vista de la mocion si, despues de todo, sin oir sus pruebas, se ordena tal anotacion? Eso es contrario
al espiritu que informa nuestro sistema de legislacion: de proporcionar a las partes justa, pronta y no
costosa administracion de justicia.
Voto por la revocacion de la orden apelada y que se devuela el expediente para ulterior tramitacion, como
tengo indicado.
4. Registration of Forged Deeds
Cases:
G.R. No. L-23148

March 25, 1926

THE DIRECTOR OF LANDS, applicant,


vs.
SEYMOUR ADDISON, ET AL., claimants,
SOLEDAD P. HERNANDEZ, claimant-appellee;
TOMAS ANGELES, ET AL., claimants-appellants.
I. P. Santos and Feria & La O for appellants.
Valentina J. Alcid and Vicente Sotto for appellee.
OSTRAND, J.:
Omitting the features not strictly relevant to the points of law involved, the facts of the present case are
briefly as follows: On February 8, 1916, a Torrens certificate of title (No. 414) to a parcel of land containing
an area of nearly 61 hectares, in the barrio of Santo Nio, municipality of Concepcion, in the Province of
Tarlac, was issued in favor of Juana Angeles and seventeen others as tenants in common (hereinafter
referred to collectively as the "Angeles heirs," though a few of them in fact bear other surnames). The
certificate of title was issued in pursuance of a decree of registration entered in land registration case No.
6540.
On April 29, 1921, a deed purporting to be executed by eleven of the persons in interest in said land and to
have been acknowledged before the notary public, and conveying about 47 hectares consisting of a western
portion of the tract described in the certificate of title to Pedro Manuntag, the son of Juana Angeles, was
presented to the register of deeds of Tarlac together with the owner's duplicate of said certificate of title No.
414. The deed contained no technical description of the land conveyed, the aforesaid certificate of title was
not cancelled, and no transfer certificate of title was issued neither to the vendors nor to the vendee; in fact
no attempt was made to comply with the provisions of section 57 and 58 of the Land Registration Act, the
register of deeds contenting himself by noting the transaction by way of a memorandum on the original
certificate of title. It has been proven beyond dispute that the deed was a forgery, at least one of the
purported conveyors being dead at the time of the date of the instrument.
Armed with the owner's duplicate of the original certificate of title containing the memorandum of the alleged
sale to him, Pedro Manuntag proceeded to mortgage the property to Soledad P. Hernandez for the sum of
P3,000. This mortgage was also noted on the owner's duplicate of the original certificate of title, the
memorandum bearing the date of August 1, 1921. On July 22, 1922, the mortgage was cancelled and an

26

absolute deed of conveyance of the property made by the same Pedro Manuntag to said Soledad P.
Hernandez, the consideration stated in the deed being P3,940. The deed was presented to the register of
deeds of Tarlac who repeated the error committed in connection with the deed from the Angeles heirs to
Pedro Manuntag and simply entered the transaction by memorandum on the back of the original certificate
of title without complying with sections 57 and 58, supra. The memorandum is dated August 1, 1921. The
owner's duplicate of the original certificate of title remained in possession of Soledad P. Hernandez who, on
October 4, 1923, executed a deed of sale with pacto de retro for the term of one year and in consideration of
the sum of P2,000 in favor of Arturo Sanchez Mijarez. This transaction was also noted on the original
certificate of title, the entry bearing the date of October 12, 1923.
In the meantime a cadastral proceeding was instituted by the Director of Lands in the municipality of
Concepcion including among other lands the tract covered by certificate of title No. 414. In this cadastral
proceeding the Angeles heirs appeared as claimants and as no other person at first appeared to contend
with them, the court on November 17, 1921, entered a decision awarding the property to them though in
some respects erroneously stating the respective shares of the coowners. After the period allowed by law for
an appeal from this decision has passed, Soledad P. Hernandez appeared by her attorney and, representing
that she had acquired the property now in question by purchase from Pedro Manuntag, asked that the
corresponding certificate of title be issued to her in the cadastral case. This motion was denied by Judge
Anacleto Diaz, then presiding over the Court of First Instance in Tarlac, on the ground that the judgment had
become final.
However, on July 26, 1923, the chief surveyor of the General Land Registration Office, having found certain
errors in the decision in the cadastral case and having observed the memoranda aforementioned upon
certificate of title No. 414, asked the court to set the cause for hearing in order that after notification to the
various parties in interest, the question of ownership might be finally and definitely determined. This
suggestion was opposed by Tomas Angeles in behalf of the Angeles heirs, and Soledad P. Hernandez again
came forward and asked that the proper certificate be issued in her name. The judge presiding over the
court (now Judge Cayetano Lukban) accepted the suggestion of the chief surveyor and, and after the parties
had all been notified, proceeded to determine the controversy between the Angeles heirs and Soledad P.
Hernandez. Upon hearing the court found that the document of April 21, 1921, purporting to be a deed of
conveyance of the land from the Angeles heirs to Pedro Manuntag, was a forgery, but nevertheless on the
authority of the decision of this court in the case of De la Cruz vs. Fabie (35 Phil., 144), decided the
controversy in favor of Soledad P. Hernandez by an order dated August 27, 1924, from which the present
appeal is taken.
Of the various questions raised by the assignments of error only one need be answered, namely, whether
the court erred in holding that Soledad P. Hernandez had acquired title to the property, notwithstanding the
fact that the deed of eleven of the Angeles heirs to Pedro Manuntag had been shown to be a forgery.
The principle that a forged deed is an absolute nullity and conveys no title is firmly embedded in our
jurisprudence and it is clear that standing alone the need purporting to be executed by the Angeles heirs did
not make Pedro Manuntag the owner of the land. But citing the case of De la Cruz vs. Fabie (35 Phil., 144),
it is argued that under our Torrens registration system the act of registration is, in the language of section 50
of the Land Registration Act, "the operative Act to convey and affect the land" and that a deed of
conveyance of registered land "shall operate only as a contract between the parties and as evidence of
authority to the clerk of register of deeds to make registration," and it is therefore urged that the presentation
of the owner's duplicate certificate and the entry thereupon of the memorandum of a transfer in fee simple to
Soledad P. Hernandez, an innocent third party, constituted in itself a valid conveyance of the title to the land
in question.
It must be conceded that if the transfers to Pedro Manuntag and by him to Soledad P. Hernandez were duly
registered, it would be difficult to differentiate the present case from that of De la Cruz vs. Fabie. But, in our
opinion, the entry of a mere memorandum of a conveyance in fee simple upon the original certificate of title
to the purchaser is not a sufficient registration of the conveyance of the fee. Sections 57 and 58 of the Land
Registration Act prescribe how conveyances in fee registered land must be made and read as follows:
SEC. 57. An owner desiring to convey in fee his registered or an any portion shall execute a deed
of conveyance, which the grantor or grantee where the lands lies. The grantor's duplicate certificate
shall be produced and presented at the same time. The register of deeds shall thereupon, in
accordance with the rules and instructions of the court, make out in the registration book a new

27

certificate of title to the grantee, and shall prepare and deliver to him an owner's duplicate
certificate. The register of deeds shall note upon the original and duplicate certificates the date of
transfer, the volume and page of the registration book where the new certificate is registered, and a
reference by number to the last prior certificate. The grantor's duplicate shall be surrendered, and
the word "canceled" stamped upon it. The original certificate shall be also stamped "canceled." The
deed of conveyance shall be filed and indorsed with the number and place of registration of the
certificate of title of the land conveyed.
SEC. 58. When a deed in fee is for a part only of the land described in a certificate of title, the
register of deeds shall also enter a new certificate and issue an owner's duplicate to the grantor for
the part of the land not included in the deed. In every case of transfer the new certificate or
certificates shall include all the land described in the original and surrendered certificates: Provided,
however, That no new certificate to a grantee of a part only of the land shall be invalid by reason of
failure of the register of deeds to enter a new certificate to the grantor for the remaining
unconveyed portion: And provided further, That in case the land described in a certificate of title is
divided into lots, designated by numbers or letters, with measurement of all the bounds, and a plan
of said has been filed with the clerk and verified pursuant to section forty-four of this Act, and a
certified copy thereof is recorded in the registration book with the original certificate, when the
original owner makes a deed of transfer in fee of one or more of such lots, the register of deeds
may, instead of canceling such certificate and entering a new certificate to the grantor for the part of
the land not included in the deed of transfer, enter on the original certificate and on the owners'
duplicate certificate a memorandum of such deed of transfer, with a reference to the lots thereby
conveyed as designated on such plan, and that the certificate is canceled as to such lot or lots; and
every certificate with such memorandum shall be effectual for the purpose of showing the grantor's
title to the remainder of the land not conveyed as if the old certificate had been canceled and a new
certificate of such land had been entered; and such process may be repeated so long as there is
convenient space upon the original certificate and the owner's duplicate certificate for making such
memorandum of sale lots.
As will be seen, the issuance of a transfer certificate of title to the purchaser is one of the essential features
of a conveyance in fee by registration and in order to enjoy the full protection of the registration system, the
purchaser must be a holder in good faith of such certificate. This appears clearly from section 39 of the Land
Registration Act which provides that "every applicant receiving a certificate of title in pursuance of a decree
of registration, and every subsequent purchaser of registered land who takes a certificate of title for value in
good faith, shall hold the same free of all incumbrance except those noted on said certificate, and any of the
following incumbrances which may be subsisting, namely, (enumeration of subsisting incumbrances)." In fact
the register of deeds has no authority to register a conveyance in fee without the presentation of the
conveyor's duplicate certificate unless he is ordered to do so by a court of competent jurisdiction (see Land
Registration Act, section 55). As we have already shown, neither Pedro Manuntag nor Soledad P.
Hernandez ever held a certificate of title to the land here in question and there had therefore been no
sufficient legal conveyance in fee to them neither by deed nor by registration. The original certificate of title
No. 414 in favor of the Angeles heirs has never cancelled and is the only certificate in existence in regard to
the property.
In the case of De la Cruz vs. Fabie, supra, the situation was entirely different. There the registration of the
property in question was decreed in the name of Gregoria Hernandez and a duplicate original certificate of
title issued to her. She returned the duplicate certificate over to her nephew, the defendant Vedasto
Velasquez, who forged a deed to himself of the property and presenting the same with the duplicate
certificate of title to the register of deeds obtained a transfer certificate with its corresponding duplicate in his
own name. He thereafter sold the land to his codefendant Ramon Fabie to whom a transfer certificate of title
was issued upon the cancellation of Velasquez' certificate. There was therefore a complete chain of
registered title. The purchaser was guilty of no negligence and was justified in relying on the certificate of
title held by the vendor. In the present case, on the other hand, the vendor held no certificate of title and
there had therefore been no complete conveyance of the fee to him. The purchaser was charged with
presumptive knowledge of the law relating to the conveyance of land by registration and, in purchasing from
a person who did not exhibit the proper muniments of title, must be considered to have been guilty of
negligence and is not in position to complain of his loss.
We may say further that the distinction we have drawn between the two cases is not a mere technicality; if in
the present case the procedure prescribed by section 58 of the Land Registration Act had been followed and
which, in accordance with paragraph 3 of section 30 of the Rules for the Uniform Administration of the

28

Registries of Deeds, as amended by Circular No. 31 of the General Land Registration Office, dated
September 28, 1921, and approved by the Secretary of Justice, would have required the presentation of a
subdivision plan and through the publicity attending the necessary monumenting of the dividing lines, the
forgery of deed would in all probility have been discovered before any harm could have been done.
It appears to be conceded by the parties that Pedro Manuntag has legitimately acquired the interests of
Juana Angeles and Silvino Angeles, amounting in all to a one-eight share in the land, which interests passed
to Soledad P. Hernandez through the deed executed by Manuntag in her favor; the rest of the land is, as we
have seen, still the property of the remaining Angeles heirs.
It appears that Bernardino Angeles and Matias Angeles have died since certificate of title No. 414 was
issued and it is possible that some of the other original coowners have suffered the same fate. The evidence
before us is hardly sufficient to definitely or exactly determine the present ownership of the shares of the
various original heirs, but the record indicates that Soledad P. Hernadez is the owner of a one-eight interest
in the land; the estate of Bernardino Angeles of one-twelfth; Leonarda, Tomasa, Ambrosia, Tomas, and
Pelagia Angeles of one-twelfth each; the estate of Matias Angeles of one-twelfth; Alberto, Florencio and
Agustin Angeles of one-twenty-fourth each; Maria, Romana, and Matias Angeles 2d one-thirty-sixth each'
and Clemente, Eulalia, and Aquilino Tullo of one-thirty- sixth each.
The order appealed from is reversed and it is ordered that certificate of title No. 414 be cancelled and that in
its stead a transfer certificate of title be issued describing the land in accordance with the cadastral survey
and stating the names and shares of the various coowners as hereinabove set forth it should be found that
recent changes in ownership have occurred, in which case the court below may upon motion and hearing, in
accordance with section 112 of the Land Registration Act, make such modifications as the evidence before
its justifies. All memoranda existing on certificate of title No. 414 will be cancelled except the one entered
under document. No. 1425, evidencing the sale with the right of repurchase in favor of Arturo Sanchez,
which memorandum shall, however, effect only the one-eight interest of Soledad P. Hernandez. No costs will
be allowed in this instance. So ordered.
Avancea, C. J., Malcolm, Villamor, Johns, Romualdez and Villa-Real, JJ., concur.

Separate Opinions
STREET, J., concurring:
I agree, but in order that my concurrence may not be taken in any wise as an indorsement of the doctrine of
De la Cruz vs. Fabie (35 Phil., 144), I hasten to add that in my opinion that case was wrongly decided and
should be entirely overruled.

G.R. No. L-6122

May 31, 1954

AURELIA DE LARA and RUFINO S. DE GUZMAN, plaintiffs-appellants,


vs.
JACINTO AYROSO, defendant-appellant.
Lauro Esteban for appellants.
Alfonso G. Espinosa for appellee.
REYES, J.:
This is an action for foreclosure of mortgage.

29

From the stipulation of facts and the additional evidence submitted at the hearing the lower court found and
it is not disputed that the spouses Jacinto Ayroso and Manuela Lacanilao were the registered owners of a
parcel of land, situated in the municipality of Cabanatuan, Nueva Ecija, their title thereto being evidenced by
Transfer Certificate No. 4203 of the land records of that province. The land had an area of a little over 3 1/2
hectares, but according to an annotation on the back of the certificate a large portion of that area a little
less than 3 hectares-had already been alienated, sold to the Pilgrim Holiness Church in 1940. The certificate
was kept in Jacinto Ayroso's trunk in his house in the poblacion of Cabanatuan, but somehow his daughter,
Juliana Ayroso, managed to get possession of it without his knowledge and consent and gave it to a man
whose name does not appear in the record. With the certificate in his possession and representing himself
to be Jacinto Ayroso, this man was able to obtain from the plaintiff spouses the sum of P2,000, which he
agreed to pay back in three months and as security therefor constituted a mortgage on Jacinto Ayroso's
interest in the land covered by the certificate, signing the deed of mortgage with the latter's name. At that
time, April 19, 1949, Jacinto Ayroso was already a widower, his wife having died on the 31st of the preceding
month. Neither Jacinto Ayroso nor the man who impersonated him was personally known to the plaintiffs,
though the latter believed in good faith that the two were one and the same person, the impostor being then
accompanied by Ayroso's daughter Juliana whom they knew personally and who also signed as a witness to
the mortgage deed. The mortgage was later registered in the office of the Register of Deeds of Nueva Ecija
and annotated on the back of the certificate of title. Jacinto Ayroso never authorized anyone to mortgage the
land and received no part of the mortgage loan.
Upon the foregoing facts, the trial court rendered judgment declaring the mortgage invalid, ordering the
Register of Deeds of Nueva Ecija to cancel the corresponding annotation on Transfer Certificate of Title No.
4203 and dismissing the complaint with costs. From this judgment an appeal has been taken directly to this
court, and the question for determination is whether the said mortgage may be enforced by plaintiffs against
the defendant Jacinto Ayroso.
There can be no question that the mortgage under consideration is a nullity, the same having been executed
by an impostor without the authority of the owner of the interest mortgaged. Its registration under the Land
Registration Law lends it no validity because, according to the last proviso to the second paragraph of
section 55 of that law, registration procured by the presentation of a forged deed is null and void.
Plaintiffs, however, allege that they are innocent holders for value of a Torrens certificate of title, and on the
authority of Eliason vs. Wilborn (281 U. S., 457), De la Cruz vs. Fabie (35 Phil., 144), and Blondeau et al. vs.
Nano andVallejo (61 Phil., 625), invoke the protection accordedto such holders. But an examination of those
cases willshow that they have no application to the one before us.
In the case first cited, Eliason vs. Wilborn, the appellants, owners of registered land, delivered the certificate
of title to a party under an agreement to sell and the said party forged a deed to himself, had the certificate
issued in his name and then conveyed it to others, who were good faith purchasers for value. Upholding the
last conveyance, the U. S. Supreme Court said: "The appellants saw fit to entrust it (the certificate) to
Napletone and they took the risk ... . As between two innocent persons, one of whom must suffer the
consequences of a breach of trust, the one who made it possible by his act of confidence must bear the
loss."
In the second case, De la Cruz vs. Fabie, the attorney-in-fact of the owner of registered land, having been
entrusted with the title to said property, abused the confidence thus reposed upon him, forged a deed in his
favor, had anew title issued to himself and then conveyed it to another, who thereafter was issued a new
certificate of title. This court held the purchaser to be the absolute owner of the land as an innocent holder of
a title for value under section 55 of Act No. 496.
It will be noted that in both of the above cases the certificate of title was already in the name of the forger
when the land was sold to an innocent purchaser. In such case the vendee had the right to rely on what
appeared in the certificate and, in the absence of anything to excite suspicion, was under no obligation to
look beyond the certificate and investigate the title of the vendor appearing on the face of said certificate to
be the registered owner. It should also be noted that in both cases fraud was made possible by the owner's
act in entrusting the certificate of title to another. And this should be emphasized because it is what impelled
this court to apply in those cases the principle of equity that "as between two innocent persons, one of whom
must suffer the consequences of a breach of trust, the one who made it possible by his act of confidence
must bear the loss."

30

In the present case the title was still in the name of the real owner when the land was mortgaged to the
plaintiffs by the impostor. And it is obvious that plaintiffs were defrauded not because they relied upon what
appeared in a Torrens certificate of title there was nothing wrong with the certificate but because they
believed the words of the impostor when he told them that he was the person named as owner in the
certificate. As the learned trial judge says in his decision, it was not incumbent upon plaintiffs to inquire into
the ownership of the property and go beyond what was stated on the face of the certificate of title, but it was
their duty to ascertain the identity of the man with whom they were dealing, as well as his legal authority to
convey, if they did not want to be imposed upon. That duty devolves upon all persons buying property of any
kind, and one who neglects it does so at his peril. It should be added that the appellee has not entrusted the
certificate of title to anybody, an element essential to the application of the principle of equity abovecited. It is
thus clear that the circumstances which impelled this court, in the cases cited to extend protection to the
innocent holders for value of the Torrens certificates, at the expense of the owner of the registered property,
are not present in the case at bar.
Nor could the third case cited, Blondeau et al. vs. Nano and Vallejo, serve as a good precedent for the one
now before us. That case, it is true, was also for foreclosure of mortgage, and the defense set up by the
registered owner was also forgery. But it should be noted that in that case this court found as a fact that the
mortgage had not been forged and in addition there was the circumstance that the registered owner had by
his negligence or acquiescence, if not actual connivance, made it possible for the fraud to be committed. It is
thus obvious that the case called for the application of the same principle of equity already mentioned, and
the decision rendered by this court was in line with the two previous cases. But that decision does not fit the
facts of the present case, where the mortgage is admittedly a forgery and the registered owner has not been
shown to have been negligent or in connivance with the forger. The contention that it was negligence on
appellee's part to leave the Torrens title in his trunk in his house in the poblacion when most of the time he
was in the farm, was we think well answered by the trial court when it said:
. . . it was not shown that the defendant has acted with negligence in keeping the certificate of title
in his trunk in his own house. That his daughter was able to steal it or take it from the trunk without
his knowledge and consent and was able to make use of it for a fraudulent purpose, (it) does not
necessarily follow that he was negligent. It is in keeping with ordinary prudence in common Filipino
homes for the owners thereof to keep their valuables in their trunks. It would be too much to expect
of him that he should carry said certificate with him to wherever he goes.
On the other hand the considerations underlying the decision in the case of Ch. Veloso and Rosales vs. La
Urbana and Del Mar (58 Phil., 681), cited by the appelle, would seem to be applicable to the present case.
In the case cited, the plaintiff Veloso, owner of certain parcels of registered land, brought action to annul
certain mortgages constituted thereon by her brother-in-law, the defendant Del Mar, using two powers of
attorney purportedly executed for that purpose by plaintiff and her husband Rosales, but which were in
reality forged, the forgery having been committed by Del Mar himself. How Del Mar obtained possession of
the certificate of title the report does not show, but the mortgages were duly registered and noted on the
certificates of title. In holding the mortgages void, this court said:
. . . Inasmuch as Del Mar is not the registered owner of the mortgaged properties and inasmuch as
the appellant was fully aware of the fact that it was dealing with him on the strength of the alleged
powers of attorney purporting to have been conferred upon him by the plaintiff, it was his duty to
ascertain the genuineness of said instruments and not rely absolutely and exclusively upon the fact
that the said powers of attorney appeared to have been registered. In view of its failure to proceed
in this manner, it acted negligently and should suffer the consequences and damages resulting
from such transactions. (P. 683.)
Appellants, however, contend that the doctrine laid down in that case has already been overruled by the
Blondeau case, supra. This is not so, and to show that it is still good jurisprudence, this court quotes it with
approval in Lopez vs. Seva et al. (69 Phil., 311), a case decided after the Blondeau decision.
We are with the learned trial judge in applying to the present case the principle underlying the decision in the
Veloso case, which, as His Honor well says, "is fair and just because it stands for the security and stability of
property rights under any system of laws, including the Torrens system," affording protection against the
dangerous tendency of unprincipled individuals "to enrich themselves at the expense of others thru illegal or
seemingly lawful operations." And as His Honor also says, "as between an interpretation and application of
the law which serves as an effective weapon to curb such dangerous tendency or that which technically may

31

aid or foment it, the choice is clear and unavoidable." For, as repeatedly stated by this court, although the
underlying purpose of the Land Registration Law is to impart stability and conclusiveness to transactions
that have been placed within its operations, still that law does not permit its provisions to be used as a shield
for the commission of fraud.
In view of the foregoing, the judgment appealed from is affirmed, with costs against the appellants.
Paras, C.J., Pablo, Bengzon, Montemayor, Jugo, Bautista Angelo, Labrador and Concepcion, JJ., concur.

G.R. No. L-41377

July 26, 1935

ANGELA BLONDEAU and FERNANDO DE LA CANTERA Y UZQUIANO, plaintiffs-appellants,


vs.
AGUSTIN NANO and JOSE VALLEJO, defendants-appellees.
John R. McFie, Jr., for appellants.
Evangelista and Santos for appellee Vallejo.
No appearance for the other appellee.
MALCOLM, J.:
This action was brought in the Court of First Instance of Manila to foreclose a mortgage alleged to have
been made by the defendants Agustin Nano and Jose Vallejo to the plaintiff Angela Blondeau, bearing date
November 5, 1931, to secure the payment of the sum of P12,000, and covering property situated on Calle
Georgia, Manila. Nano, purporting to represent both defendants, after filing an answer, was found in
contempt of court. The other defendant Vallejo thereupon presented an amended answer in which it was
alleged that his signature to the mortgage was a forgery. Following the trial, judgment was rendered against
Nano but not against Vallejo. From this judgment the plaintiffs have taken an appeal.
With all due deference to the findings of the trial judge, now an honored member of this court, we are
inclined to the view, first, that the accessorias bearing Nos. 905A to 905F, Calle Georgia, Manila, were as
indicated in the mortgage, the property of the defendant Agustin Nano, and second, that the purported
signature of the defendant Vallejo to the mortgage was not a forgery. In support of the first of our statements,
attention need only be invited to a series of documents, including the transfer certificate of title, showing that
Vallejo was considered the owner of the land only. As to the second statement, it needs be recalled that the
mortgage was executed in the home of the plaintiffs, and that of those present, the principal plaintiff Angela
Blondeau and her husband Fernando de la Cantera, together with the instrumental witness Pedro Jimenez
Zoboli, identified Vallejo as the person who signed the document. As against their testimony stands the alibi
of Vallejo, partially corroborated by the testimony of the notary public Gregorio Bilog. It is expecting a great
deal to have us believe that not only the mortgage but the power of attorney of Vallejo in favor of Nano and a
series of documents were the product of the evil machinations of Nano, and that although Nano and Vallejo,
members of same family, lived together, Vallejo was entirely unacquainted with the activities of Nano in
dealing with their joint property. It is significant that the proper cedulas of Vallejo were presented for the
accomplishment of the documents, and that if there was fraud, not one but a number of notaries public were
deceived thereby.
We repeat that upon its face, the mortgage appears to be regular and to have been duly executed and
accepted by Vallejo on November 5, 1931. The evidence then resolves itself into a question of the execution
of the mortgage by Vallejo on the one hand, and the denial of its execution on the other hand. That there
was a conflict between experts as to the handwriting, one being of the opinion that the signatures of Vallejo
were genuine, and the other being of the opinion that they were not genuine, is not unexpected. Under such
conditions, the question is, which side produced the weightier testimony, and as hereinbefore indicated, we
are of the opinion that the balance inclined in favor of the plaintiffs.
But there is a narrower ground on which the defenses of the defendant-appellee must be overruled. Agustin
Nano had possession of Jose Vallejo's title papers. Without those title papers handed over to Nano with the

32

acquiescence of Vallejo, a fraud could not have been perpetrated. When Fernando de la Cantera, a member
of the Philippine bar and the husband of Angela Blondeau, the principal plaintiff, searched the registration
records, he found them in due form, including the power of attorney of Vallejo, in favor of Nano. If this had
not been so and if thereafter the proper notation of the encumbrance could not have been made, Angela
Blondeau would not have lent P12,000 to the defendant Vallejo.
The Torrens system is intended for the registration of title, rather than the muniments of title. It represents a
departure from the orthodox principles of property law. Under the common law, if the pretended signature of
the mortgagor is a forgery, the instrument is invalid for every purpose and will pass on the title or rights to
anyone, unless the spurious document is ratified and accepted by the mortgagor. The Torrens Act on the
contrary permits a forged transfer, when duly entered in the registry, to become the root of a valid title in a
bona fide purchaser. The act erects a safeguard against a forged transfer being registered, by the
requirement that no transfer shall be registered unless the owner's certificate was produced along with the
instrument of transfer. An executed transfer of registered lands placed by the registered owner thereof in the
hands of another operates as a representation to a third party that the holder of the transfer is authorized to
deal with the lands. (53 C.J., 1141, 1142; Act No. 496, as amended, secs. 47, 51, 55.)
With respect to the conclusiveness of the Torrens title and the binding force and effect of annotations
thereon even when through a forged deed the land passes into the possession of an innocent purchaser for
value, the basic rule is found in the opinion delivered by Mr. Chief Justice Arellano in De la Cruz vs. Fabie
( [1916], 35 Phil., 144). The history of the case was as follows:
Vedasto Velazquez was attorney in fact of Gregoria Hernandez. Gregoria Hernandez registered her
title of ownership to the land in question in the property registry and was issued certificate of title
No. 121. Vedasto Velazquez, being the attorney in fact of Gregoria Hernandez, had in his
possession all the muniments of title of the land, including the certificate of title No. 121, and,
abusing her confidence in him, a few days after the registration of the land, forged a notarial
instrument wherein he made it appear that she had sold the said land to him for the price of
P8,000.
Vedasto Velazquez then went to the register of deeds and applied for the registration of the land in
his own name, presenting Gregoria Hernandez' certificate of title No. 121 for cancellation, and the
deed of conveyance which was purported to have been made by Gregoria Hernandez in his favor
in order that he might be registered as the true owner of the land. All this was done; Gregoria
Hernandez' title was cancelled and certificate of title No. 43 was issued to Vedasto Velazquez.
xxx

xxx

xxx

On May 31, 1907, Vedasto Velazquez sold the land finally and absolutely to Ramon Fabie, who presented to
the register of deeds the notarial instrument executed for the purpose and was thereupon furnished with the
certificate of title No. 766." On these facts, it was held that Fabie was an innocent holder of a title for value
and that, under section 55 of the Land Registration Law, he was the absolute owner of the land.
The decision above cited has repeatedly been reexamined by this court, one of the most recent instances
being found in the case of El Hogar Filipino vs. Olviga ( [1934], 60 Phil., 17). While counsel for the appellee
is undoubtedly correct in his contention that neither the case of Fabie nor the case of Olgiva nor any other
case relied upon by the appellants is on all fours with the present facts, the principle on which these cases
rest should here be carried forward and given application.
The recent decision of the United States Supreme Court in the case of Eliason vs. Wilborn ( [1930], 281
U.S., 457), is of enlightening interest. Plaintiffs in this case, purchasers of land previously brought under the
Illinois Torrens Act, delivered the certificate of title to a party under an agreement to sell, who forged a deed
to himself, had a certificate issue in his name, and then conveyed to defendants who were good faith
purchasers for value. Plaintiffs informed the register of the forgery after the defendants had bought, and
demanded the cancellation of the deeds and certificates, and the reissue of a certificate to themselves. The
register refused, and a petition was brought to compel such action. The Circuit Court for Cook County,
Illinois, the Supreme Court of Illinois, and the United States Supreme Court, united in dismissing the petition.
Mr. Justice Holmes, delivering the opinion of the latter court, said:

33

. . . The statute requires the production of the outstanding certificate, as a condition to the issue of
a new one. The appellants saw fit no entrust it to Napletone and they took the risk. They say that
according to the construction of the act adopted the registrar's certificate would have had the same
effect even if the old certificate had not been produced. But that, if correct, is no answer.
Presumably the register will do his duty, and if he does he will require the old certificate to be
handed in. It does not justify the omission of a precaution that probably would be sufficient, to point
out that a dishonest official could get around it. There is not the slightest reason to suppose that
Napletone would have got a certificate on which the Wilborns could rely, without the delivery of the
old one by the appellants. As between two innocent persons, one of whom must suffer the
consequence of a breach of trust, the one who made it possible by his act of confidence must bear
the loss.
Vargas & Maalac in their treatise on the Philippine Land Registration Law quote with approval the
comment of Mr. Powell in his book on Land Registration, section 213. The question which the author
propounded was: Why does the law say that the person who had no title at all and only a forged deed as a
color of title should become the true owner of the land by merely continuing to occupy and enjoy the land
which in fact does not belong to him, but which belongs to the victim of the forgery? His answer was:
. . . that public policy, expediency, and the need of a statute of repose as to the possession of land,
demand such a rule. Likewise, public policy, expediency, and the need of repose and certainty as to
land titles demand that the bona fide purchaser of a certificate of title to registered land, who,
though he buys on a forged transfer, succeeds in having the land registered in his name, should
nevertheless hold an unimpeachable title. There is more natural justice in recognizing his title as
being valid than there is in recognizing as valid the title of one who has succeeded in ripening a
forged color of title by prescription.
In the first place, a forger cannot effectuate his forgery in the case of registered land by executing a
transfer which can be registered, unless the owner has allowed him, in some way, to get
possession of the owner's certificate. The Act has erected in favor of the owner, as a safeguard,
against a forged transfer being perpetrated against him, the requirement that no voluntary transfer
shall be registered unless the owner's certificate is produced along with the instrument of transfer.
Therefore, if the owner has voluntarily or carelessly allowed the forger to come into possession of
his owner's certificate he is to be judged according to the maxim, that when one of two innocent
persons must suffer by the wrongful act of a third person the loss fall on him who put it into the
power of that third person to perpetrate the wrong. Furthermore, even if the forger stole the owner's
certificate, the owner is up against no greater hardship than is experienced by one whose money or
negotiable paper payable to bearer is stolen and transferred by the thief to an innocent purchaser.
Other incidental facts might be mentioned and other incidental legal propositions might be discussed, but in
its final analysis this is a case of a mortgagee relying upon a Torrens title, and loaning money in all good
faith on the basis of the title standing in the name of the mortgagors only thereafter to discover one
defendant to be an alleged forger and the other defendant, if not a party to the conspiracy, at least having by
his negligence or acquiescence made it possible for the fraud to transpire. Giving to the facts the most
favorable interpretation for Vallejo, yet, as announced by the United States Supreme Court, the maxim is, as
between two innocent persons, in this case Angela Blondeau and Jose Vallejo, one of whom must suffer the
consequence of a breach of trust, the one who made it possible by his act of confidence must bear the loss,
in this case Jose Vallejo. Accordingly, the four errors assigned will be sustained, the judgment reversed, and
in the court of origin a new one entered sustaining plaintiff's mortgage and granting her the relief prayed for
in her complaints .So ordered, without special pronouncement as to the costs in either instance.
Villa-Real, Imperial, Butte, and Goddard, JJ., concur.
5. Priority of Registration based on Day Book
Case:
G.R. No. L-15466

February 18, 1921

34

FIDELITY and SURETY COMPANY OF THE PHILIPPINE ISLANDS, plaintiff-appellant,


vs.
PASTOR CONEGERO VDA. DE LIZARRAGA, ET AL., defendants-appellees.
Ross and Lawrence for appellant.
No appearance for appellees.
STREET, J.:
Prior to June 26, 1913, Pastora Conegero was the holder of Torrens certificate of title, No. 147, covering a
parcel of land in the city of Iloilo. After the Torrens title aforesaid had been issued, a cadastral survey
covering this and other land in the city of Iloilo was undertaken by the Government; and in the course of the
cadastral proceedings the court found it convenient or desirable to order that the certificate of title No. 147
be cancelled and that a new certificate of title should be issued to Pastora Conegero in its stead. The
explanation of this order, though unimportant for the purposes of this decision, is said to be that the court
had discovered that certificate No. 147 included, in addition to the land of which Pastora Conegero was the
true owner, two strips of land which belonged to her children. At any rate, Pastora Conegero surrendered
certificate No. 147, and two new certificates were issued: one to herself (No. 194), and another to her
children (No. 195). The land included in certificate No. 194 may be assumed, as stated in the agreed facts,
to be the same as that which had been included in the old certificate No. 147, though it is possible that the
lots covered by the two certificates are not exactly the same. With certificate No. 195 we are not here
concerned.
The cancellation of certificate No. 147 was effected under the authority of an order of the Court of Fist
Instance of Iloilo, dated July 26, 1913; and the mandate of the Chief of the General Land Registration Office,
directed to the register of deeds in Iloilo, directing the change, is dated October 1, 1914.
While Pastora Conegero was yet the holder of certificate No. 147, she mortgaged the land covered by it to
El Hogar Filipino to secure a debt, and the encumbrance thereby created was noted on her duplicate
certificate of title. On March 30, 1916, Pastora Conegero entered into an agreement with one Samuel
Thomas whereby, in consideration of the sum of P1,637.49, she bargained and sold to the said Thomas the
property described in title No. 147. At the time this sale was made the Torrens certificate covering the land
was not produced or delivered to the purchaser in the city of Manila where the contract was made; and in
fact at that time certificate No. 147, referred to in the description of the land in said contract, was nonexistent, having been cancelled as already stated. Of this fact, however, the purchaser was presumably
ignorant; and although he (or his attorney) was aware that the owner's certificate, No. 147, had been sent to
Iloilo for use in the cadastral proceedings, the irregularity of making the contract without having the
certificate in hand was considered unimportant. The description inserted in the contract was taken, it may be
observed, from that in the mortgage executed by Pastora Conegero in favor of El Hogar Filipino.
Soon after the contract of sale, evidenced by the deed of March 30, 1916, had been executed by Pastora
Conegero in favor of Samuel Thomas, the latter's attorney sent the document to Francisco Enage, register
of deeds in Iloilo, in order that the transfer might be registered and that a new certificate might in due course
be issued to Samuel Thomas. To this communication, Mr. Enage replied, returning the document and
informing the writer that the registration thereof could not be effected for the reason that certificate No. 147
had been cancelled and has been supplanted by certificate No. 194 in the name of Pastora Conegero, The
register of deeds, however, noted in his entry book the fact that such a deed had been presented to him at
10 a.m., on April 18, 1916, and placed a memorandum to the same effect on the document itself.
On October 18, 1916, Pastora Conegero mortgaged the property described in certificate No. 194 to the
Fidelity and Surety Company of the Philippine Islands to secure a credit of P2,000 guaranteed by the surety
company. This mortgage was registered and noted on the original certificate of title, No. 194, by the register
of deeds at Iloilo on March 29, 1917.
On November 2, 1917, Samuel Thomas commenced an action in the Court of First Instance of Iloilo to
compel Pastora Conegero to produce certificate No. 194 for cancellation, and to secure the issuance of a
new certificate of title in his name. Notice of lis pendens was filed on November 5, 1917. On November 9,
1917, Pastora Conegero executed a third mortgage, to Southworth and Goyena, to secure a note for P500.

35

On March 22, 1918, the Fidelity and Surety Company of the Philippine Islands brought this action to
foreclose its mortgage, naming Samuel Thomas and Southworth and Goyena as codefendants with Pastora
Conegero.
After hearing the evidence, the trial court held that the property belonged to Samuel Thomas, when the
plaintiff's mortgage was registered, and limited the plaintiff's remedy to a judgment in personam against
Pastora Conegero for P1,982.50. From this judgment the plaintiffs appealed.
The mortgage in favor of El Hogar Filipino was of course superior to all subsequent transfers and
incumbrances; and it is equally clear that the mortgage in favor of Southworth and Goyena is inferior to that
in favor of the present plaintiff, the Fidelity and Surety Company. The only question which here concerns us,
therefore, is whether the deed of March 30, 1916, to Samuel Thomas is superior to the mortgage of October
18, 1916, executed in favor of the Fidelity and Surety Company. The solution of this question depends upon
the effect to be conceded to the notation made on April 18, 1916, by the register of deeds of Iloilo in his entry
book concerning the deed executed by Pastora Conegero in favor of Thomas. Did the entering of this
memorandum in said book operate as an effective registration of the title, or transfer of title, and thereby
held that it had this effect. With this conclusion we are unable to agree.
Section 56 of Act No. 496 provides in part as follows:
Each register of deeds shall keep an entry book in which he shall enter in the order of their
reception all deeds and other voluntary instruments, and all copies of writs or other process filed
with him relating to registered land. He shall note in such book the year, month, day, hour, and
minute of reception of all instruments, in the order in which they are received. They shall be
regarded as registered from the time so noted, and the memorandum of each instrument when
made on the certificate of title to which it refers shall bear the same date.
We think that, where the statute says that an instrument shall be regarded as registered from the time the
annotation is made in the entry book, these word must be understood to apply to such instruments as are
competent to transfer, or effect, the Torrens title and upon which a new certificate is in fact issued in due
course. What is here really meant, we suppose, is that wherever registration is actually effected, and a new
certificate issued, the registration is retroactive and takes effect by relation as of the date when the
annotation in the entry book was made. n the light of this interpretation it is quite evident that the mere
annotation of a contract relating to land covered by a Torrens title, which is not followed by registration and
the emission of a new certificate, is without significance as regards its effect upon such title. To put the point
another way, it might be said that the constructive registration, if such it be, which results from the notation of
a document in the entry book cannot be given effect in the case where actual registration, or the actual
issuance of a new certificate, is impossible. At the time the absolute deed of sale in favor of Thomas was
presented to the register of deeds in Iloilo in the case before us the Torrens title upon which that deed was
supposed to operate was non-existent, having been judicially canceled with the consent of the owner. There
can be no constructive registration in a situation of this kind.
Under section 50 of Act No. 496, "no deed, mortgage, lease, or other voluntary instrument, except a will,
purporting to convey or affect registered land, shall take effect as a conveyance or bind the land, but shall
operate only as a contract between the parties and as evidence of authority to the clerk or register of deeds
to make registration. The act of registration shall be the operative act to convey and affect the land." The
steps by which registration is accomplished are fully set out in section 57 of the same Act; and by reference
thereto, it will be seen that registration of the transfer of registered land depends upon several vital
conditions, among which is the requirement that the grantor's duplicate certificate, upon which the title is
founded, shall be produced before the register of deeds for cancellation; and that he shall also have before
him the original certificate, likewise to be cancelled. This prerequisite condition was not complied with when
the deed to Thomas was presented for registration. On the other hand, the conveyance of the land covered
by certificate No. 194, by way of mortgage to the Fidelity and Surety Company, was effected in compliance
with all legal requirements. As a consequence it must be held that the title acquired by the Fidelity and
Surety Company is superior to that acquired by Samuel Thomas.
It follows that the judgments appealed from must be reversed; and the cause will be remanded to the court
of origin with directions to proceed to the foreclosure of the plaintiff's mortgage in the manner prescribed by
law. No special pronouncement will be made as to costs of either instance. So ordered.

36

Mapa, C.J., Araullo, Malcolm and Villamor, JJ., concur.


B. Conveyances
1. General Procedure (Sec 57 PD 1529)
Section 57. Procedure in registration of conveyances. An owner desiring to convey his registered land in fee
simple shall execute and register a deed of conveyance in a form sufficient in law. The Register of Deeds
shall thereafter make out in the registration book a new certificate of title to the grantee and shall prepare
and deliver to him an owner's duplicate certificate. The Register of Deeds shall note upon the original and
duplicate certificate the date of transfer, the volume and page of the registration book in which the new
certificate is registered and a reference by number to the last preceding certificate. The original and the
owner's duplicate of the grantor's certificate shall be stamped "canceled". The deed of conveyance shall be
filled and indorsed with the number and the place of registration of the certificate of title of the land
conveyed.
a. Determination of Land
Cases:
G.R. No. L-43094

August 31, 1936

MATEO C. SANCHEZ, applicant-appellee,


vs.
THE DIRECTOR OF LANDS, THE DIRECTOR OF FORESTRY, MARTINA ARIZALETA, ET AL., oppositors.
THE DIRECTOR OF LANDS, appellant.
Office of the Solicitor-General Hilado for appellant.
Leonardo Abola for appellee.
LAUREL, J.:
On January 9, 1932, Mateo C. Sanchez filed with the Court of First Instance of Masbate an application for
the registration of three parcels of land situated in the barrio of Uson, municipality of Dimasalang, Province
of Masbate, described in the plan (Exhibit A) and in the technical description (Exhibit A-1) to the application.
The application was opposed by the Director of Lands on the ground that the said parcels of land are public
lands and that the petitioner does not possess any title fit for registration; by the Director of Forestry on the
ground that portions thereof are public forests; and by Martina Arizaleta and Jose, Isidro and Francisco
Moraza who claimed lot No. 1 indicated in the plan. The oppositions filed by the last-named persons and by
the Director of Forestry were later on withdrawn.
On October 8, 1934, the trial court rendered a decision overruling the opposition of the Director of Lands and
ordering the registration of the three parcels of land in question in favor of the conjugal partnership of Mateo
C. Sanchez and Priscila Zamora subject to a right of way indicated by the red line in Exhibit 1 of the Bureau
of Forestry.
On December 12, 1934, the provincial fiscal of Masbate, on behalf of the Director of Lands and the Director
of Forestry, filed a motion for new trial on the ground that the decision of the trial court was contrary to law
and the weight of the evidence, which motion was set for hearing on December 22, 1934. On December 15,
1934, prior to the date set for the hearing of the motion for new trial, the provincial fiscal of Masbate, on
behalf of the Director of Lands and the Director of Forestry, filed the bill of exceptions in this case which was
approved by the trial court on January 7, 1935.
It is admitted by the appellant Director of Lands that the provincial fiscal of Masbate who represented him,
filed the bill of exceptions while the motion for new trial was still pending resolution by the trial court. The
presentation of the bill of exceptions prior to the resolution of a motion for new trial has the effect of
withdrawing such motion for new trial. (Conspecto vs. Fruto (1915], 31 Phil., 144, 147, cited with approval in
Dimaliwat vs. Dimaliwat [1931], 55 Phil., 673, 679; Heirs of Advincula vs. Imperial [1932], 56 Phil., 837;

37

Laxamana vs. Carlos [1932], 57 Phil., 722, 725, 726.) The fact that the case before us is one of registration
is immaterial because the rule with reference to the order of filing the motion for new trial, exception, appeal
and bill of exceptions is the same in ordinary civil actions and in registration proceedings. (Laxamana vs.
Carlos, supra, citing sec. 14, Act No. 496, as amended by Act No. 1108, and Director of Lands vs. Court of
First Instance of Tarlac [1928], 51 Phil., 805.) It is well-settled that in order that the evidence adduced before
the trial court may be reviewed by this court it is necessary, under section 497, subsection 2, of the Code of
Civil Procedure, (a) that the excepting party file in the trial court a motion for new trial on the ground that the
evidence was insufficient to justify the decision; (b) that said motion be overruled by the trial judge; and (c)
that due exception be taken to the overruling of the motion. (See Lopez vs. Orozco [1908], 11 Phil., 53, 54;
De la Rama vs. De la Rama [1906], 201 U. S., 303; 11 Phil., 746, 751; Lazarte vs. Nolan [1921], 42 Phil.,
563, 566, citing Singayan vs. Mabborang [1908], 10 Phil., 601, Sandeliz vs. Reyes [1909], 12 Phil., 506,
Buencamino vs. Soriano [1915], 29 Phil., 230, and Layda vs. Legazpi [1918], 39 Phil., 83; Granados and
Granados vs. Bandelaria [1923], 45 Phil., 505, 507-509 and cases cited; Dais vs. Torres and Ibaez [1933],
57 Phil., 897, 904.) It has also been held that the motion and exception should be incorporated in the bill of
exceptions (Rubert and Guamis vs. Luengo and Martinez [1907], 8 Phil., 732) and that in his brief the
appellant should assign errors raising questions of fact (Granados and Granados vs. Bandelaria, supra; Dais
vs. Torres and Ibaez, supra; Enriquez vs. Enriquez [1907], 8 Phil., 565, 566; Capellania de Tambobong vs.
Antonio [1907], 8 Phil., 683, 684; Paterno vs. City of Manila [1910], 17 Phil., 26-29; Santiago vs. Felix
[1913], 24 Phil., 378, 383, 384) and cite the pages of the record where evidence relied upon may be found.
(Palarca vs. Baguisi [1918], 38 Phil., 177, 178.) We are, therefore, constrained to accept the findings of fact
made by the trial judge.
Even accepting, however, the facts found by the trial judge, we do not feel justified in granting to the
applicant, Mateo C. Sanchez, more land than what his title calls for.
The findings of fact of the lower court are contained in the following paragraph of its decision:
Se ha demostrado por las pruebas del solicitante, a satisfaccion del Juzgado, que desde el ao
1886 Juan Perez de Tagle estaba en posesion de los tres lotes de terreno cuyo registro se solicita,
y desde el ao 1889 hasta 1894 se han tomado los pasos por el mismo para adquirir dichos
terrenos por compra del Estado, habiendo sido dichas parcelas medidas y tasadas por la
Inspeccion General de Montes (exhibits B y B-1); que en 1896, dichos tres lotes de terreno, que
forman una sola parcela, fueron vendidos por Juan Perez de Tagle a favor de Dolores Ramirez;
que la muerte de esta, ocurrida en 1904, le heredo y le sucedio en la posesion su hija Remedios
Medina, quien, a su vez, en 10 de abril de 1917 lo vendio, con consentimiento de su esposo, el
testigo Antero Zafra, a favor de Jose Y. de Egurrola (Exhibit C), y este a su vez, en 10 de
septiemtbre de 1921, lo traspaso en venta a favor del aqui solicitante Mateo C. Sanchez y que
tanto la posesion de este asi como la de sus anteceros sobre el terreno en cuestion, ha sido
siempre quieta, publica, continuada y adversa y en concepto de dueo, habiendolo dedicado
desde entonces hasta ahora para pasto de ganados.
It should be observed that the land found to have been occupied by Juan Perez de Tagle since 1896 is that
in reference to which "se han tomado los pasos por el mismo para adquirir dichos terrenos por compra del
Estado, habiendo sido dichas parcelas medidas y tasadas por la Inspeccion General de Montes (exhibits B
y B-1)" Exhibit B refers to the preliminary steps of inspection and survey ordered in connection with the
application of Juan Perez de Tagle for the acquisition by purchase from the Government of one parcel of
land "que linda por el norte con bosques del Estado, por el sur con cogonales del Estado, por el este y este
con bosques tambien del Estado."
Exhibit B-1 is entitled "expediente general referente a la enajenacion en publica subasta de un terreno
situado en la jurisdiccion del Pueblo de Uson (Masbate y Ticao) promovido por D. Juan Perez de Tagle" and
adjudicated on May 13, 1894 to the applicant Tagle "el terreno de referenda radica en el Sitio de Bagsulan
jurisdiccion de dicho pueblo y distrito dista unos veinte kilometros de la Yglesia del pueblo y fuera de la que
por la principalia se considera como legua comunal, sus limites son: al norte, este, sur y oeste con terrenos
del Estado cuya superficie es de Ciento treinta y una hectareas y mil trescientos metros cuadrados tasados
a tres pesos cincuenta centimos la hectarea," for P458.88.
Mateo C. Sanchez, however, seeks the judicial confirmation of a title to 1,107 hectares, 91 ares and 70
centares of public land. Why is there a difference of 976 hectares, 78 ares and 70 centares between the
area stated in the grant and that stated in the application? In his brief, the applicant accounts for this gross

38

discrepancy by stating that "surveys made during the Spanish regime were inaccurate, because of lack of
proper means and scientific instruments", so that, in his opinion, the area of 131 hectares and 13 ares stated
in Exhibit B-1 "can not be exact."
We are not inclined to hold that the area stated in Exhibit B-1 is erroneous. In accordance with the Royal
Decree of June 25, 1880 (published in the Gazeta de Manila on September 8, 1880), said to have marked
the beginning of modern Spanish land legislation in the Philippines (Vargas & Maalac, Philippine Land
Registration Law, pp. 11-14), the "Decreto del Gobierno General de 1880" was promulgated providing,
among other things, that no title could be issued without a correct survey of the land covered thereby being
first made and without the corresponding plan thereof showing the correct boundaries and areas or, to use
the very language of the decree, con exactitud (de) la cabida y linderos." For a better understanding of the
said decree, we shall quote its pertinent provisions:
Considerando que la demanda de terrenos baldios realengos y de composiciones de tierras cultivadas,
aument diariamente en proporcion considerable, haciendo cada vez mss imposible que los empleados de
Montes puedan desempenar elservicio de medicion y tasacion, on la brevedad conveniente.
Considerando que es de sumo interes facilitar todo lo posible el establecimiento de la verdadera
propiedad rural, este Gobierno General viene en decretar lo siguiente:
1. La clasificacion de los terrenos realengos que los particulares deseen adquirir por compra o
composicion, se hara siempre por los empleados facultativos de Montes, los cuales previo
reconocimiento si fuere necesario, o con omision del mismo si tuviese ya conocimiento detallado
de la localidad en que el terreno denunciado radique, determinaran si por razones cosmologicas,
hidrologicas o de aptitud para el cultivo agrario permanente, debe o no accederse a la
enajenacion.
2. Los interesados presentaran un croquis del terreno levantado a su costa por un agrimensor,
debiendo hacer constar en aquel con exactitud la cabida y linderos.
3. A las operaciones de medicion asistiran el gobernadorcillo o un teniente de justicia y dos
principales, extendiendose un acta firmada por todos los cocurrentes en que conste la distancia del
predio a la iglesia del pueblo, si el terreno esta o no baldio en todo o en parte, si contien o no
arbolado maderable y de que clase, quienes son los poseedores de las roturaciones en caso de
haberlas, la cabida de cada una de estas y si se han presentado o no reclamaciones antes de la
operacion o durante la misma, a cuyo efecto se anunciara por bandillo, durante tres dias
consecutivos, aquel en que las operaciones hayan de ejecutarse, constando dicha publicacion en
el acta.
4. Los gobernadorcillos no podran negar el concurso de la comision antes indicada, a los
particulares que lo soliciten quedando de lo contrario incursos en la multa que en cada caso se
determine. (Berriz, Guia del Comprador de Terrenos, pp. 336-338.) (Emphasis supplied.)
It is to be presumed that in the grant (Exhibit B-1) the requirements of the law above-quoted have been
followed. (Sec. 334, pars. 14 and 31, Code of Civil Procedure.) The area of the land sold to Juan Perez de
Tagle as stated should, therefore, be accepted as true.
The applicant also cites the cases of Escudero and Marasigan Director of Lands ([1922], 44 Phil., 83) and
Smith, Bell & Co. vs. Director of Lands ([1924], 50 Phil., 879, 882), as authority for the proposition that the
area given is not the principal element for the identification of land. The applicant, indeed, could have cited
many more cases holding that what really defines a piece of land is not the area mentioned in its description
but rather the boundaries therein laid down. As stated in the case of Loyola vs. Bartolome ([1919], 39 Phil.,
544, 550): "It is not of vital consequence that a deed or contract for the sale of land should declare that the
area with mathematical accuracy. It is sufficient if its extent is objectively indicated with sufficient precision to
enable one to identify it; and where the boundaries given are adequate for this purpose, an error as to the
superficial area is immaterial." (See also Government of the Philippine Islands vs. Franco [1926], 49 Phil.,
328, 329; Prieto vs. Director of Lands [1926], 50 Phil., 971-973; Government of the Philippine Islands vs.
Abaja [1928], 52 Phil., 261, 265.) But a careful review of the applicable cases will show that it is only when
the boundaries given are sufficiently certain and the identity of the land clearly proved by the boundaries

39

thus indicated that an erroneous statement concerning the area can be disregarded or ignored. Otherwise,
the area stated is followed. A few illustrative cases will be given.
In the case of Pamintuan vs. Insular Government ([1907], 8 Phil., 512, 515), it appears that the Spanish
Government made a grant of 92 hectares and 10 ares of public land to the ancestors of the petitioner. The
petitioner, however, claimed in is application 626 hectares, 38 ares and 95 centiares of land. This court said:
While the proposition of law laid down by the court below may be true to the effect that natural
boundaries will prevail over area, yet when the land sought to be registered is almost seven times
as much as that described in the deed, the evidence as to natural boundaries must be very clear
and convincing before that rule can be applied. No such evidence was given in this case, and the
judgment of the court below can not stand.
For a quite similar reason, in the case of Paras vs. Insular Government ([1908], 11 Phil., 378), the petitioner
failed in his attempt to prove his ownership of 67 hectares of land by presenting a patent from the Spanish
Government for 43 hectares, and in the case of Carrillo vs. Insular Government ([1908], 11 Phil., 379), the
petitioner failed in his attempt to prove his ownership of 107 hectares of land by presenting a patent from the
Spanish Government for 26 hectares.
In the case of Waldroop vs. Castaeda ([1913], 25 Phil., 50, 56) it appears that the Spanish Government
conveyed to Hilario Castaeda 23 hectares, 11 ares and 12 centiares of public land. This parcel of land
was later on conveyed to the petitioners. Due to the absence of proof that the land which Hilario Castaeda
had obtained from the Government had natural boundaries sufficient to clearly segregate it from the
adjoining lands, it was held that the only land to which the petitioners were entitled was the land which
Hilario Castaeda had obtained from the Spanish Government. In this case, the following doctrine was laid
down by this court:
In order that natural boundaries of land may be accepted for the purpose of varying the extent of
the land included in a deed of conveyance, the evidence as to such natural boundaries must be
clear and convincing. Such natural boundaries must be of such a character as to definitely and
accurately segregate the land in question from the adjoining property. There must be no doubt left
that the land included within the natural boundaries is the, same land which was intended to be
sold by the deed of conveyance. (See also Sales vs. Director of Lands, 61 Phil., 759.)
As already indicated above, the boundaries of the land purchased by Juan Perez de Tagle from the Spanish
Government in 1894 were as follows: "Al norte, este, sur y este con terrenos del Estado." (Exhibit B-1.)
Nothing can be more uncertain and indefinite!
It should be observed in this connection that the Royal Decrees in force at the time of the acquisition by
Juan Perez de Tagle did not recognize any grant of public land in excess of one thousand hectares. (See
Valdez vs. Director of Lands, 62 Phil., 362.)
The Royal Decree of November 25, 1880 provides:
Considerando que la naturaleza e importancia del asunto aconsejan adopter algunas precauciones
para evitar ciertos abusos de trascendencia, que al amparo de disposiciones transitoriales
pudieran cometerse, y que redundarian en perjuicio del Tesoro publico y de los particulares que se
dedican a cultivar y no a especular con la venta a otros, de los terrenos que se les conceden:
Considerando por ultimo que deben exigirse por el Estado ciertas garantias para aceptar las
mediciones y tasaciones que practiquen los agrimensores particulares en terrenos que son de su
pertinencia; S. M. el Rey (q. D. g.) ha tenido a bien aprobar el decreto de ese Gobierno General de
28 de agosto ultimo con las modificiones siguientes:
"1. La extension de los terrenos a los cuales se refiere dicho decreto, no podra exceder de mil
hectareas para los terrenos de secano; quinientas para los de igual clase poblados de arbolado
maderable, y ciento para los clasificados en el articulo 6. del mismo decreto con la frase "que a
poca costa puedan hacerse de regadio"."

40

The Royal Decree of October 26, 1881, repeats the same restriction in more vigorous terms:
Es asimismo preciso, que para favorecer la division de la propiedad territorial y el fomento del
cultivo intensivo y el de las producciones como el tabaco, la calla de azucar, el cafe y otros
semejantes, que se atienda con mais interes a las solicitudes en demanda de pequenas
extensiones de terreno para dedicarlos a los cultivos citados, que a las que no hallen en ese caso
y se comprenda que no solo no han de ponerse desde luego en condiciones de produccion, sino
que lo que busca es acaparar los mejores terrenos para poderse despues lucrar con su venta.
En su consecuencia S. M. el Rey (q. D. g.) ha tenido a bien disponer lo siguiente:
"1. Que a fin de favorecer la division de la propiedad, en las ventas de terrenos se tenga en
cuenta lo prevenido en el parrafo 1. de la Real Orden de 25 de noviembre de 1880, para que no se
verifique ninguna concesion que exceda de mil hectareas en terrenos de secano, de quinientas
cuando esten poblados de arbolado y de ciento cuando sean tierras que a poca costa puedan
hacerse de regadio."
It should also be observed that the amount of permissible error in the measurement of public land was only
five per cent of the total area. Royal Decree of January 19, 1883, article 27.)
There is still another point which weigh heavily against the claims of the applicant. It appears that Juan
Perez de Tagle contracted with the Spanish Government for the sale of the parcel of land in question at a
fixed price per unit of measure or at P3.50 per hectare, to be exact. There can be no mistake as to the
intention of the parties, no doubt as to the area conveyed by the Government to Tagle. And if Tagle bought
131 hectares and 13 ares of land paying the sum of P3.50 per hectare, it is not seen why the same land
having been conveyed to the applicant, the latter should now be allowed to claim a bigger tract of land. This
would be unfair to the State.
Under the laws in force at the time the purchase by Tagle was made, lands of the public domain were sold
only by unit of measure, that is to say, at a fixed price per hectare or per quion, and not in the mass
(cuerpos ciertos). (See Valdez vs. Director of Lands, 62 Phil., 362.)
Articles 1469 and 1470 of the Spanish Civil Code embody a rule of construction which has been followed,
according to Manresa, by the Spanish Government in the sale of public lands. Article 1469, in part, provides:
If a sale of real property should be made with a statement of its area, at a certain price for each unit
of measure or number, the vendor shall be obliged to deliver to the vendee, if the latter should
require it, all that which has been specified in the contract; but should, this not be possible, the
vendee may choose between a proportional reduction in the price or the rescission of the contract,
provided that in the latter case the deficiency be not less than one-tenth of the stated area of the
property. And article 1470 provides:
If in the case mentioned in the next preceding article the area of the realty should be greater than
that specified in the contract, the vendee shall be obliged to pay the price of the excess if the
greater area should not exceed one-twentieth of that specified in the contract; but it should be more
than one-twentieth, the vendee may choose between paying the greater value of the property or
withdrawing from the contract.
This court recognized and gave effect to the principle governing the sale of public lands in the case of
Barretto vs. Director of Lands (G. R. No. 29717, promulgated December 29, 1928, not reported). In this
case, the title conveying a tract of public land in the Province of Zambales to Antonio Lorenzo Barretto was
described by natural boundaries as follows: "Baldios y realengos unos terrenos situados en la Provincia de
Zambales, jurisdiccion del Pueblo de Cabungan, Sitio de Balintagac, lindando al sur, con el Monte de
Carmen; al norte, el Rio Anonang; al este, el rincon de Balintagac y al oeste el Monte de Tictic." The are was
stated to be 200 quiones and for each quion four reales were paid.
This court said:

41

Dado que, excepto el Rio Anonang al lado norte, los demas linderos consignados en este titulo no
son puntos o lineas especificas por no constar claramente ni en tal documento ni en las pruebas
aportadas donde empiezan determinadamente el monte del Carmen, el rincon de Balintagac o el
Monte de Tictic, y teniendo en cuenta que la venta efectuada por el Gobierno espanol a favor de D.
Antonio Lorenzo Barretto causante del aqui solicitante, no fue a cuerpo cierto toda vez que los
linderos son inciertos sino de 200 quinones a razon de cuatro reales cada quinon, es decir, a un
tanto por unidad de medida, entendemos acertada la alegacion de los abogados del apelante de
que la verdadera intencion del Estado como vendedor y del referido D. Antonio Lorenzo Barretto
como comprador fue transferir a este 200 quinones de terreno en aquel Sitio de Balintagac
extendiendose desde el Rio Aninang hacia el sur, este u oeste. Y tal intencion, del Estado de
celebrar la venta, no a cuerpo cierto, sino a un la tanto por unidad de medida y que, antes del 7 de
abril de 1869 todavia daba lugar a incertidumbres en casos dudosos, quedo desde dicha fecha
definitivamente reconocida por el orden del Poder Ejecutivo, la cual se refiere Manresa en el
parrafo que trascribimos a continuacion:
"Desde esta fecha de 7 de abril de 1869 es, por lo tanto, indudable que las ventas de bienes del
Estado no se hacen a cuerpo cierto, sino a razon de un tanto por unidad de medida o numero. Por
otra parte, las sentencias del Tribunal Supremo de 5 de mayo de 1870 y de 11 de febrero de 1877,
y el Real Decreto sentencia de 20 de marzo de 1885, coinciden en afirmar que la doctrina de los
cuerpos ciertos no pueden tener aplicacion a las ventas del bienes del Estado, sea cual fuere su
fecha." (10 Manresa, Comentarios al Codigo Civil Espaol, pag. 164, Edicion de 1908.)
The same principle has been embodied in several decrees. In the Royal Decree of November 27, 1880,
published in the Gaceta de Manila, No. 65, of March 6, 1881, it was said, among other things:
Acreditado por los mismos titulos que presenta Ramirez, que lo que verdaderamente adquirio del
Estado o mejor sus causantes D. Mariano Albea y D. Felix Guianzo, se reduce solo a 2438
hectareas, poco mas o menos, es evidente que la pretension de que se le reconozca como
legitimo poseedor de 16,000, a pretexto de lo que adjudicado ha de etenderse como cuerpo cierto,
si se apoya en disposicion alguna positiva, ni en doctrina, ni principios atendibles bajo ningun
concepto, pues la teoria de cuerpos ciertos, desechada ya en la Peninsula absolutamente, segun
se declara en varias disposiciones del Gobierno, no ha regido nunca en Filipinas, ni aun cuando
hubiera estado en vigor, seria aplicable a este caso dados los terminos e que se hicieron las
respectivas adjudicaciones. Otro tanto puede decirse de las demis pretensiones formuladas por el
recurrente Ramirez, invocando los principios de aquidad porque esta no puede ser decisiva
cuando se perjudican los intereses de una de las partes; y es notorio que aqui se perjudicarian
notablemente los del Estado, tolerando una usurpacion tan considerable o recibiendo como precio
muchisimo menos del que realmente tienen los terrenos que al mismo Estado pertenecen.
In paragraph 5 of the "Decreta del Gobierno General de 20 de agosto de 1880", hereinbefore referred to, the
principle regarding the conclusiveness of area was plainly recognized:
En cualquiera epoca en que se descubra error o ocultacion en la medida del terreno, que exceda
de un quinto de la cabida total, y en caso de que se averigue que no ha sido consignada en el acta
la reclamacion hecha por alguna persona, o que los limites no se han expresado con exactitud, se
anulara la adjudicacion y el Estado reivindicara la propiedad del terreno, cualesquiera que sean las
condiciones en que se halle, sin indemnizacion alguna por las mejoras que el poseedor hubiere
hecho, ni reintegro de lo satisfecho. Of the same tenor is paragraph 3 of the Royal Decree of June
22, 1882:
Si entablase reclamacion sobre exceso o falta de cabida del terreno subastado y del expediente
resultase que dicha falta o exceso iguala a la quinta parte de la expresada en el anuncio, sera nula
la venta; quedando en el caso contrario, firme y subsistente y sin derecho a indemnicacion la
Hacienda ni el comprador. Article 27, Royal Decree of January 19, 1883, provided:
El error tolerable en las mediciones de baldios realengos sera el de cinco por ciento de la cabida
total. Cuando exceda de dicha cantidad y no pase del quince por ciento, el miismo poseedor del
terreno tendra derecho a la composicion de la parte sobrante por el precio de la tasacionque
corresponda considerado como baldio; pero si el exceso fuese mayor de quince por ciento se
sacara a subasta con obligacion por parte del rematante de indemnizar al poseeder el importe de

42

las mejoras se, hara por un perito nombrado por cada parte y por un tercerto nombrado por la
Administracion en caso de discordia. Cuando el error de la medicion exceda del quince por ciento,
se instruira expediente para exigir a los peritos la responsabilidad que corresponda.
In three recent cases involving also lands situated in the Province of Masbate, this court applied the
foregoing principle governing the sale of lands of the public domain and denied the application for
registration of lands in excess of those stated in the titles concerned. These are the cases of Rosado vs.
Director of Lands (58 Phil., 833); Martinez vs. Director of Lands (G. R. No. 37303, promulgated January 19,
1934 [59, Phil., 958]); and Valdez vs. Director of Lands (62 Phil., 362).
In the first of these cases, the title described the land as follows: "Al norte y oeste, terrenos del Estado; al
este, playa, y al sur, bosque y terrenos del Estado." The area was stated to be 144 hectares, 89 ares and 76
centiares. The applicant, however, sought the registration in his favor of 966 hectares, 30 ares and 95
centiares of public pasture land. In rejecting the application, this court said:
It is doubtless true that when a deed describes a tract of land by definite and ascertainable
boundaries, an additional statement as to the area included is of secondary importance, because it
is presumed that the parties to the deed contracted with reference to the land specifically delimited
in the description. But this rule, has no application in the present case for two reasons: First,
because the land is not specifically delimited by definite and ascertainable boundaries; and second,
because the record shows, as above set out, that the Spanish Government and Alejandro Danao
contracted with reference to a definite area, because the minimum acceptable bid was based on
the area of 144 hectares, 89 ares and 70 centares.
In the second case, the title described the land as bounded on the north by the Boracay River and public
land; on the east by the sea; on the south, by the Bangad River and public land; and on the west, by public
cogon land. The area was stated to be 80 hectares, 71 ares and 30 centiares but the applicant sought the
registration of 866 hectares, 54 ares and 17 centiares of land. After quoting the rule laid down in the case of
Rosado vs. Director of Lands, supra, this court said:
In the case before us the price of the grant was estimated on the basis of two pesos per hectare
and the price paid for 80 hectares, 71 ares and 30 centares amounted to only about P161. This
does not show a right to the 866 hectares and a fraction claimed by the appellant.
In the third and last case, the total area sold by the Spanish Government and purchased by the grantees in
19 titles was 2,225.9194 hectares of land. The lands were sold to the grantees at fixed price per hectare. In
denying the application for the 28,006.5959 hectares of public land, this court referred to the two cases
above discussed and said:
Under the Royal Decree of October 28, 1869, the decisions of the Intendencia General de
Hacienda adjudicating titles to public lands were required to be published in the Gaceta de Manila
of which we take judicial notice. (Director of Lands vs. Absolo, 46 Phil., 282, 307.) From these
decisions as well as from the recitals in the nineteen titulos themselves, which are the origin of the
claimants' title in the case before us, it appears that each of the nineteen tracts was sold to the
purchaser at a fixed price per hectare, that is to say, both the government and the purchaser
contracted specifically with reference to the area stated in the titulos. For each title the government
was paid by the hectare for the number of hectares indicated in the title and no more. Any area
granted to these applicants in excess of the percentage of permissible error would be a pure gift
without consideration whatever to the State.
In view of the foregoing, we conclude that the applicant, Mateo C. Sanchez, is entitled to the registration
only of 131 hectares and 13 ares of the land claimed by him and to the issuance to him of a certificate of title
covering this area. Judgment is accordingly modified and upon the submission of an amended and
approved plan in conformity with this decision, the lower court will order the issuance of the corresponding
decree of registration and confirmation of the title. No costs will be charged in this instance. So ordered.
Avancea, C. J., Villa-Real, Abad Santos, Imperial, Diaz, and Recto, JJ., concur.
G.R. No. L-16394

December 17, 1966

43

JOSE SANTA ANA, JR. and LOURDES STO. DOMINGO, petitioners,


vs.
ROSA HERNANDEZ, respondent.
Manuel J. Serapio for petitioners..
J. T. de los Santos for respondent.
REYES, J.B.L., J.:
Appeal from the decision of the Court of Appeals in its Case CA-G.R. No. 20582-R, in effect reversing the
decision of the Court of First Instance of Bulacan in its Civil Case No. 1036.
The petitioners herein, spouses Jose Santa Ana, Jr. and Lourdes Sto. Domingo, owned a 115,850-square
meter parcel of land situated in barrio Balasing, Sta. Maria, Bulacan, and covered by Transfer Certificate of
Title No. T-3598. On 28 May 1954, they sold two (2) separate portions of the land for P11,000.00 to the
herein respondent Rosa Hernandez. These portions were described in the deed of sale as follows:
Bahaguing nasa gawing Hilagaan. Humahanga sa Hilaga, kina Maria Perez, at Aurelio Perez; sa
Timugan, sa lupang kasanib; sa Silanganan, kay Mariano Flores at Emilio Ignacio; sa Kanluran,
kay Cornelio Ignacio; Mayroong (12,500), m.c. humigit kumulang.
Bahaguing nasa gawing Silanganan Humahanga sa Hilagaan, sa kay Rosa Hernandez; sa
Silanganan, kay Domingo Hernandez at Antonio Hernandez; sa Timugan, sa Sta. Maria-Tigbi
Road; at sa Kanluran, sa lupang kasanib (Jose Sta. Ana, Jr.), mayroong (26,500) metros
cuadrados, humigit kumulang.
After the sale (there were two other previous sales to different vendees of other portions of the land), the
petitioners-spouses caused the preparation of a subdivision plan, Psd-43187, was approved on 13 January
1955 by the Director of Lands. Rosa Hernandez, however, unlike the previous vendees, did not conform to
the plan and refused to execute an agreement of subdivision and partition for registration with the Register
of Deeds of Bulacan; and she, likewise, refused to vacate the areas that she had occupied. Instead, she
caused the preparation of a different subdivision plan, which was approved by the Director of Lands on 24
February 1955. This plan, Psd-42844, tallied with the areas that the defendant, Rosa Hernandez, had
actually occupied.
On 28 February 1955, herein petitioners-spouses filed suit against respondent Rosa Hernandez in the Court
of First Instance of Bulacan, claiming that said defendant was occupying an excess of 17,000 square meters
in area of what she had bought from them. Defendant Rosa Hernandez, on the other hand, claimed that the
alleged excess, was part of the areas that she bought.
The trial court observed:
The only question, therefore, to be determined by the Court is whether or not the plaintiffs had sold
two portions without clear boundaries but with exact areas (12,500 sq. m. and 26,000 sq. m.) at the
rate of P.29 per square meter or, as defendant Rosa Hernandez claimed, two portions, the areas of
which were not definite but which were well defined on the land and with definite boundaries and
sold for the lump sum of P11,000.00.
Finding for the plaintiffs, the said court ordered the defendant, among other things, to vacate "the excess
portions actually occupied by her and to confine her occupation only to Lots 4-a and 4-b as shown in the
plan, Exhibit E, of the plaintiffs . . .," referring to Psd-43187.
Not satisfied with the judgment, defendant Hernandez appealed to the Court of Appeals.
The Court of Appeals dismissed the complaint and declared Rosa Hernandez the owner of lots 4-a and 4-b
in her plan, Psd-42844, upon the following findings:

44

The contract between appellees and appellant (Exhibit D) provided for the sale of two separate
portions of the same land for the single consideration of P11,000.00. Appellee Jose Santa Ana, Jr.
said the transaction was by a unit of measure or per square meter, and that although the actual
total purchase price of the two parcels of land was P11,300.00 at P0.29 per square meter the
parties agreed to the sale at the reduced price of P11,000.00. The appellant denied this claim of
appellees. Gonzalo V. Ignacio, the notarial officer before the contract of sale was executed, failed to
corroborate Sta. Ana upon this point. Upon the contrary, Ignacio testified that appellant complained
to him and the appellees to the effect that the areas stated in the contract were less than the actual
areas of the parcels of land being sold and here we quote the notarial officer's own words:
"That the area stated in the document will not be the one to prevail but the one to prevail
is the boundary of the land which you already know." (p. 74, Innocencio).
Sta. Ana is the nephew of the appellant, and the former's assurance probably appeased the latter
against insisting in the correction of the areas stated in the contract of sale.
Two witnesses testified for the appellant. Jesus Policarpio divulged that the same parcels of land
involved in this case were previously offered to him by the appellees for the single purchase price
of P12,000.00. Julio Hernandez stated that his sister, the herein appellant, had offered P10,000.00
as against the appellees' price of P12,000.00, and that he was able to persuade the parties to meet
halfway on the price. Furthermore the previous conveyances made by the appellees for other
portions of the same property (Exhibits B and C) are also for lump sums.
The difference in area of 17,000 square meters is about one-half of the total area of the two parcels
of land stated in the document, but not for this alone may we infer gross mistake on the part of
appellees. The appellees admit the lands in question were separated from the rest of their property
by a long and continuous "pilapil" or dike, and there is convincing proof to show that the bigger lot
(Lot 4-a) was wholly tenanted for appellees by Ciriaco Nicolas and Santiago Castillo and the
smaller lot (Lot 4-b) was wholly tenanted for said appellees by Gregorio Gatchalian. These facts
support the theory that the two parcels of land sold to the appellant were identified by the
conspicuous boundaries and the extent or area each tenant used to till for the vendors. Again,
appellees should not be heard to complain about the deficiency in the area because as registered
owners and possessors of the entire land since 1949 they can rightly be presumed to have
acquired a good estimate of the value and areas of the portions they subsequently sold.
The Court of Appeals concluded by applying to the case Article 1542 of the new Civil Code:
In the sale of real estate, made for a lump sum and not at the rate of a certain sum for a unit of
measure or number, there shall be no increase or decrease of the price, although there be greater
or less area or number than that stated in the contract.
The same rule shall be applied when two or more immovables are sold for a single price; but if,
besides mentioning the boundaries, which is indispensable in every conveyance of real estate, its
area or number should be designated in the contract, the vendor shall be bound to deliver all that is
included within said boundaries, even when it exceeds the area or number specified in the contract;
and, should he not be able to do so, he shall suffer a reduction in the price, in proportion to what is
lacking in the area or number, unless the contract is rescinded because the vendee does not
accede to the failure to deliver what has been stipulated.
and declared Rosa Hernandez the owner of the whole of lots 4-a and 4-b of her own subdivision Plan Psd42844, notwithstanding their increased area as compared to that specified in the deed of sale.
In turn, the Sta. Ana spouses appealed to this Court, assigning the following errors:
The Court of Appeals committed a grave error of law when it departed from the accepted and usual
course of judicial proceedings, by disturbing the findings of fact of the trial court, made upon
conflicting testimonies of the witnesses for the plaintiffs, now in the petitioners, and the defendant,
now the respondent, Rosa Hernandez.

45

The Court of Appeals committed a grave error of law when it held that the deed of sale, Exhibit D,
was for a lump sum, despite the fact that the boundaries given therein were not sufficiently certain
and the boundaries indicated did not clearly identify the land, thereby erroneously deciding a
question of substance in a way not in accord with law and the applicable decisions of this
Honorable Court.
On the face of the foregoing assignments of error and the petitioners' discussions thereabout, their position
can be summarized as follows: that the Court of Appeals erred in substituting its own findings of fact for that
of the trial court's, without strong and cogent reasons for the substitution, contrary to the rule that appellate
courts shall not disturb the findings of fact of trial courts in the absence of such strong and cogent reasons;
and that Article 1542 of the Civil Code of the Philippines does not apply, allegedly because the boundaries,
as shown in the deed of sale, are not definite.
In the first assignment of error, the petitioner spouses complain against the failure of the Court of Appeals to
accept the findings of fact made by the Court of First Instance. The credibility of witnesses and the weighing
of conflicting evidence are matters within the exclusive authority of the Court of Appeals, and it is not
necessarily bound by the conclusions of the trial court. Both the Judiciary Act (R.A. 296, section 29) and the
Rules of Court (Rule 45, section 2) only allow a review of decisions of the Court of Appeals on questions of
law; and numerous decisions of this Court have invariably and repeatedly held that findings of fact by the
Court of Appeals are conclusive and not reviewable by the Supreme Court (Galang vs. Court of Appeals, L17248, 29 January 1962; Fonacier vs. Court of Appeals, 96 Phil. 418, 421; and cases therein cited;
Onglengco vs. Ozaeta, 70 Phil. 43; Nazareno vs. Magwagi, 71 Phil. 101). Barring, therefore, a showing that
the findings complained of are totally devoid of support in the record, or that they are so glaringly erroneous
as to constitute serious abuse of discretion, such findings must stand, for this Court is not expected or
required to examine and contrast the oral and documentary evidence submitted by the parties. As pointed
out by former Chief Justice Moran in his Comments on the Rules of Court (1963 Ed., Vol. 2, p. 412), the law
creating the Court of Appeals was intended mainly to take away from the Supreme Court the work of
examining the evidence, and confine its task for the determination of questions which do not call for the
reading and study of transcripts containing the testimony of witnesses.
The first assignment of error must, therefore, be overruled. We now turn to the second.
Despite the incontestable fact that the deed of sale in favor of Rosa Hernandez recites a price in a lump sum
(P11,000.00) for both lots (Annex "C", Complaint, Rec. on App., p. 21), appellants insist that the recited area
should be taken as controlling. They combat the application of Article 1542 of the Civil Code, on the ground
that the boundaries given in the deed are indefinite. They point out that the southern boundary of the small
parcel is merely given as "lupang kasanib" and that the same occurs with the western boundary of the
bigger lot, which is recited as "lupang kasanib (Jose Sta. Ana, Jr.)". The Court of Appeals, however, found as
a fact that
the two parcels of land sold to appellant (i.e., appellee herein, Rosa Hernandez) were identified by
the conspicuous boundaries. (Emphasis supplied)
consisting in a long and continuous pilapil or dike that separated the lands in question from the rest of the
property. On the basis of such findings, that can not be questioned at this stage, for reasons already shown,
it is unquestionable that the sale made was of a definite and identified tract, a corpus certum, that obligated
the vendors to deliver to the buyer all the land within the boundaries, irrespective of whether its real area
should be greater or smaller than what is recited in the deed (Goyena vs. Tambunting, 1 Phil. 490; Teran vs.
Villanueva, 56 Phil. 677; Azarraga vs. Gay, 52 Phil. 599; Mondragon vs. Santos, 87 Phil. 471). And this is
particularly true where, as in the case now before this Court, the area given is qualified to be approximate
only ("humigit kumulang", i.e., more or less Rec. on App., p. 22).
To hold the buyer to no more than the area recited on the deed, it must be made clear therein that the sale
was made by unit of measure at a definite price for each unit.
If the defendant intended to buy by the meter be should have so stated in the contract (Goyena vs.
Tambunting, supra).

46

The ruling of the Supreme Court of Spain, in construing Article 1471 of the Spanish Civil Code (copied
verbatim in our Article 1542) is highly persuasive that as between the absence of a recital of a given price
per unit of measurement, and the specification of the total area sold, the former must prevail and determines
the applicability of the norms concerning sales for a lump sum.
La venta a cuerpo cierto indudablemente se verifica cuando en el contrato no solo no es precisado
el precio singular por unidad de medida, sino que tampoco son indicadas los dimensiones globales
bales del inmueble, pero tambien se verifica cuando aun ng habiendo sido indicado un precio
singular por unidad de medida, sin embargo es especificada la dimension total del inmueble, en
cuyo ultimo caso entre los dos indices en contraste, constituido uno por la falta de un precio
singular por unidad de medida, y otro por la concrecion de las dimensiones globales del unmueble,
la Ley da prevalencia al mero y presume que aquella individualizacion no habia tenido para las
partes valor esencial, que solo constituia una superabundancia, y no significa que las partes hayan
convenido aquel precio global solo en cuanto el inmueble tuviese efectivamente aquellas
dimensiones totales, siendo de estimar que esta es una presuncion absoluta, contra la cual ni el
comprador ni el vendedor pueden articular prueba contraria.
Por tanto, ni el comprador ni el vendedor pueden pretender una disminucicion o, respectivamente
un suplemento de precio, cuando las dimensiones globales del unmueble resulten despues
mayores o menores de las indicadas en el contrato, aunque aduzcan que solo en tanto han
convenido el aquel precio en cuanto creian que las dimensiones de la cosa fueran las precisadas
en el contrato. (Tribunal Supreme de Espaa, Sent. de 26 Junio 1956; Rep. Jurisp. Aranzadi,
2.729) (Emphasis supplied)
The Civil Code's rule as to sales "a cuerpo cierto" was not modified by Act 496, section 58, prohibiting the
issuance of a certificate of title to a grantee of part of a registered tract until a subdivision plan and technical
description are duly approved by the Director of Lands, and authorizing only the entry of a memorandum on
the grantor's certificate of title in default of such plan. The latter provision is purely a procedural directive to
Registers of Deeds that does not attempt to govern the rights of vendor and vendee inter se, that remain
controlled by the Civil Code of the Philippines. It does not even bar the registration of the contract itself to
bind the land.
WHEREFORE, the decision of the Court of Appeals, in its case No. 20582-R, is hereby affirmed. Costs
against the appellants, Jose Santa Ana, Jr. and Lourdes Sto. Domingo.
Concepcion, C.J., Barrera, Dizon, Regala, Makalintal, Bengzon, J.P., Zaldivar and Sanchez, JJ., concur.
2. Sale of Part of Registered Land Sec 58 PD1529
Section 58. Procedure where conveyance involves portion of land. If a deed or conveyance is for a part only
of the land described in a certificate of title, the Register of Deeds shall not enter any transfer certificate to
the grantee until a plan of such land showing all the portions or lots into which it has been subdivided and
the corresponding technical descriptions shall have been verified and approved pursuant to Section 50 of
this Decree. Meanwhile, such deed may only be annotated by way of memorandum upon the grantor's
certificate of title, original and duplicate, said memorandum to serve as a notice to third persons of the fact
that certain unsegregated portion of the land described therein has been conveyed, and every certificate
with such memorandum shall be effectual for the purpose of showing the grantee's title to the portion
conveyed to him, pending the actual issuance of the corresponding certificate in his name.
Upon the approval of the plan and technical descriptions, the original of the plan, together with a certified
copy of the technical descriptions shall be filed with the Register of Deeds for annotation in the
corresponding certificate of title and thereupon said officer shall issue a new certificate of title to the grantee
for the portion conveyed, and at the same time cancel the grantor's certificate partially with respect only to
said portion conveyed, or, if the grantor so desires, his certificate may be canceled totally and a new one
issued to him describing therein the remaining portion: Provided, however, that pending approval of said
plan, no further registration or annotation of any subsequent deed or other voluntary instrument involving the
unsegregated portion conveyed shall be effected by the Register of Deeds, except where such
unsegregated portion was purchased from the Government or any of its instrumentalities. If the land has
been subdivided into several lots, designated by numbers or letters, the Register of Deeds may, if desired by

47

the grantor, instead of canceling the latter's certificate and issuing a new one to the same for the remaining
unconveyed lots, enter on said certificate and on its owner's duplicate a memorandum of such deed of
conveyance and of the issuance of the transfer certificate to the grantee for the lot or lots thus conveyed,
and that the grantor's certificate is canceled as to such lot or lots.
3. Encumbrances (Sec 59, PD 1529)
Section 59. Carry over of encumbrances. If, at the time of any transfer, subsisting encumbrances or
annotations appear in the registration book, they shall be carried over and stated in the new certificate or
certificates; except so far as they may be simultaneously released or discharged.
a. Restrictions on land imposed by contract
Cases:
G.R. No. L-2886

August 22, 1952

GREGORIO ARANETA, INC., plaintiff-appellant,


vs.
PAZ TUASON DE PATERNO and JOSE VIDAL, defendants-appellants.
Araneta and Araneta for appellant.
Ramirez and Ortigas for defendants-appellants.
Perkins, Ponce Enrile and Contreras And La O and Feria for appellee.
TUASON, J.:
This is a three-cornered contest between the purchasers, the seller, and the mortgagee of certain portions
(approximately 40,703 square meters) of a big block of residential land in the district of Santa Mesa, Manila.
The plaintiff, which is the purchaser, and the mortgagee elevated this appeal. Though not an appellant, the
seller and mortgagor has made assignments of error in her brief, some to strengthen the judgment and
others for the purpose of new trial.
The case is extremely complicated and multiple issues were raised.
The salient facts in so far as they are not controverted are these. Paz Tuason de Paterno is the registered
owner of the aforesaid land, which was subdivided into city lots. Most of these lots were occupied by lessees
who had contracts of lease which were to expire on December 31,1952, and carried a stipulation to the
effect that in the event the owner and lessor should decide to sell the property the lessees were to be given
priority over other buyers if they should desire to buy their leaseholds, all things being equal. Smaller lots
were occupied by tenants without formal contract.
In 1940 and 1941 Paz Tuason obtained from Jose Vidal several loans totalling P90,098 and constituted a
first mortgage on the aforesaid property to secure the debt. In January and April, 1943, she obtained
additional loans of P30,000 and P20,000 upon the same security. On each of the last-mentioned occasions
the previous contract of mortgage was renewed and the amounts received were consolidated. In the first
novated contract the time of payment was fixed at two years and in the second and last at four years. New
conditions not relevant here were also incorporated into the new contracts.
There was, besides, a separate written agreement entitled "Penalidad del Documento de Novacion de Esta
Fecha" which, unlike the principal contracts, was not registered. The tenor of this separate agreement, all
copies, of which were alleged to have been destroyed or lost, was in dispute and became the subject of
conflicting evidence. The lower court did not make categorical findings on this point, however, and it will be
our task to do so at the appropriate place in this decision.
In 1943 Paz Tuason decided to sell the entire property for the net amount of P400,000 and entered into
negotiations with Gregorio Araneta, Inc. for this purpose. The result of the negotiations was the execution on

48

October 19, 1943, of a contract called "Promesa de Compra y Venta" and identified as Exhibit "1." This
contract provided that subject to the preferred right of the lessees and that of Jose Vidal as mortgagee, Paz
Tuason would sell to Gregorio Araneta, Inc. and the latter would buy for the said amount of P400,000 the
entire estate under these terms.
El precio sera pagado como sigue: un 40 por ciento juntamente con la carta de aceptacion del
arrendatario, un 20 por ciento delprecio al otorgarse la escritura de compromiso de venta, y el
remanente 40 por ciento al otorgarse la escritura de venta definitiva, la cual sera otorgada despues
de que se habiese canceladola hipoteca a favor de Jose Vidal que pesa sobre dichos lotes.
Lacomision del 5 por ciento que corresponde a Jose Araneta serapagada al otorgarse la escritura
de compromiso de venta.
Paz Tuason se obliga a entregar mediante un propio las cartasque dirigira a este efecto a los
arrendatarios, de conformidad con el formulario adjunto, que se marca como Apendice A.
Expirado el plazo arriba mencionado, Paz Tuason otorgara las escrituras correspondientes de
venta a los arrendatarios que hayan decidido comprar sus respectivos lotes.
9. Los alquieres correspondientes a este ao se prorratearan entre la vendedora y el comprador,
correspondiendo al comprador los alquileres correspondientes a Noviembre y Diciembre de este
ao y asimismo sera por cuenta del comprador el amillaramiento correspondiente a dichos
meses.
10. Paz Tuason, reconoce haver recibido en este acto de Gregorio Araneta, Inc., la suma de Ciento
Noventa Mil Pesos (P190,000)como adelanto del precio de venta que Gregorio Araneta, Inc.,
tuviere que pagar a Paz Tuason.
La cantidad que Paz Tuason recibe en este acto sera aplicadapor ella a saldar su deuda con Jose
Vidal, los amillaramientos, sobre el utilizado por Paz Tuason para otros fines.
11. Una vez determinados los lotes que Paz Tuason podra vendera Gregorio Araneta, Inc., Paz
Tuason otorgara una escritura deventa definitiva sobre dichos lotes a favor de Gregorio Araneta,
Inc.
Gregorio Araneta, Inc., pagara el precio de venta como sigue: 90 por ciento del mismo al otorgarse
la escritura de venta definitiva descontandose de la cantidad que entonces se tenga que pagar de
adelanto de P190,000 que se entrega en virtud de esta escritura. El 10 por ciento remanente se
pagara a Paz Tuazon, una vez se haya cancelado la hipoteca que pesa actualmente sobre el
terreno.
No obstante la dispuesto en el parrafo 8, cualquier arrendatario que decida comprar el lote que
occupa con contrato de arrendamiento podra optar por pedir el otorgamiento inmediato a su favor
el acto de la escritura de venta definitiva pagando en el acto el 50 por ciento del precio (ademas
del 40 por ciento que debio incluir en su carta de aceptacion) y el remanente de 10 por ciento
inmediatemente despues de cancelarse la hipoteca que pesa sobre el terreno.
12. Si la mencionada cantidad de P190,000 excediere del 90 por ciento de la cantidad que
Gregorio Araneta, Inc., tuviere que vender a dicho comprador, el saldo sera pagado
inmediatamente por Paz Tuazon, tomandolo de las cantidades que reciba de los arrendatarios
como precio de venta.
In furtherance of this promise to buy and sell, letters were sent the lessees giving them until August 31,
1943, an option to buy the lots they occupied at the price and terms stated in said letters. Most of the
tenants who held contracts of lease took advantage of the opportunity thus extended and after making the
stipulated payments were giving their deeds of conveyance. These sales, as far as the record would show,
have been respected by the seller.

49

With the elimination of the lots sold or be sold to the tenants there remained unencumbered, except for the
mortgage to Jose Vidal, Lots 1, 8-16 and 18 which have an aggregate area of 14,810.20 square meters; and
on December 2, 1943, Paz Tuason and Gregorio Araneta, Inc. executed with regard to these lots an
absolute deed of sale, the terms of which, except in two respects, were similar to those of the sale to the
lessees. This deed, copy of which is attached to the plaintiff's complaint as Exhibit A, provided, among other
things, as follows:
The aforesaid lots are being sold by he Vendor to the Vendee separately at the prices mentioned in
paragraph (6) of the aforesaid contract entitled "Promesa de Compra y Venta," making a total sum
of One Hundred Thirty-Nine Thousand Eighty-three pesos and Thirty-two centavos (P139,083.32),
ninety (90%) per cent of which amount, i.e., the sum of One Hundred Twenty-five Thousand One
Hundred Seventy-four Pesos and Ninety-nine centavos (P125,174.99), the Vendor acknowledges
to have received by virtue of the advance of One Hundred Ninety Thousand (P190,000) Pesos
made by the Vendee to the Vendor upon the execution of the aforesaid contract entitled "Promesa
de Compra y Venta". The balance of Sixty-Four Thousand Eight Hundred Twenty-five Pesos and
One centavo (P64,825.01) between the sum of P125,174.99, has been returned by the Vendor to
the Vendee, which amount the Vendee acknowledges to have received by these presents;
The aforesaid sum of P190,000 was delivered by the Vendee to the Vendor by virtue of four checks
issued by the Vendee against the Bank of the Philippine Islands, as follows:

No. C-286445 in favor of Paz Tuason de Paterno


No. C-286444 in favor of the City Treasurer, Manila

P13,476.62
3,373.38

No. C-286443 in favor of Jose Vidal

30,000.00

No. C-286442 in favor of Jose Vidal

143,150.00

Total

P190,000.00

The return of the sum of P64,825.01 was made by the Vendor to the Vendee in a liquidation which
reads as follows:

Hemos recibido de Da. Paz Tuason de Paterno la cantidad de


Sesenta y Cuatro mil Ochocientos Veinticinco Pesos y un
centimo (P64,825.01) enconcepto de devolucion que nos hace
del excesode lo pagadoa ella de

P190,000.0
0

Menos el 90% de P139,083.32, importe de los lotes que vamos a


comprar

125,174.99

Exceso

64,825.01

Cheque BIF No. D-442988 de Simplicio del Rosario

21,984.20

Cheque PNB No. 177863-K de L.E. Dumas

21,688.60

50

Cheque PNB No. 267682-K de Alfonso Sycip

20,000.00

Cheque PNB No. 83940 de Josefina de Pabalan

4,847.96

Billetes recibidos de Alfonso Sycip

42.96
P68,563.21

Menos las comisiones de 5 % recibidas de Josefina


de Pabalan

P538.60

L.E. Dumas

1,084.43

Angela S. Tuason

1,621.94

3,244.97
P65,318.24

Menos cheque BIF No. C-288642 a favor de Da. Paz


Tuason de Paterno que le entregamos como exceso

493.23
P64,825.01

Manila, Noviembre 2, 1943

GREGORIO ARANETA, INCORPORATED


Por;
(Fdo.) "JOSE ARANETA
Presidente
Recibido cheque No. C-288642 BIF-P493.23

Por:
(Fdo.) "M.J. GONZALEZ
In view of the foregoing liquidation, the vendor acknowledges fully and unconditionally, having
received the sum of P125,174.99 of the present legal currency and hereby expressly declares that
she will not hold the Vendee responsible for any loss that she might suffer due to the fact that two
of the checks paid to her by the Vendee were issued in favor of Jose Vidal and the latter has, up to
the present time, not yet collected the same.
The ten (10%) per cent balance of the purchase price not yet paid in the total sum of P13,908.33
will be paid by the Vendee to the Vendor when the existing mortgage over the property sold by the
Vendor to the Vendee is duly cancelled in the office of the Register of Deeds, or sooner at the
option of the Vendee.

51

This Deed of Sale is executed by the Vendor free from all liens and encumbrances, with the only
exception of the existing lease contracts on parcels Nos. 1, 10, 11, and 16, which lease contracts
will expire on December 31, 1953, with the understanding, however, that this sale is being executed
free from any option or right on the part of the lessees to purchase the lots respectively leased by
them.
It is therefore clearly understood that the Vendor will pay the existing mortgage on her property in
favor of Jose Vidal.
The liquidation of the amounts respectively due between the Vendor and the Vendee in connection
with the rents and real estate taxes as stipulated in paragraph (9) of the contract entitled "Promesa
de Compara y Venta" will be adjusted between the parties in a separate document.
Should any of the aforesaid lessees of lots Nos. 2, 3, 4, 5, 6, 7, 9 and 17 fail to carry out their
respective obligations under the option to purchase exercised by them so that the rights of the
lessee to purchase the respective property leased by him is cancelled, the Vendor shall be bound
to sell the same to the herein Vendee, Gregorio Araneta, Incorporated, in conformity with the terms
and conditions provided in the aforesaid contract of "Promesa de Compra y Venta";
The documentary stamps to be affixed to this deed will be for the account of the Vendor while the
expenses for the registration of this document will be for the account of the Vendee.
The remaining area of the property of the Vendor subject to Transfer Certificates of Title Nos.
60471 and 60472, are lots Nos. 2, 3, 4, 5, 6, 7, 9, and 17, all of the Consolidation of lots Nos. 20
and 117 of plan II-4755, G.L.R.O. Record No. 7680.
Before the execution of the above deed, that is, on October 20, 1943, the day immediately following the
signing of the agreement to buy and sell, Paz Tuason had offered to Vidal the check for P143,150
mentioned in Exhibit A, in full settlement of her mortgage obligation, but the mortgagee had refused to
receive that check or to cancel the mortgage, contending that by the separate agreement before mentioned
payment of the mortgage was not to be effected totally or partially before the end of four years from April,
1943.
Because of this refusal of Vidal's Paz Tuason, through Atty. Alfonso Ponce Enrile, commenced an action
against the mortgagee in October or the early paret of November 1943. the record of that case was
destroyed and no copy of the complaint was presented in evidence. Attached to the complaint or deposited
with the clerk of court by Attorney Ponce Enrile simultaneously with the docketing of the suit were the check
for P143,150 previously turned down by Vidal, another certified check for P12,932.61, also drawn by
Gregorio Araneta, Inc., in favor of Vidal, and one ordinary check for P30,000 issued by Paz Tuazon. These
three checks were supposed to cover the whole indebtedness to Vidal including the principal and interest up
to that time and the penalty provided in the separate agreement.
But the action against Vidal never came on for trial and the record and the checks were destroyed during the
war operations in January or February, 1945; and neither was the case reconstituted afterward. This failure
of the suit for the cancellation of Vidal's mortgage, coupled with the destruction of the checks tendered to the
mortgagee, the nullification of the bank deposit on which those checks had been drawn, and the tremendous
rise of real estate value following the termination of the war, gave occasion to the breaking off the schemes
outlined in Exhibits 1 and A; Paz Tuason after liberation repudiated them for the reasons to be hereafter set
forth. The instant action was the offshoot, begun by Gregorio Araneta, Inc. to compel Paz Tuason to deliver
to the plaintiff a clear title to the lots described in Exhibit A free from all liens and encumbrances, and a deed
of cancellation of the mortgage to Vidal. Vidal came into the case in virtue of a summon issued by order of
the court, and filed a cross-claim against Paz Tuazon to foreclose his mortgage.
It should be stated that the outset that all the parties are in agreement that Vidal's loans are still outstanding.
Paz Tuason's counsel concede that the tender of payment to Vidal was legally defective and did not operate
to discharge the mortgage, while the plaintiff is apparently uninterested in this feature of the case
considering the matter one largely between the mortgagor and the mortgagee, although to a certain degree
this notion is incorrect. At any rate, the points of discord between Paz Tuason and Vidal concern only the
accrual of interest on the loans, Vidal's claim to attorney's fees, and the application of the debt moratorium

52

law which the debtor now invokes. These matters will be taken up in the discussion of the controversy
between Paz Tuason and Jose Vidal.
The principal bone of contention between Gregorio Araneta, Inc., and Paz Tuason was the validity of the
deed of sale of Exhibit A on which the suit was predicated. The lower court's judgment was that this contract
was invalid and was so declared, "sin per juicio de que la demandada Paz Tuason de Paterno pague a la
entidad demandante todas las cantidades que habia estado recibiendo de lareferida entidad demandante,
en concepto de pago de losterrenos, en moneda corriente, segun el cambio que debiaregir al tiempo de
otorgarse la escritura segun la escalade "Ballentine", descontando, sin embargo, de dichas cantidades
cualesquiera que la demandante haya estadorecibiendo como alquileres de los terrenos
supuestamentevendidos a ella." The court based its opinion that Exhibit 1. His Honor, Judge Sotero Rodas,
agreedwith the defendant that under paragraph 8 of Exhibit 1 there was to be no absolute sale to Gregorio
Araneta, Inc., unless Vidal's mortgage was cancelled.
In our opinion the trial court was in error in its interpretation of Exhibit 1. The contemplated execution of an
absolute deed of sale was not contingent on the cancellation of Vidal's mortgage. What Exhibit 1 did provide
(eleventh paragraph) was that such deed of absolute sale should be executed "una vez determinado los
lotes que Paz Tuason podra vender a Gregorio Araneta, Inc." The lots which could be sold to Gregorio
Araneta, Inc. were definitely known by October 31, 1943, which was the expiry of the tenants' option to buy,
and the lots included in the absolute of which the occupants' option to buy lapsed unconditionally. Such deed
as Exhibit A was then in a condition to be made.
Vidal's mortgage was not an obstacle to the sale. An amount had been set aside to take care of it, and the
parties, it would appear, were confident that the suit against the mortgagee would succeed. The only doubt
in their minds was in the amount to which Vidal was entitled. The failure of the court to try and decide that
the case was not foreseen either.
This refutes, were think, the charge that there was undue rush on the part of the plaintiff to push across the
sale. The fact that simultaneously with Exhibit A similar deeds were given the lessees who had elected to
buy their leaseholds, which comprise an area about twice as big as the lots described in Exhibit A, and the
further fact that the sale to the lessees have never been questioned and the proceeds thereof have been
received by the defendant, should add to dispel any suspicion of bad faith on the part of the plaintiff. If
anyone was in a hurry it could have been the defendant. The clear preponderance of the evidence that Paz
Tuason was pressed for cash and that the payment of the mortgage was only an incident, or a necessary
means to effectuate the sale. Otherwise she could have settled her mortgage obligation merely by selling a
portion of her estate, say, some of the lots leased to tenants who, except two who were in concentration
camps, were only too anxious to buy and own the lots on which their houses were built.
Whatever the terms of Exhibit 1, the plaintiff and the defendant were at perfect liberty to make a new
agreement different from or even contrary to the provisions of that document. The validity of the subsequent
sale must of necessity depend on what it said and not on the provisions of the promise to buy and sell.
It is as possible proof or fraud that the discrepancies between the two documents bear some attention. It
was alleged that Attorneys Salvador Araneta and J. Antonio Araneta who the defendant said had been her
attorneys and had drawn Exhibit A, and not informed or had misinformed her about its contents; that being
English, she had not read the deed of sale; that if she had not trusted the said attorneys she would not have
been so foolish as to affix her signature to a contract so one-sided.
The evidence does not support the defendant. Except in two particulars, Exhibit A was a substantial
compliance with Exhibit 1 in furtherance of which Exhibit A was made. One departure was the proviso that
10 per cent of the purchase price should be paid only after Vidal's mortgage should have been cancelled.
This provisional deduction was not onerous or unusual. It was not onerous or unusual that the vendee
should withhold a relatively small portion of the purchase price before all the impediments to the final
consummation of the sale had been removed. The tenants who had bought their lots had been granted the
privilege to deduct as much as 40 per cent of the stipulated price pending discharge of the mortgage,
although his percentage was later reduced to 10 as in the case of Gregorio Araneta, Inc. It has also been
that the validity of the sales to the tenants has not been contested; that these sales embraced in the
aggregate 24,245.40 square meters for P260,916.68 as compared to 14,811.20 square meters sold to
Gregorio Araneta, Inc. for P139,083.32; that the seller has already received from the tenant purchasers 90
per cent of the purchase money.

53

There is good reason to believe that had Gregorio Araneta, Inc. not insisted on charging to the defendant the
loss of the checks deposited with the court, the sale in question would have gone the smooth way of the
sales to the tenants. Thus Dindo Gonzales, defendant's son, declared:
P. Despues de haberse presentado esta demanda, recuerda usted haber tenido conversacion con
Salvador Araneta acerca de este asunto?
R. Si Seor.
P. Usted fue quien se acerco al seor Salvador Araneta?
R. Si, seor.
P. Quiero usted decir al Honorable Juzgado que era lo que usted dijo al seor Salvador Araneta?
R. No creo que es propio que yo diga, por tratarse de mi madre.
P. En otras palabras, usted quiere decir que no quiere usted que se vuelva decir o repetir ante este
Honorable Juzgado lo que usted dijo al seor Salvador Araneta, pues, se trata de su madre?
R. No, seor.
P. Puede usted decirnos que quiso usted decir cuando que no quisiera decir?
R. Voy a decir lo que Salvador Araneta, yo me acerque a Don Salvador Araneta, y yo le dije que es
una verguenza de que nosotros, en la familia tengamos que ir a la Corte por este, y tambien dije
que mi madre de por si quiere vender el terreno a ellos, porque mi madre quiere pagar al seor
Vidal, y que es una verguenza, siendo entre parientes, tener que venir por este; era lo que yo dije
al seor Salvador Araneta.
xxx

xxx

xxx

P. No recuerda usted tambien dijo al seor Salvador Araneta que usted no comulgaba con ella (su
madre) en este asunto?
R. Si, Seor; porque yo creia que mi madre solamente queria anular esta venta, pero cuando me
dijo el seor La O y sus abogados que, encima de quitar la propiedad, todavia tendria ella que
pagar al seor Vidal, este no veso claro.
xxx

xxx

xxx

P. Ahora bien; de tal suerte que, tal como nosotros desperendemos de su testimonio, tanto, usted
como, su madre, esteban muy conformes en la venta, es asi?
R. Si, seor.
The other stipulation embodied in Exhibit A which had no counterpart in Exhibit 1 was that by which Gregorio
Araneta Inc. would hold Paz Tuason liable for the lost checks and which, as stated, appeared to be at the
root of the whole trouble between the plaintiff and the defendant.
The stipulation reads:
In view of the foregoing liquidation, the Vendor acknowledges fully and unconditionally, having
received the sum of P125,174.99 of the present legal currency and hereby expressly declares that
she will not hold the Vendee responsible for any loss that she might suffer due to the fact that two

54

of the checks paid to her by the Vendee were used in favor of Jose Vidal and the latter has, up to
the present time, not yet collected the same.
It was argued that no person in his or her right senses would knowingly have agreed to a covenant so
iniquitous and unreasonable.
In the light of all the circumstances, it is difficult to believe that the defendant was deceived into signing
Exhibit A, in spite of the provision of which she and her son complaint. Intelligent and well educated who had
been managing her affairs, she had an able attorney who was assisting her in the suit against Vidal, a case
which was instituted precisely to carry into effect Exhibit A or Exhibit 1, and a son who is leading citizen and
a business-man and knew the English language very well if she did not. Dindo Gonzalez took active part in,
if he was not the initiator of the negotiations that led to the execution of Exhibit 1, of which he was an
attesting witness besides. If the defendant signed Exhibit A without being apprised of its import, it can hardly
be conceived that she did not have her attorney or her son read it to her afterward. The transaction involved
the alienation of property then already worth a fortune and now assessed by the defendant at several times
higher. Doubts in defendant's veracity are enhanced by the fact that she denied or at least pretended in her
answer to be ignorant of the existence of Exhibit A, and that only after she was confronted with the signed
copy of the document on the witness did she spring up the defense of fraud. It would look as if she gambled
on the chance that no signed copy of the deed had been saved from the war. She could not have forgotten
having signed so important a document even if she had not understood some of its provisions.
From the unreasonableness and inequity of the aforequoted Exhibit A it is not to be presumed that the
defendant did not understand it. It was highly possible that she did not attach much importance to it,
convinced that Vidal could be forced to accept the checks and not foreseeing the fate that lay in store for the
case against the mortgagee.
Technical objections are made against the deed of sale.
First of these is that Jose Araneta, since deceased, was defendant's agent and at the same time the
president of Gregorio Araneta, Inc.
The trial court found that Jose Araneta was not Paz Tuason's agent or broker. This finding is contrary to the
clear weight of the evidence, although the point would be irrelevant, if the court were right in its holding that
Exhibit A was void on another ground, i.e., it was inconsistent with Exhibit 1.
Without taking into account defendant's Exhibit 7 and 8, which the court rejected and which, in our opinion,
should have been admitted, Exhibit 1 is decisive of the defendant's assertion. In paragraph 8 of Exhibit 1
Jose Araneta was referred to as defendant's agent or broker "who acts in this transaction" and who as such
was to receive a commission of 5 per cent, although the commission was to be charged to the purchasers,
while in paragraph 13 the defendant promised, in consideration of Jose Araneta's services rendered to her,
to assign to him all her right, title and interest to and in certain lots not embraced in the sales to Gregorio
Araneta, Inc. or the tenants.
However, the trial court hypothetically admitting the existence of the relation of principal and agent between
Paz Tuason and Jose Araneta, pointed out that not Jose Araneta but Gregorio Araneta, Inc. was the
purchaser, and cited the well-known distinction between the corporation and its stockholders. In other words,
the court opined that the sale to Gregorio Araneta, Inc. was not a sale to Jose Araneta the agent or broker.
The defendant would have the court ignore this distinction and apply to this case the other well-known
principle which is thus stated in 18 C.J.S. 380: "The courts, at law and in equity, will disregard the fiction of
corporate entity apart from the members of the corporation when it is attempted to be used as a means of
accomplishing a fraud or an illegal act.".
It will at once be noted that this principle does not fit in with the facts of the case at bar. Gregorio Araneta,
Inc. had long been organized and engaged in real estate business. The corporate entity was not used to
circumvent the law or perpetrate deception. There is no denying that Gregorio Araneta, Inc. entered into the
contract for itself and for its benefit as a corporation. The contract and the roles of the parties who
participated therein were exactly as they purported to be and were fully revealed to the seller. There is no
pretense, nor is there reason to suppose, that if Paz Tuason had known Jose Araneta to Gregorio Araneta,

55

Inc's president, which she knew, she would not have gone ahead with the deal. From her point of view and
from the point of view of public interest, it would have made no difference, except for the brokerage fee,
whether Gregorio Araneta, Inc. or Jose Araneta was the purchaser. Under these circumstances the result of
the suggested disregard of a technicality would be, not to stop the commission of deceit by the purchaser
but to pave the way for the evasion of a legitimate and binding commitment buy the seller. The principle
invoked by the defendant is resorted to by the courts as a measure or protection against deceit and not to
open the door to deceit. "The courts," it has been said, "will not ignore the corporate entity in order to further
the perpetration of a fraud." (18 C.J.S. 381.)
The corporate theory aside, and granting for the nonce that Jose Araneta and Gregorio Araneta, Inc. were
identical and that the acts of one where the acts of the other, the relation between the defendant and Jose
Araneta did not fall within the purview of article 1459 of the Spanish Civil Code.1
Agency is defined in article 1709 in broad term, and we have not come across any commentary or decision
dealing directly with the precise meaning of agency as employed in article 1459. But in the opinion of
Manresa(10 Manresa 4th ed. 100), agent in the sense there used is one who accepts another's
representation to perform in his name certain acts of more or less transcendency, while Scaevola (Vol. 23, p.
403) says that the agent's in capacity to buy his principal's property rests in the fact that the agent and the
principal form one juridicial person. In this connection Scaevola observes that the fear that greed might get
the better of the sentiments of loyalty and disinterestedness which should animate an administrator or agent,
is the reason underlying various classes of incapacity enumerated in article 1459. And as American courts
commenting on similar prohibition at common law put it, the law does not trust human nature to resist the
temptations likely to arise of antogonism between the interest of the seller and the buyer.
So the ban of paragraph 2 of article 1459 connotes the idea of trust and confidence; and so where the
relationship does not involve considerations of good faith and integrity the prohibition should not and does
not apply. To come under the prohibition, the agent must be in a fiduciary with his principal.
Tested by this standard, Jose Araneta was not an agent within the meaning of article 1459. By Exhibits 7
and 8 he was to be nothing more than a go-between or middleman between the defendant and the
purchaser, bringing them together to make the contract themselves. There was no confidence to be
betrayed. Jose Araneta was not authorize to make a binding contract for the defendant. He was not to sell
and he did not sell the defendant's property. He was to look for a buyer and the owner herself was to make,
and did make, the sale. He was not to fix the price of the sale because the price had been already fixed in
his commission. He was not to make the terms of payment because these, too, were clearly specified in his
commission. In fine, Jose Araneta was left no power or discretion whatsoever, which he could abuse to his
advantage and to the owner's prejudice.
Defendant's other ground for repudiating Exhibit A is that the law firm of Araneta & Araneta who handled the
preparation of that deed and represented by Gregorio Araneta, Inc. were her attorneys also. On this point
the trial court's opinion is likewise against the defendant.
Since attorney Ponce Enrile was the defendant's lawyer in the suit against Vidal, it was not likely that she
employed Atty. Salvador Araneta and J. Antonio Araneta as her attorneys in her dealings with Gregorio
Araneta, Inc., knowing, as she did, their identity with the buyer. If she had needed legal counsels, in this
transaction it seems certain that she would have availed herself of the services of Mr. Ponce Enrile who was
allegedly representing her in another case to pave the way for the sale.
The fact that Attys. Salvador and Araneta and J. Antonio Araneta drew Exhibits 1 and A, undertook to write
the letters to the tenants and the deeds of sale to the latter, and charged the defendant the corresponding
fees for all this work, did not themselves prove that they were the seller's attorneys. These letters and
documents were wrapped up with the contemplated sale in which Gregorio Araneta, Inc. was interested, and
could very well have been written by Attorneys Araneta and Araneta in furtherance of Gregorio Araneta's
own interest. In collecting the fees from the defendant they did what any other buyer could have
appropriately done since all such expenses normally were to be defrayed by the seller.
Granting that Attorney Araneta and Araneta were attorneys for the defendant, yet they were not forbidden to
buy the property in question. Attorneys are only prohibited from buying their client's property which is the
subject of litigation. (Art. 1459, No. 5, Spanish Civil Code.) The questioned sale was effected before the

56

subject thereof became involved in the present action. There was already at the time of the sale a litigation
over this property between the defendant and Vidal, but Attys. Salvador Araneta and J. Antonio Araneta
were not her attorneys in that case.
From the pronouncement that Exhibit A is valid, however, it does not follow that the defendant should be
held liable for the loss of the certified checks attached to the complaint against Vidal or deposited with the
court, or of the funds against which they had been issued. The matter of who should bear this loss does not
depend upon the validity of the sale but on the extent and scope of the clause hereinbefore quoted as
applied to the facts of the present case.
The law and the evidence on this branch of the case revealed these facts, of some of which passing mention
has already been made.
The aforesaid checks, one for P143,150 and one for P12,932.61, were issued by Gregorio Araneta, Inc. and
payable to Vidal, and were drawn against the Bank of the Philippines with which Gregorio Araneta, Inc. had
a deposit in the certification stated that they were to be "void if not presented for payment date of
acceptance" office (Bank) within 90 days from date of acceptance."
Under banking laws and practice, by the clarification" the funds represented by the check were transferred
from the credit of the maker to that of the payee or holder, and, for all intents and purposes, the latter
became the depositor of the drawee bank, with rights and duties of one such relation." But the transfer of the
corresponding funds from the credit of the depositor to that of that of the payee had to be co-extensive with
the life of the checks, which in the case was 90 days. If the checks were not presented for payment within
that period they became invalid and the funds were automatically restored to the credit of the drawer though
not as a current deposit but as special deposit. This is the consensus of the evidence for both parties which
does not materially differ on this proposition.
The checks were never collected and the account against which they were drawn was not used or claimed
by Gregorio Araneta, Inc.; and since that account "was opened during the Japanese occupation and in
Japanese currency," the checks "became obsolete as the account subject thereto is considered null and
void in accordance with Executive Order No. 49 of the President of the Philippines", according to the Bank.
Whether the Bank of the Philippines could lawfully limit the negotiability of certified checks to a period less
than the period provided by the Statute of Limitations does not seem material. The limitation imposed by the
Bank as to time would adversely affect the payee, Jose Vidal, who is not trying to recover on the instruments
but on the contrary rejected them from the outset, insisting that the payment was premature. As far as Vidal
was concerned, it was of no importance whether the certification was or was not restricted. On the other
hand, neither the plaintiff nor the defendant now insists that Vidal should present, or should have presented,
the checks for collection. They in fact agree that the offer of those checks to Vidal did not, for technical
reason, work to wipe out the mortgage.
But as to Gregorio Araneta and Paz Tuason, the conditions specified in the certification and the prevailing
regulations of the Bank were the law of the case. Not only this, but they were aware of and abided by those
regulations and practice, as instanced by the fact that the parties presented testimony to prove those
regulations and practice. And that Gregorio Araneta, Inc. knew that Vidal had not cashed the checks within
90 days is not, and could not successfully be denied.
In these circumstances, the stipulation in Exhibit A that the defendant or seller "shall not hold the vendee
responsible for any loss of these checks" was unconscionable, void and unenforceable in so far as the said
stipulation would stretch the defendant's liability for this checks beyond 90 days. It was not in accord with
law, equity or good conscience to hold a party responsible for something he or she had no access to and
could not make use of but which was under the absolute control and disposition of the other party. To make
Paz Tuason responsible for those checks after they expired and when they were absolutely useless would
be like holding an obligor to answer for the loss or destruction of something which the obligee kept in its safe
with no power given the obligor to protect it or interfere with the obligee's possession.
To the extent that the contract Exhibit A would hold the vendor responsible for those checks after they had
lapsed, the said contract was without consideration. The checks having become obsolete, the benefit in
exchange for which the defendant had consented to be responsible for them had vanished. The sole

57

motivation on her part for the stipulation was the fact that by the checks the mortgage might or was to be
released. After 90 days the defendant stood to gain absolutely nothing by them, which had become veritable
scraps of paper, while the ownership of the deposit had reverted to the plaintiff which alone could withdraw
and make use of it.
What the plaintiff could and should have done if the disputed stipulation was to be kept alive was to keep the
funds accessible for the purpose of paying the mortgage, by writing new checks either to Vidal or to the
defendant, as was done with the check for P30,000, or placing the deposit at the defendant's disposal. The
check for P30,000 intended for the penalty previously had been issued in the name of Vidal and certified,
too, but by mutual agreement it was changed to an ordinary check payable to Paz Tuason. Although that
check was also deposited with the court and lost, its loss undoubtedly was imputable to the defendant's
account, and she did not seem to disown her liability for it.
Let it be remembered that the idea of certifying the lost checks was all the plaintiff's. The plaintiff would not
trust the defendant and studiously so arranged matters that she could not by any possibility put a finger on
the money. For all the practical intents and purposes the plaintiff dealt directly with the mortgagee and
excluded the defendant from meddling in the manner of payment to Vidal. And let it also be kept in mind that
Gregorio Araneta, Inc. was not a mere accommodator in writing these checks. It was as much interested in
the cancellation of the mortgage as Paz Tuason.
Coming down to Vidal's cross-claim Judge Rodas rendered no judgment other than declaring that the
mortgage remained intact and subsisting. The amount to be paid Vidal was not named and the question
whether interest and attorney's fees were due was not passed upon. The motion for reconsideration of the
decision by Vidal's attorney's praying that Paz Tuason be sentenced to pay the creditor P244,917.90 plus
interest at the rate of 1 percent monthly from September 10, 1948 and that the mortgaged property be
ordered sold in case of default within 90 days, and another motion by the defendant seeking specification of
the amount she had to pay the mortgagee were summarily denied by Judge Potenciano Pecson, to whom
the motions were submitted, Judge Rodas by that time having been appointed to the Court of Appeals.
All the facts and evidence on this subject are on the record, however, and we may just as well determine
from these facts and evidence the amount to which the mortgagee is entitled, instead of remanding the case
for new trial, if only to avoid further delay if the disposition of this case.
It is obvious that Vidal had a right to judgment for his credit and to foreclose the mortgage if the credit was
not paid.
There is no dispute as to the amount of the principal and there is agreement that the loans made in 1943, in
Japanese war notes, should be computed under the Ballantyne conversion table. As has been said, where
the parties do not see eye-to-eye was in regard to the mortgagee's claim to attorney's fees and interest from
October, 1943, which was reached a considerable amount. It was contended that, having offered to pay
Vidal her debt in that month, the defendant was relieved thereafter from paying such interest.
It is to be recalled that Paz Tuason deposited with the court three checks which were intended to cover the
principal and interest up to October, 1943, plus the penalty provided in the instrument "Penalidad del
Documento de Novacion de Esta Fecha." The mortgagor maintains that although these checks may not
have constituted a valid payment for the purpose of discharging the debt, yet they did for the purpose of
stopping the running of interest. The defendant draws attention to the following citations:
An offer in writing to pay a particular sum of money or to deliver a written instrument or specific
personal property is, if rejected, equivalent to the actual production and tender of the money,
instrument or property. (Sec. 24, Rule 123.)
It is not accord with either the letter or the spirit of the law to impose upon the person affecting a
redemption of property, in addition to 12 per cent interest per annum up to the time of the offer to
redeem, a further payment of 6 per cent per annum from the date of the officer to redeem. (Fabros
vs. Villa Agustin, 18 Phil., 336.)
A tender by the debtor of the amount of this debt, if made in the proper manner, will suspend the
running of interest on the debt for the time of such tender. (30 Am. Jur., 42.)

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In the case of Fabrosa vs. Villa Agustin, supra, a parcel of land had been sold on execution to one Tabliga.
Within the period of redemption Fabros, to whom the land had been mortgaged by the execution debtor, had
offered to redeem the land from the execution creditor and purchaser at public auction. The trial court ruled
that the redemptioner was not obliged to pay the stipulated interest of 12 per cent after he offered to redeem
the property; nevertheless he was sentenced to pay 6 per cent interest from the date of the offer.
This court on appeal held that "there is no reason for this other (6 per cent) interest, which appears to be a
penalty for delinquency while there was no delinquency." The court cited an earlier decision, Martinez vs.
Campbell, 10 Phil., 626, where this doctrine was laid down: "When the right of redemption is exercised
within the term fixed by section 465 of the Code of Civil Procedure, and an offer is made of the amount due
for the repurchase of the property to which said right refers, it is neither reasonable nor just that the
repurchaser should pay interest on the redemption money after the time when he offered to repurchase and
tendered the money therefor."
In the light of these decisions and law, the next query is; Did the mortgagor have the right under the contract
to pay the mortgage on October 20, 1943? The answer to this question requires an inquiry into the provision
of the "Penalidad del Documento de Novacion de Esta Fecha."
Vidal introduced oral evidence to the effect that he reserved unto himself in that agreement the right "to
accept or refuse the total payment of the loan outstanding . . ., if at the time of such offer of payment he
considered it advantageous to his interest." This was gist of Vidal's testimony and that of Lucio M. Tiangco,
one of Vidal's former attorneys who, as notary public, had authenticated the document. Vidal's above
testimony was ordered stricken out as hearsay, for Vidal was blind and, according to him, only had his other
lawyer read the document to him.
We are of the opinion that the court erred in excluding Vidal's statement. There is no reason to suspect that
Vidal's attorney did not correctly read the paper to him. The reading was a contemporaneous incident of the
writing and the circumstances under which the document was read precluded every possibility of design,
premeditation, or fabrication.
Nevertheless, Vidal's testimony, like the testimony of Lucio M. Tiangco's, was based on recollection which,
with the lapse of time, was for from infallible. By contrast, the testimony of Attorneys Ponce Enrile, Salvador
Araneta, and J. Antonio Araneta does not suffer from such weakness and is entitled to full faith and credit.
The document was the subject of a close and concerted study on their part with the object of finding the
rights and obligations of the mortgagee and the mortgagor in the premises and mapping out the course to
be pursued. And the results of their study and deliberation were translated into concrete action and
embodied in a letter which has been preserved. In line with the results of their study, action was instituted in
court to compel acceptance by Vidal of the checks consigned with the complaint, and before the suit was
commenced, and with the document before him, Atty. Ponce Enrile, in behalf of his client, wrote Vidal
demanding that he accept the payment and execute a deed of cancellation of the mortgage. In his letter Atty.
Ponce Enrile reminded Vidal that the recital in the "Penalidad del Documento de Novacion de Esta Fecha"
was "to the effect that should the debtor wish to pay the debt before the expiration of the period the
reinstated (two years) such debtor would have to pay, in addition to interest due, the penalty of P30,000
this is in addition to the penalty clause of 10 per cent of the total amount due inserted in the document of
mortgage of January 20, 1943."
Atty. Ponce Enrile's concept of the agreement, formed after mature and careful reading of it, jibes with the
only possible reason for the insertion of the penalty provision. There was no reason for the penalty unless it
was for defendant's paying her debt before the end of the agreed period. It was to Vidal's interest that the
mortgage be not settled in the near future, first, because his money was earning good interest and was
guaranteed by a solid security, and second, which was more important, he, in all probability, shared the
common belief that Japanese war notes were headed for a crash and that four years thence, judging by the
trends of the war, the hostilities would be over.
To say, as Vidal says, that the debtor could not pay the mortgage within four years and, at the same time,
that there would be penalty if she paid after that period, would be a contradiction. Moreover, adequate
remedy was provided for failure to pay or after the expiration of the mortgage: increased rate or interest,
foreclosure of the mortgage, and attorney's fees.

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It is therefore to be concluded that the defendant's offer to pay Vidal in October, 1943, was in accordance
with the parties' contract and terminated the debtor's obligation to pay interest. The technical defects of the
consignation had to do with the discharge of the mortgage, which is conceded on all sides to be still in force
because of the defects. But the matter of the suspension of the running of interest on the loan stands of a
different footing and is governed by different principles. These principles regard reality rather than
technicality, substance rather than form. Good faith of the offer or and ability to make good the offer should
in simple justice excuse the debtor from paying interest after the offer was rejected. A debtor can not be
considered delinquent who offered checks backed by sufficient deposit or ready to pay cash if the creditor
chose that means of payment. Technical defects of the offer cannot be adduced to destroy its effects when
the objection to accept the payment was based on entirely different grounds. If the creditor had told the
debtor that he wanted cash or an ordinary check, which Vidal now seems to think Paz Tuason should have
tendered, certainly Vidal's wishes would have been fulfilled, gladly.
The plain truth was that the mortgagee bent all his efforts to put off the payment, and thanks to the defects
which he now, with obvious inconsistency, points out, the mortgage has not perished with the checks.
Falling within the reasons for the stoppage of interest are attorney's fees. In fact there is less merit in the
claim for attorney's fees than in the claim for interest; for the creditor it was who by his refusal brought upon
himself this litigation, refusal which, as just shown, resulted greatly to his benefit.
Vidal, however, is entitled to the penalty, a point which the debtor seems to a grant. The suspension of the
running of the interest is premised on the thesis that the debt was considered paid as of the date the offer to
pay the principal was made. It is precisely the mortgagor's contention that he was to pay said penalty if and
when she paid the mortgage before the expiration of the four-year period provided in the mortgage contract.
This penalty was designed to take the place of the interest which the creditor would be entitled to collect if
the duration of the mortgage had not been cut short and from which interest the debtor has been relieved.
"In obligations with a penalty clause the penalty shall substitute indemnity for damages and the payment of
interest. . ." (Art. 1152, Civil Code of Spain.).
To summarize, the following are our findings and decision:
The contract of sale Exhibit A was valid and enforceable, but the loss of the checks for P143,150 and
P12,932.61 and invalidation of the corresponding deposit is to be borne by the buyer. Gregorio Araneta, Inc.
the value of these checks as well as the several payments made by Paz Tuason to Gregorio Araneta, Inc.
shall be deducted from the sum of P190,000 which the buyer advanced to the seller on the execution of
Exhibit 1.
The buyer shall be entitled to the rents on the land which was the subject of the sale, rents which may have
been collected by Paz Tuason after the date of the sale.
Paz Tuason shall pay Jose Vidal the amount of the mortgage and the stipulated interest up to October
20,1943, plus the penalty of P30,000, provided that the loans obtained during the Japanese occupation shall
be reduced according to the Ballantyne scale of payment, and provided that the date basis of the
computation as to the penalty is the date of the filing of the suit against Vidal.
Paz Tuason shall pay the amount that shall have been found due under the contracts of mortgage within 90
days from the time the court's judgment upon the liquidation shall have become final, otherwise the property
mortgaged shall be ordered sold provided by law.
Vidal's mortgage is superior to the purchaser's right under Exhibit A, which is hereby declared subject to said
mortgage. Should Gregorio Araneta, Inc. be forced to pay the mortgage, it will be subrogated to the right of
the mortgagee.
This case will be remanded to the court of origin with instruction to hold a rehearing for the purpose of
liquidation as herein provided. The court also shall hear and decide all other controversies relative to the
liquidation which may have been overlooked at this decision, in a manner not inconsistent with the above
findings and judgment.

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The mortgagor is not entitled to suspension of payment under the debt moratorium law or orders. Among
other reasons: the bulk of the debt was a pre-war obligation and the moratorium as to such obligations has
been abrogated unless the debtor has suffered war damages and has filed claim for them; there is no
allegation or proof that she has. In the second place, the debtor herself caused her creditor to be brought
into the case which resulted in the filing of the cross-claim to foreclose the mortgage. In the third place,
prompt settlement of the mortgage is necessary to the settlement of the dispute and liquidation between
Gregorio Araneta, Inc. and Paz Tuason. If for no other reason, Paz Tuason would do well to forego the
benefits of the moratorium law.
There shall be no special judgments as to costs of either instance.
Paras, C.J., Pablo, Bengzon, Padilla, Bautista Angelo and Labrador, JJ., concur.

RESOLUTION

December 22, 1952


TUASON, J.:
The motion for reconsideration of the plaintiff, Gregorio Araneta, Inc., and the defendant, Paz Tuason de
Paterno, are in large part devoted to the question, extensively discussed in the decision, of the validity of the
contract of sale Exhibit A. The arguments are not new and at least were given due consideration in the
deliberation and study of the case. We find no reason for disturbing our decision on this phase of the case.
The plaintiff-appellant's alternative proposition to wit: "Should this Honorable Court declare that the
purchase price was not paid and that plaintiff has to bear the loss due to the invalidation of the occupation
currency, its loss should be limited to: (a) the purchase price of P139,083.32 less P47,825.70 which plaintiff
paid and the defendant actually collected during the occupation, or the sum of P92,233.32, or at most, (b)
the purchase price of the lot in the sum of P139,083.32," as well as the alleged over-payment by the
defendant-appellee, may be taken up in the liquidation under the reservation in the judgment that "the court
(below) shall hold a rehearing for the purpose of liquidation as herein provided" and "shall also hear and
decide all other controversies relative to the liquidation which may have been overlooked in this decision, in
the manner not inconsistent with the above findings and judgment."
These payments and disbursement are matters of accounting which, not having been put directly in issue or
given due attention at the trial and in the appealed decision, can better be treshed out in the proposed
rehearing where each party will have an opportunity to put forward his views and reasons, with supporting
evidence if necessary, on how the various items in question should be regarded and credited, in the light of
our decision.
As to Jose Vidal's motion: There is nothing to add to or detract from what has been said in the decision
relative to the interest on the loans and attorney's fees. There are no substantial features of the case that
have not been weighed carefully in arriving at our conclusions. It is our considered opinion that the decision
is in accord with law, reason and equity.
The vehement protest that this court should not modify the conclusion of the lower court on interest and
attorney's fees is actually and entirely contrary to the cross-claimant's own suggestion in his brief. From
page 20 of his brief, we copy these passages:
We submit that this Honorable Court is in a position now to render judgment in the foreclosure of
mortgage suit as no further issue of fact need be acted upon by the trial court. Defendant Paz
Tuason has admitted the amount of capital due. That is a fact. She only requests that interest be
granted up to October 20,1943, and that the moratorium law be applied. Whether this is possible or

61

not is a legal question, which can be decided by this court. Unnecessary loss of time and expenses
to the parties herein will be avoided by this Honorable Court by rendering judgment in the
foreclosure of mortgage suit as follows:
xxx

xxx

xxx

In reality, the judgment did not adjudicate the foreclosure of the mortgage nor did it fix the amount due on
the mortgage. The pronouncement that the mortgage was in full force and effect was a conclusion which the
mortgagor did not and does not now question. There was therefore virtually no decision that could be
executed.
Vidal himself moved in the Court of First Instance for amendment of the decision alleging, correctly, that "the
court failed to act on the cross-claim of Jose Vidal dated April 22, 1947, where he demanded foreclosure of
the mortgage . . . ." That motion like Paz Tuason's motion to complete the judgment, was summarily denied.
In strict accordance with the procedure, the case should have been remanded to the court of origin for
further proceedings in the form stated by Paz Tuason's counsel. Both the mortgagor and the mortgagee
agree on this. We did not follow the above course believing it best, in the interest of the parties themselves
and following Vidal's attorney's own suggestion, to decide the controversies between Vidal and Paz Tuason
upon the records and the briefs already submitted.
The three motions for reconsideration are denied.
Paras, C.J., Pablo, Bengzon, Padilla, Montemayor, Jugo, Bautista Angelo and Labrador, JJ., concur.

RESOLUTION

January 26, 1953


TUASON, J.:
In the second motion for reconsideration by defendant-appellee it is urged that the sale be resolved for
failure of plaintiff-appellant to pay the entire purchase price of the property sold.
Rescission of the contract, it is true, was alternative prayer in the cross-complaint, but the trial court declared
the sale void in accordance with the main contention of the defendant, and passed no judgment on the
matter of rescission. For this reason, and because rescission was not pressed on appeal, we deemed
unnecessary, if not uncalled for, any pronouncement touching this point.
In the second place, the nonpayment of a portion, albeit big portion, of the price was not, in our opinion,
such failure as would justify recission under Articles 1124 and 1505 et seq. of the Civil Code of Spain, which
was still in force when this case was tried. "The general rule is that recission will not be permitted for a slight
or casual breach of the contract, but only for such breaches as are so substantial and fundamental as to
defeat the object of the parties." (Song Fo & Co. vs. Hawaiian-Philippine Co., 47 Phil., 821, 827.)
In the present case, the vendee did not fail or refuse to pay by plan or design, granting there was failure or
refusal to pay. As a matter of fact, the portion of the purchase price which is said not to have been satisfied
until now was actually received by checks by the vendor and deposited by her with the court in the suit
against Vidal, in accordance with the understanding if not express agreement between vendor and vendee.
The question of who should bear the loss of this amount, the checks having been destroyed and the funds
against which they were drawn having become of no value, was one of the most bitterly debated issues, and
in adjudging the vendee to be the party to shoulder the said loss and ordering the said vendee to pay the
amount to the vendor, this Court's judgment was not, and was not intended to be, in the nature of an

62

extension of time of payment. In contemplation of the Civil Code there was no default, except possibly in
connection with the alleged overcharges by the vendee arising from honest mistakes of accounting,
mistakes which, by our decision, are to be corrected in a new trial thereby ordered.
The second motion for reconsideration is, therefore, denied.
Paras, C.J., Pablo, Bengzon, Padilla, Montemayor, Reyes, Jugo, Bautista Angelo and Labrador, JJ., concur.

Footnotes
1

Art. 1459. The following persons cannot take by purchase, even at a public or judicial auction,
either in person or through the mediation of another:
xxx
2

xxx

xxx

An agent, any property of which the management or sale may have been intrusted to him;
xxx

xxx

xxx

G.R. No. L-33794 May 31, 1982


MANILA ELECTRIC COMPANY, petitioner, vs. CA and PEDRO J. VELASCO, respondents.
MELENCIO-HERRERA, J.:
In this Petition for the review of a Decision of the Court of Appeals, 1 judgment may be rendered on the basis
of the following enumeration of facts:
1. On February 12, 1948, respondent Pedro J. Velasco (VELASCO, for short) purchased three (3) lots from
the People's Homesite and Housing Corporation (PHHC, for short), located at the corner of the then South D
and South 6 Streets of Quezon City.
2. The Deed of Sale, among others, provided that:
(b) The properties herein sold and any other construction that shall be made thereon shall be used
exclusively for residential purposes and no business, industry or factory of whatever kind or nature shall be
allowed or permitted within the premises.
xxx xxx xxx
(c) The vendor ... shall have the right to enter the premises ... for the purpose of ... installing electric ... lines
or any other utility for the community.
xxx xxx xxx
II. This sale is made under the following terms and conditions the violation of any of which shall entitle the
Vendor to rescind this contract and seek the cancellation of the title issued as a result hereof and to
repossess the property and dispose of the same as if there had been no previous sale thereof, and said
terms and conditions shall likewise be annotated on the certificate or title concerned and considered a
burden to the property.
xxx xxx xxx

63

III. The terms, burdens, conditions, limitations, incumbrances and restrictions herein contained shall be
binding upon the heirs, executors, administrators, successors and assigns of the respective parties hereto
and any reference to the Vendor or Vendee herein shall be understood to include their respective heirs,
executors, administrators, successors and assigns.
The foregoing conditions were substantially, but not word for word, annotated on the title issued to
VELASCO.
3. On January 31, 1952, VELASCO sold two of the aforesaid three lots (the PROPERTY, for short) to
petitioner Manila Electric Company (MERALCO, for short), which is the public service company furnishing
electric current to the Manila area, including Quezon City.
4. The following year, MERALCO established a substation within the PROPERTY, the construction of which
"was started in September, 1953 and was finished the following November". 2
5. On November 29, 1954, VELASCO wrote a letter to MERALCO stating, inter-alia:
In mild spirit, the time has come when the undersigned is compelled to call your attention to a previously
anticipated would-be effect of your electric sub-station, in order to avoid possible bad effects and
"repercussions and complications" which might be too late to remedy.
xxx xxx xxx
The undersigned with his family tried to tolerate for a while, but the severe noise without let up, plus the
electrification of the ground, especially that in which the artesian well of the undersigned is located, made life
of the whole family unbearable, in a residential district which, by your sub-station, was illegally converted
into dangerous factory-like site. (Exhibit "J")
6. The following year, on February 1, 1955, VELASCO filed a complaint in Civil Case No. Q-1355 of the
Court of First Instance of Rizal (the NUISANCE CASE, for short) praying that MERALCO be ordered "to
remove and abate the nuisances herein complained against," with damages. The trial Court dismissed the
complaint but, on appeal to this Court, the dismissal was set aside and, on August 6, 1971, MERALCO was
"ordered to either transfer its sub-station at South D and South 6 Streets, Diliman, Quezon City, or take
appropriate measures to reduce its noise at the property line between the defendant company's compound
and that of the plaintiff-appellant to an average of forty (40) to fifty 50 decibels within 90 days from finality of
this decision;" 3
7. In the meanwhile, on November 23, 1957, VELASCO had instituted a complaint in Civil Case No Q-2716
of the Court of First Instance of Rizal (the CANCELLATION CASE, for short) for the rescission of the sale of
the PROPERTY to MERALCO and to collect rentals for the use and occupation of the PROPERTY while in
the latter's possession. The complaint was dismissed by the trial Court on the ground that the NUISANCE
CASE and the CANCELLATION CASE had split VELASCO'S cause of action such that the CANCELLATION
CASE was precluded from being instituted. On appeal to the Court of Appeals, the judgment of the trial
Court was reversed on the finding that no cause of action was split, considering that abatement of nuisance
was distinct and separate from rescission of the contract of sale in favor of ME RALCO
Upon the recited facts, we have resolved to set aside the decision of the Appellate Tribunal, and to dismiss
the complaint in the CANCELLATION CASE. The factors relied upon are:
THE RIGHT OF ACTION.- The contract of sale between PHHC and VELASCO provided that only
constructions exclusively for "residential purposes" shall be built on the PROPERTY. That requirement,
naturally, was binding on VELASCO himself, as it is also binding on MERALCO as his assignee. Be that as
it may, that contract implies that it is PHHC itself which has the right of action against any assignee of
VELASCO. Cancellation of the title to the PROPERTY would be by virtue of the condition imposed in the
PHHC- VELASCO contract, and not by virtue of the contract between VELASCO and MERALCO.
The exact relevant wording of the contract between PHHC and VELASCO was as follows:

64

... the violation of any of which (inclusive of the "residential purposes" restriction) shall entitle the vendor
(PHHC) to rescind this contract and seek the cancellation of the title issued as a result hereof and to
repossess the property.
It will be seen that if the PROPERTY were used by VELASCO himself not for "residential purposes", PHHC
can rescind "this contract", which is the contract between PHHC and VELASCO, and PHHC can "seek the
cancellation of the title" issued as a result "of this contract". The PROPERTY' having been transferred to
MERALCO, PHHC cannot rescind the contract between VELASCO and MERALCO because PHHC was not
a party to that VELASCO-MERALCO contract. PHHC's redress would be to directly "seek cancellation of the
title" of MERALCO, and to repossess the PROPERTY.
Considering that redress for the use of the PROPERTY for non-residential purposes is the cancellation of
the title and repossession by PHHC, it should be clear that the right of action based on violation of the
restriction has to be with PHHC and not with VELASCO. If title to the PROPERTY is cancelled, and PHHC
repossesses, no damage will be suffered by VELASCO who had already sold and had received the value
thereof. The damage will be borne solely by MERALCO. Hence, it cannot be that VELASCO can have a
right of action against MERALCO for violation of the restriction.
RESIDENTIAL PURPOSES.As the Court understands it, PHHC's requirement in regards to "residential
purposes" has not been made particularly in reference to the three lots sold to VELASCO, but it relates to
the entirety of a bigger parcel of land subdivided for sale to the public by PHHC. the term "residential
purposes", therefore, should be given a meaning viewed from the standpoint of PHHC, and not from that of
VELASCO.
From the PHHC, or community, point of view, the construction of an electric sub-station by the local electric
public service company within the subdivision can be deemed encompassed within "residential purposes"
for the simple reason that residences are expected to be furnished with electrical connection. If there is no
electric current because of the lack of a sub- station, the residences within the entire subdivision area could
be valueless for residential purposes.
The need for public services in residential areas is even recognized in the PHHC Deed of Sale in favor of
VELASCO which provides that "the vendor ... shall have the right ... to enter the premises ... for the purpose
of ... installing water pipes, gas, electric and telephone lines or any other utility for the community where the
property herein involved is located"
It may further be pointed out that, in respect of Quezon City as a municipal corporation, the PROPERTY was
within a residential district. Notwithstanding, the authorities of Quezon City granted a permit for the
construction of the sub-station, thereby conceding that a sub-station is not necessarily non-residential.
CONTRACTUAL ESTOPPEL.- Even if the requirement for "residential purposes" were a condition imposed
by VELASCO himself in the contract of sale between VELASCO and MERALCO, the former can no longer
cancel the contract on the alleged violation of the condition. When MERALCO erected the sub-station in
September, 1953, VELASCO did not object to its construction as such. In his letter, Exhibit "M", dated
September 26, 1953, VELASCO merey asked for "technical assurance that your electric sub-station is not
dangerous to neighbors nor would that be a nuisance". It could not be that he did not then realize that the
sub-station was not a residence. He must have viewed it as for "residential purposes". According to Exhibit
"J", VELASCO's letter of September 29, 1954, or one year after the sub-station had been established, he
"with his family tried to tolerate (it) for a while". Actually, what was ultimately objected to by VELASCO was
the noise of the sub-station; but there was no original and timely objection to the establishment itself of the
sub-station as being not for residential purposes. If there had been no noise whatsoever from the substation, no controversy would have arisen.
Contracts should be given effect as the parties construe it. "Acts done by the parties to a contract in the
course of its performance are admissible in evidence upon the question of its meaning as being their own
contemporaneous interpretation of , its terms". 4 Thus, VELASCO should be held as estopped from seeking
cancellation of his sale of the PROPERTY to MERALCO because the sub-station, while it was built, was
considered by VELASCO as not violative of the requirement for "residential purposes". Estoppel against
VELASCO has set in.

65

COLLATERAL ESTOPPEL BY JUDGEMENT-MERALCO had pleaded before the trial Court that the filing of
the NUISANCE CASE "has barred the filing of the complaint in this" CANCELLATION CASE. The trial Judge
dismissed the Complaint on the ground that the NUISANCE CASE and the CANCELLATION CASE had split
a single cause of action and that the CANCELLATION CASE being the later proceeding was improperly
instituted. We agree with the Appellate Tribunal that there was no split of a single cause of action, because
the cause of action for abatement of nuisance is different from a cause of action for cancellation of contract.
However, it does not mean that a judicial proceeding cannot be barred by a previous case involving another
cause of action. The principle applicable would be estoppel by judgment or, more specifically, "collateral
estoppel by judgment". That procedural matter is treated in 46 Am Jur 2d. pp. 563-566 as follows: 5
Although there are some cases that confine the term "res judicata" to that aspect of the doctrine which
precludes the relitigation of the same cause of action the term, in its literal meaning of a "matter adjudged",
is broad enough to include, in addition, the other aspect of the doctrine, which precludes the relitigation of
the same facts or issues in a subsequent action on a different cause of action, and the term "res judicata" is,
indeed, so used in numerous cases. In this respect, it has been declared that if a party is barred from
relitigating a matter, it can make little difference to him by what name the lethal doctrine is called. On the
other hand, the confusion and looseness of thought resulting from the absence of distinctive terms to
describe each aspect of the doctrine has been well pointed out.
The term "estoppel" has frequently been used in connection with the doctrine of res judicata, not only
with respect to the relitigation of particular issues in a subsequent action on a different cause of action, but
also with respect to the relitigation of the same cause of action. In some cases, the term "estoppel by
judgment" has been used to described the effect of a judgment to preclude relitigation of the same cause of
action, and the phrase, "estoppel by verdict", to describe the effect of the former proceeding to preclude
further litigation of the particular facts on which the jury necessarily made findings in the former action. The
decisions have not, however, been uniform in this respect, and in some opinions the term 'estoppel by
judgment' has been used to describe the rule precluding the litigation of particular issues in a subsequent
action on a different cause of action. Sometimes, the term "estoppel by record" is so used. The more recent
tendency is to describe the latter aspect of the doctrine of res judicata as a "collateral estoppel" or a
"collateral estoppel by judgment", as distinguished from the "direct estoppel by judgment" where the earlier
and later causes of action are Identical. 6
More and more, the tendency of procedural law is to obviate multiplicity of suit such that if an issue has been
resolved in one cause of action, it cannot be relitigated in a subsequent case filed on a different cause of
action. In Hoag v. New Jersey, 2L Ed. 2d., 913-919, the following was said by the United States Supreme
Court:
A common statement of the rule of collateral estoppel is that "where a question of fact essential to the
judgment is actually litigated and determined by a valid and final judgment, the determination is conclusive
between the parties in a subsequent action on a different cause of action". Restatement, Judgments, #68(l).
As an aspect of the broader doctrine of res judicata, collateral estoppel is designed to eliminate the expense,
vexation, waste, and possible inconsistent results of duplicatory litigation. See Developments in the Law Res
Judicata, 65 Hary L Rev. 818, 820. (Emphasis supplied)
In a previous case, this Court has similarly stated:
The basis of the judgment was the stipulation of facts submitted by the parties and their agreement fixing the
liability of the defendant therein for rentals and the manner in which the same was to be paid by him. It was
a final judgment on the merits, and said judgment, under the express provisions of section 44, paragraph (b)
of Rule 39 of the Rules of Court, is conclusive between the parties, not only as to the question on which the
parties made stipulation but also as to any other possible issue which the parties could have raised in the
case. The fact that the defendant in that action, plaintiff-appellant in this, did not raise that issue in the
previous case is no reason for allowing him to raise the same issue in the action he has instituted to annul
the said judgment.The principle of res judicata applicable is what is known as estoppel by judgment and in
the language of Mr. Justice Field in the case of Cromwell vs. Sac Country, 94 U.S., 351, cited in Pealoza
vs. Tuason, 22 Phil., 303, It is a finality as to the claim or demand in controversy, concluding parties and
those in privity with them, not only as to every matter which was offered and received to sustain or defeat
the claim or demand, but as to any other admissible matter which might have been offered for that purpose.
7

66

When VELASCO instituted the NUISANCE CASE, he conceded, which he is now estopped to deny, that
MERALCO had the right to establish the sub-station within the PROPERTY without violation of the restriction
to "residential purposes". What he subsequently alleged, after the sub-station had become operative, was
that the sub-station, because of the generated noise, had become a nuisance which should be abated.
Although the propriety of the establishment of the sub-station was not a controverted matter in the
NUISANCE CASE, it was a tacit admission on the part of VELASCO, which can form part of an estoppel
within the NUISANCE CASE. It would not be good law to allow him now to take the position, even if he had
the right of action, that the construction of the sub-station violated the restriction provided for by PHHC. If the
present standpoint of VELASCO should be upheld, then the procedurally wrong result would be that, after
this Court had decided that the sub-station can remain within the PROPERTY with reduction of the noise,
the Appellate Tribunal, a subordinate tribunal, can subsequently nullify the decision of this Court and order
the removal of the sub-station from the PROPERTY.
WHEREFORE, considering the foregoing legal considerations, the Decision and Resolution of respondent
Court of Appeals in its CA-G.R. No. 30488-R are reversed, and the Complaint filed in the case at bar is
ordered dismissed.
Without costs.
SO ORDERED.
Teehankee (Chairman), Makasiar, Plana, Relova and Gutierrez, Jr., JJ., concur.
Vasquez, J., took no part.

Footnotes
1 Penned by Justice Magno S. Gatmaitan and concurred in by Justices Ruperto G. Martin
and Arsenio F. Solidum.
2 109 Phil. 603 (1960).
3 40 SCRA 342(1971).
4 Kriedt v. E.C. McCullough & Co., 37 Phil. 474 (1918).
5 Durfee v. Duke, 375 US 106, 11 L Ed 2d 186, 84 S Ct. 242; Hoag v. New Jersey, 356 US
464, 2 L Ed 2d 913, 78 S Ct 829, reh den 357 US 933, 2 L Ed 1375, 78 S Ct 1366;
Partmar Corp. vs. Paramount Pictures Theatres Corp. 347 US 89, 98 L Ed 532, 74 S Ct
414, reh den 347 US 931, 98 L Ed 1083, 74 S Ct 527; St. Lo Construction Co. vs.
Koenigsberger 84 App DC 319,174 F 2d 25, 10 ALR 2d 349, cert den 338 US 821, 94 L
Ed 498, 70 S Ct 66; United States v. Silliman CA3 NJ 1-67 F 2d 607, cert den 335 US
825, 93 L Ed. 379, 69 S Ct.48.
6 46 Am Jur 2d, pp. 563-566.
7 Miranda vs. Dominguez, 96 Phil. 2C 529-530(1955).

b. Inadequacy of Price/ Underpricing


Case:

67

G.R. No. L-36083 September 5, 1975


Spouses RAMON DOROMAL, SR., and ROSARIO SALAS, and Spouses RAMON DOROMAL, JR., and
GAUDELIA VEGA, petitioners,
vs.
HON. COURT OF APPEALS and FILOMENA JAVELLANA, respondents.
Salonga, Ordonez, Yap, Parlade and Associates and Marvin J. Mirasol for petitioners. Arturo H. Villanueva,
Jr. for private respondent.

BARREDO, J.:
Petition for review of the decision of the Court of Appeals in CA-G.R. No.
47945-R entitled Filomena Javellana vs. Spouses Ramon Doromal, Sr., et al. which reversed the decision of
the Court of First Instance of Iloilo that had in turn dismissed herein private respondent Filomena Javellana's
action for redemption of a certain property sold by her co-owners to herein petitioners for having been made
out of time.
The factual background found by the Court of Appeals and which is binding on this Court, the same not
being assailed by petitioners as being capricious, is as follows:
IT RESULTING: That the facts are quite simple; Lot 3504 of the cadastral survey of Iloilo, situated in the
poblacion of La Paz, one of its districts, with an area of a little more than 2- hectares was originally
decreed in the name of the late Justice Antonio Horilleno, in 1916, under Original Certificate of Title No.
1314, Exh. A; but before he died, on a date not particularized in the record, he executed a last will and
testament attesting to the fact that it was a co-ownership between himself and his brothers and sisters, Exh.
C; so that the truth was that the owners or better stated, the co-owners were; beside Justice Horilleno,
"Luis, Soledad, Fe, Rosita, Carlos and Esperanza,"
all surnamed Horilleno, and since Esperanza had already died, she was succeeded by her only daughter
and heir herein plaintiff. Filomena Javellana, in the proportion of 1/7 undivided ownership each; now then,
even though their right had not as yet been annotated in the title, the co-owners led by Carlos, and as to
deceased Justice Antonio Horilleno, his daughter Mary, sometime since early 1967, had wanted to sell their
shares, or if possible if Filomena Javellana were agreeable, to sell the entire property, and they hired an
acquaintance Cresencia Harder, to look for buyers, and the latter came to interest defendants, the father and
son, named Ramon Doromal, Sr. and Jr., and in preparation for the execution of the sale, since the brothers
and sisters Horilleno were scattered in various parts of the country, Carlos in Ilocos Sur, Mary in Baguio,
Soledad and Fe, in Mandaluyong, Rizal, and Rosita in Basilan City, they all executed various powers of
attorney in favor of their niece, Mary H. Jimenez Exh. 1-8, they also caused preparation of a power of
attorney of identical tenor for signature by plaintiff, Filomena Javellana, Exh. M, and sent it with a letter of
Carlos, Exh. 7 dated 18 January, 1968 unto her thru Mrs. Harder, and here, Carlos informed her that the
price was P4.00 a square meter, although it now turns out according to Exh. 3 that as early as 22
October, 1967, Carlos had received in check as earnest money from defendant Ramon Doromal, Jr., the
sum of P5,000.00 and the price therein agreed upon was five (P5.00) pesos a square meter as indeed in
another letter also of Carlos to Plaintiff in 5 November, 1967, Exh. 6, he had told her that the Doromals had
given the earnest money of P5,000.00 at P5.00 a square meter, at any rate, plaintiff not being agreeable,
did not sign the power of attorney, and the rest of the co-owners went ahead with their sale of their 6/7,
Carlos first seeing to it that the deed of sale by their common attorney in fact, Mary H. Jimenez be signed
and ratified as it was signed and ratified in Candon, Ilocos Sur, on 15 January, 1968, Exh. 2, then brought to
Iloilo by Carlos in the same month, and because the Register of Deeds of Iloilo refused to register right
away, since the original registered owner, Justice Antonio Horilleno was already dead, Carlos had to ask as
he did, hire Atty. Teotimo Arandela to file a petition within the cadastral case, on 26 February, 1968, for the
purpose, Exh. C, after which Carlos returned to Luzon, and after compliance with the requisites of
publication, hearing and notice, the petition was approved, and we now see that on 29 April, 1968, Carlos
already back in Iloilo went to the Register of Deeds and caused the registration of the order of the cadastral
court approving the issuance of a new title in the name of the co-owners, as well as of the deed of sale to

68

the Doromals, as a result of which on that same date, a new title was issued TCT No. 23152, in the name of
the Horillenos to 6/7 and plaintiff Filomena Javellana to 1/7, Exh. D, only to be cancelled on the same day
under TCT No. 23153, Exh. 2, already in the names of the vendees Doromals for 6/7 and to herein plaintiff,
Filomena Javellana, 1/7, and the next day 30 April, 1968, the Doromals paid unto Carlos by check, the sum
of P97,000.00 Exh. 1, of Chartered Bank which was later substituted by check of Phil. National Bank,
because there was no Chartered Bank Branch in Ilocos Sur, but besides this amount paid in check, the
Doromals according to their evidence still paid an additional amount in cash of P18,250.00 since the agreed
price was P5.00 a square meter; and thus was consummated the transaction, but it is here where
complications set in,
On 10 June, 1968, there came to the residence of the Doromals in Dumangas, Iloilo, plaintiff's lawyer, Atty.
Arturo H. Villanueva, bringing with him her letter of that date, reading,
"P.O. Box 189, Bacolod City
June 10, 1968
Mr. & Mrs. Ramon Doromal, Sr.
and Mr. and Mrs. Ramon Doromal, Jr.
"Dumangas Iloilo
Dear Mr. and Mrs. Doromal:
The bearer of this letter is my nephew, Atty. Arturo H. Villanueva, Jr., of this City. Through
him, I am making a formal offer to repurchase or redeem from you the 6/7 undivided share
in Lot No. 3504, of the Iloilo Cadastre, which you bought from my erstwhile co-owners, the
Horillenos, for the sum of P30,000.00, Atty. Villanueva has with him the sum of
P30,000.00 in cash, which he will deliver to you as soon as you execute the contract of
sale in my favor.
Thank you very much for whatever favorable consideration you can give this request.
Very truly yours,
(SIGNED)
Mrs. FILOMENA JAVELLANA"
p. 26, Exh. "J", Manual of Exhibits.
and then and there said lawyer manifested to the Doromals that he had the P30,000.00
with him in cash, and tendered it to them, for the exercise of the legal redemption, the
Doromals were aghast, and refused. and the very next day as has been said. 11 June,
1968, plaintiff filed this case, and in the trial, thru oral and documentary proofs sought to
show that as co-owner, she had the right to redeem at the price stated in the deed of sale,
Exh. 2, namely P30,000.00 of the but defendants in answer, and in their evidence, oral
and documentary sought to show that plaintiff had no more right to redeem and that if ever
she should have, that it should be at the true and real price by them paid, namely, the total
sum of P115,250.00, and trial judge, after hearing the evidence, believed defendants, that
plaintiff had no more right, to redeem, because,
"Plaintiff was informed of the intended sale of the 6/7 share belonging to the Horillenos."
and that,
"The plaintiff have every reason to be grateful to Atty. Carlos Horilleno because in the
petition for declaration of heirs of her late uncle Antonio Horilleno in whose name only the
Original Certificate of Title covering the Lot in question was issued, her uncle Atty. Carlos

69

Horilleno included her as one of the heirs of said Antonio Horilleno. Instead, she filed this
case to redeem the 6/7 share sold to the Doromals for the simple reason that the
consideration in the deed of sale is the sum of P30,000.00 only instead of P115,250.00
approximately which was actually paid by the defendants to her co-owners, thus she
wants to enrich herself at the expense of her own blood relatives who are her aunts,
uncles and cousins. The consideration of P30,000.00 only was placed in the deed of sale
to minimize the payment of the registration fees, stamps, and sales tax. pp. 77-78, R.A.,
and dismiss and further condemned plaintiff to pay attorney's fees, and moral and
exemplary damages as set forth in few pages back, it is because of this that plaintiff has
come here and contends, that Lower Court erred:
"I. ... in denying plaintiff-appellant, as a co-owner of Lot No. 3504, of the Iloilo Cadastre,
the right of legal redemption under Art. 1620, of the Civil Code:
"II. ... as a consequence of the above error, in refusing to order the defendants-appellees,
the vendees of a portion of the aforesaid Lot No. 3504 which they bought from the coowners of the plaintiff-appellant, to reconvey the portion they purchased to the herein
plaintiff-appellant..
"III. ... in admitting extrinsic evidence in the determination of the consideration of the sale,
instead of simply adhering to the purchase price of P30,000.00, set forth in the pertinent
Deed of Sale executed by the vendors and owners of the plaintiff-appellant in favor of the
defendants-appellees.
"IV. ... in dismissing the complaint filed in this case." pp. 1-3, Appellant's Brief,.
which can be reduced to the simple question of whether or not on tile basis of the
evidence and the law, the judgment appealed from should be maintained; (Pp. 16-22,
Record.) .
Upon these facts, the Court of Appeals reversed the trial court's decision and held that although respondent
Javellana was informed of her co-owners' proposal to sell the land in question to petitioners she was,
however, "never notified ... least of all, in writing", of the actual execution and registration of the
corresponding deed of sale, hence, said respondent's right to redeem had not yet expired at the time she
made her offer for that purpose thru her letter of June 10, 1968 delivered to petitioners on even date. The
intermediate court further held that the redemption price to be paid by respondent should be that stated in
the deed of sale which is P30,000 notwithstanding that the preponderance of the evidence proves that the
actual price paid by petitioners was P115,250. Thus, in their brief, petitioners assign the following alleged
errors:
I
IT IS ERROR FOR THE COURT OF APPEALS TO HOLD THAT THE NOTICE IN WRITING OF
THE SALE CONTEMPLATED IN ARTICLE 1623 OF THE CIVIL CODE REFERS TO A NOTICE IN
WRITING AFTER THE EXECUTION AND REGISTRATION OF THE INSTRUMENT OF SALE, HENCE, OF
THE DOCUMENT OF SALE.
II
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE INSCRIPTION OF THE SALE
IN THE REGISTRY OF PROPERTY TAKES EFFECT AS AGAINST THIRD PERSONS INCLUDING
CLAIMS OF POSSIBLE REDEMPTIONERS.
ASSUMING, ARGUENDO THAT PRIVATE RESPONDENT HAS THE RIGHT TO REDEEM, THE
COURT OF APPEALS ERRED IN HOLDING THAT THE REDEMPTION PRICE SHOULD BE THAT
STATED IN THE DEED OF SALE. (Pp. 1-2, Brief for Petitioner, page 74-Rec.)
We cannot agree with petitioners.

70

Petitioners do not question respondent's right to redeem, she being admittedly a 1/7 co-owner of the
property in dispute. The thrust of their first assignment of error is that for purposes of Article 1623 of the Civil
Code which provides that:
ART. 1623. The right of legal pre-emption or redemption shall not be exercised except within thirty
days from the notice in writing by the prospective vendor, or by the vendor, as the case may be. The deed of
sale shall not be recorded in the Registry of Property, unless accompanied by an affidavit of the vendor that
he has given written notice thereof to all possible redemptioners.
The right of redemption of co-owners excludes that of adjoining owners.
the letters sent by Carlos Horilleno to respondent and dated January 18, 1968, Exhibit 7, and November 5,
1967, Exhibit 6, constituted the required notice in writing from which the 30-day period fixed in said provision
should be computed. But to start with, there is no showing that said letters were in fact received by
respondent and when they were actually received. Besides, petitioners do not pinpoint which of these two
letters, their dates being more than two months apart, is the required notice. In any event, as found by the
appellate court, neither of said letters referred to a consummated sale. As may be observed, it was Carlos
Horilleno alone who signed them, and as of January 18, 1968, powers of attorney from the various coowners were still to be secured. Indeed, the later letter of January 18, 1968 mentioned that the price was
P4.00 per square meter whereas in the earlier letter of November 5, 1967 it was P5.00, as in fact, on that
basis, as early as October 27, 1967, Carlos had already received P5,000 from petitioners supposedly as
earnest money, of which, however, mention was made by him to his niece only in the later letter of January
18, 1968, the explanation being that "at later negotiation it was increased to P5.00 per square meter." (p. 4
of petitioners' brief as appellees in the Court of Appeals quoting from the decision of the trial court.) In other
words, while the letters relied upon by petitioners could convey the idea that more or less some kind of
consensus had been arrived at among the other co-owners to sell the property in dispute to petitioners, it
cannot be said definitely that such a sale had even been actually perfected. The fact alone that in the later
letter of January 18, 1968 the price indicated was P4.00 per square meter while in that of November 5,
1967, what was stated was P5.00 per square meter negatives the possibility that a "price definite" had
already been agreed upon. While P5,000 might have indeed been paid to Carlos in October, 1967, there is
nothing to show that the same was in the concept of the earnest money contemplated in Article 1482 of the
Civil Code, invoked by petitioner, as signifying perfection of the sale. Viewed in the backdrop of the factual
milieu thereof extant in the record, We are more inclined to believe that the said P5,000 were paid in the
concept of earnest money as the term was understood under the Old Civil Code, that is, as a guarantee that
the buyer would not back out, considering that it is not clear that there was already a definite agreement as
to the price then and that petitioners were decided to buy 6/7 only of the property should respondent
Javellana refuse to agree to part with her 1/7 share.
In the light of these considerations, it cannot be said that the Court of Appeals erred in holding that the
letters aforementioned sufficed to comply with the requirement of notice of a sale by co-owners under Article
1623 of the Civil Code. We are of the considered opinion and so hold that for purposes of the co-owner's
right of redemption granted by Article 1620 of the Civil Code, the notice in writing which Article 1623 requires
to be made to the other co-owners and from receipt of which the 30-day period to redeem should be counted
is a notice not only of a perfected sale but of the actual execution and delivery of the deed of sale. This is
implied from the latter portion of Article 1623 which requires that before a register of deeds can record a sale
by a co-owner, there must be presented to him, an affidavit to the effect that the notice of the sale had been
sent in writing to the other co-owners. A sale may not be presented to the register of deeds for registration
unless it be in the form of a duly executed public instrument. Moreover, the law prefers that all the terms and
conditions of the sale should be definite and in writing. As aptly observed by Justice Gatmaitan in the
decision under review, Article 1619 of the Civil Code bestows unto a co-owner the right to redeem and "to be
subrogated under the same terms and conditions stipulated in the contract", and to avoid any controversy as
to the terms and conditions under which the right to redeem may be exercised, it is best that the period
therefor should not be deemed to have commenced unless the notice of the disposition is made after the
formal deed of disposal has been duly executed. And it being beyond dispute that respondent herein has
never been notified in writing of the execution of the deed of sale by which petitioners acquired the subject
property, it necessarily follows that her tender to redeem the same made on June 10, 1968 was well within
the period prescribed by law. Indeed, it is immaterial when she might have actually come to know about said
deed, it appearing she has never been shown a copy thereof through a written communication by either any
of the petitioners-purchasers or any of her co-owners-vendees. (Cornejo et al. vs. CA et al., 16 SCRA 775.)

71

The only other pivotal issue raised by petitioners relates to the price which respondent offered for the
redemption in question. In this connection, from the decision of the Court of Appeals, We gather that there is
"decisive preponderance of evidence" establishing "that the price paid by defendants was not that stated in
the document, Exhibit 2, of P30,000 but much more, at least P97,000, according to the check, Exhibit 1, if
not a total of P115,250.00 because another amount in cash of P18,250 was paid afterwards."
It is, therefore, the contention of petitioners here that considering said finding of fact of the intermediate
court, it erred in holding nevertheless that "the redemption price should be that stated in the deed of sale."
Again, petitioners' contention cannot be sustained. As stated in the decision under review, the trial court
found that "the consideration of P30,000 only was placed in the deed of sale to minimize the payment of the
registration fees, stamps and sales tax." With this undisputed fact in mind, it is impossible for the Supreme
Court to sanction petitioners' pragmatic but immoral posture. Being patently violative of public policy and
injurious to public interest, the seemingly wide practice of understating considerations of transactions for the
purpose of evading taxes and fees due to the government must be condemned and all parties guilty thereof
must be made to suffer the consequences of their ill-advised agreement to defraud the state. Verily, the trial
court fell short of its devotion and loyalty to the Republic in officially giving its stamp of approval to the stand
of petitioners and even berating respondent Javellana as wanting to enrich herself "at the expense of her
own blood relatives who are her aunts, uncles and cousins." On the contrary, said "blood relatives" should
have been sternly told, as We here hold, that they are in pari-delicto with petitioners in committing tax
evasion and should not receive any consideration from any court in respect to the money paid for the sale in
dispute. Their situation is similar to that of parties to an illegal contract. 1
Of course, the Court of Appeals was also eminently correct in its considerations supporting the conclusion
that the redemption in controversy should be only for the price stipulated in the deed, regardless of what
might have been actually paid by petitioners that style inimitable and all his own, Justice Gatmaitan states
those considerations thus:
CONSIDERING: As to this that the evidence has established with decisive preponderance that the price
paid by defendants was not that stated in the document, Exh. 2 of P30,000.00 but much more, at least
P97,000.00 according to the check, Exh. 1 if not a total of P115,250.00 because another amount in cash of
P18,250.00 was paid afterwards, perhaps it would be neither correct nor just that plaintiff should be
permitted to redeem at only P30,000.00, that at first glance would practically enrich her by the difference, on
the other hand, after some reflection, this Court can not but have to bear in mind certain definite points.
1st According to Art. 1619
"Legal redemption is the right to be subrogated, upon the same terms and conditions stipulated in the
contract, in the place of one who acquires a thing by purchase or dation in payment, or by any other
transaction whereby ownership is transmitted by onerous title." pp. 471-472, New Civil Code,
and note that redemptioner right is to be subrogated
"upon the same terms and conditions stipulated in the contract."
and here, the stipulation in the public evidence of the contract, made public by both vendors and vendees
is that the price was P30,000.00;
2nd According to Art. 1620,
"A co-owner of a thing may exercise the right of redemption in case the share of all the other co-owners or
any of them, are sold to a third person. If the price of the alienation is grossly excessive, the redemptioner
shall pay only a reasonable one. p. 472, New Civil Code, .
from which it is seen that if the price paid is 'grossly excessive' redemptioner is required to pay only a
reasonable one; not that actually paid by the vendee, going to show that the law seeks to protect
redemptioner and converts his position into one not that of a contractually but of a legally subrogated

72

creditor as to the right of redemption, if the price is not 'grossly excessive', what the law had intended
redemptioner to pay can be read in Art. 1623.
The right of a legal pre-emption or redemption shall not be exercised except within thirty (30) days from
the notice in writing by the prospective vendor, or by the vendor as the case may be. The deed of sale shall
not be recorded in the Registry of Property, unless accompanied by an affidavit of the vendor that he has
given written notice thereof of all possible redemptioners.' p. 473, New Civil Code,
if that be so that affidavit must have been intended by the lawmakers for a definite purpose, to argue that
this affidavit has no purpose is to go against all canons of statutory construction, no law mandatory in
character and worse, prohibitive should be understood to have no purpose at all, that would be an absurdity,
that purpose could not but have been to give a clear and unmistakable guide to redemptioner, on how much
he should pay and when he should redeem; from this must follow that that notice must have been intended
to state the truth and if vendor and vendee should have instead, decided to state an untruth therein, it is they
who should bear the consequences of having thereby misled the redemptioner who had the right to rely and
act thereon and on nothing else; stated otherwise, all the elements of equitable estoppel are here since the
requirement of the law is to submit the affidavit of notice to all possible redemptioners, that affidavit to be a
condition precedent to registration of the sale therefore, the law must have intended that it be by the parties
understood that they were there asking a solemn representation to all possible redemptioners, who upon
faith of that are thus induced to act, and here worse for the parties to the sale, they sought to avoid
compliance with the law and certainly refusal to comply cannot be rewarded with exception and acceptance
of the plea that they cannot be now estopped by their own representation, and this Court notes that in the
trial and to this appeal, plaintiff earnestly insisted and insists on their estoppel;
3rd If therefore, here vendors had only attempted to comply with the law, they would have been
obligated to send a copy of the deed of sale unto Filomena Javellana and from that copy, Filomena would
have been notified that she should if she had wanted to redeem, offered no more, no less, that P30,000.00,
within 30 days, it would have been impossible for vendors and vendees to have inserted in the affidavit that
the price was truly P97,000.00 plus P18,250.00 or a total of P115,250.00; in other words, if defendants had
only complied with the law, they would have been obligated to accept the redemption money of only
P30,000.00;
4th If it be argued that foregoing solution would mean unjust enrichment for plaintiff, it need only be
remembered that plaintiff's right is not contractual, but a mere legal one, the exercise of a right granted by
the law, and the law is definite that she can subrogate herself in place of the buyer,
"upon the same terms and conditions stipulated in the contract,"
in the words of Art. 1619, and here the price
"stipulated in the contract"
was P30,000.00, in other words, if this be possible enrichment on the part of Filomena, it was not unjust
but just enrichment because permitted by the law; if it still be argued that plaintiff would thus be enabled to
abuse her right, the answer simply is that what she is seeking to enforce is not an abuse but a mere
exercise of a right; if it be stated that just the same, the effect of sustaining plaintiff would be to promote not
justice but injustice, the answer again simply is that this solution is not unjust because it only binds the
parties to make good their solemn representation to possible redemptioners on the price of the sale, to what
they had solemnly averred in a public document required by the law to be the only basis for that exercise of
redemption; (Pp. 24-27, Record.)
WHEREFORE, the decision of the Court of Appeals is affirmed, with costs against petitioners..
Fernando, Makasiar, Esguerra, Aquino and Martin, JJ., concur.
Makalintal, CJ., took no part.
Muoz Palma, J., took no part.

73

Antonio and Concepcion Jr., JJ., are on leave.

Separate Opinions

TEEHANKEE, J., concurring:


The legal (and moral) right of private respondent Filomena Javellana as (1/7) pro-indiviso co-owner to
exercise the right granted her by the Civil Code of legal redemption of the pro-indiviso 6/7 share of the
property which was sold by her erstwhile co-owners to the Doromals as interested third persons for the
stipulated contractual price of P30,000.00 is unassailable.
It is admitted in the record (from the Doromals' own evidence and the trial court's factual findings) that the
Doromals (buyers) and the co-owners (sellers) had criminally understated and falsified the contractual price
in the deed of sale as registered with the Register of Deeds to be P30,000.00 instead of P115,250.00 as
"actually paid" by the Doromals, admittedly for the illegal and criminal purpose "to minimize the payment of
the registration fees, stamps and sales tax. 1 (It may be added that such gross understatement of the actual
price was resorted to obviously to minimize the resultant tax liability of the co-owners for income tax or
capital gains from the sale of the property as well as to minimize, if not conceal, the sources and assets of
the Doromals as buyers and make it falsely appear that their capital outlay for the purchase was only onefourth () of the actual price which is a device notoriously availed of by tax evaders to willfully and
criminally evade the payment of taxes justly due to the government).
This criminal and illegal conduct in no way entitles the Doromals to claim callously as against respondent
redemptioner who is merely exercising her legal right of redemption "to be subrogated, upon the same terms
and conditions stipulated in the contract, in the place of the Doromals as third-person buyers [Articles 1619
and 1620, Civil Code] that she may only redeem the property from them by paying the larger amount of
P115,250.00 that they had actually paid the co-owners for their 6/7 share of the property. Such criminal-tax
evasion can in no way be abated if the courts and the law would yet pay heed to the plea of the tax evaders
that they had falsely understated the contract price and that the courts should order the redemptioner to pay
them not the contract price but the larger amount they had actually paid but illegally understated in
order to evade the taxes justly due to the Government. A party to an illegal contract cannot come to court
and ask it to help carry out his illegal objects. 2
For the tax evaders to invoke in court their very act of tax evasion and to ask the courts to sanction the same
by declaring that the understated stipulated price was only for purposes of tax evasion but that for the
exercise of the legal right of redemption, respondent must be ordered by the courts to pay them the larger
amount they had actually paid but falsely understated in the deed would be to put a premium on criminal
conduct and frank cynicism in gross derogation of the law, morals, good customs and public policy.
When the Doromals falsely understated the contractual price of their purchase from respondent's co-owners,
they did so at their own risk and with full knowledge of respondent's right to redeem the property for the
price stated in the contract.
By virtue of the rule of in pari delicto, they cannot even seek recourse against the co-owners to refund to
them the difference between the redemption price (of P30,000.00) and the much larger amount (of
P115,250.00) that they actually paid the co-owners.
If, say, there were no question of redemption but that they had a valid cause for rescission of their purchase
and brought suit therefor, (so that the case were strictly one between the Doromals and their sellers), the
courts would order the return of only the price as officially stated in the deed and not the larger amount (of
P115,250.00) that they had actually paid (but understated for tax evasion purposes) since the law will not
aid either party in pari delicto but will leave the parties where it finds them, or more accurately where they
have placed themselves. Manifestly the law will not aid the Doromals as against respondent-redemptioner
who had no part in their illegal and criminal conduct.

74

Finally, if such notorious tax evasion is to be effectively curbed, and the facts of record in the case at bar are
duly established in the appropriate proceedings, the Doromals and the co-owners-sellers should be
criminally charged for falsification of public documents besides being held liable by the proper authorities for
the full amount of taxes, income and capital gains, documentary stamps, registration fees, etc., that they had
admittedly willfully evaded by the false understatement of the real and actual price in the deed of sale
executed between them.
Separate Opinions
TEEHANKEE, J., concurring:
The legal (and moral) right of private respondent Filomena Javellana as (1/7) pro-indiviso co-owner to
exercise the right granted her by the Civil Code of legal redemption of the pro-indiviso 6/7 share of the
property which was sold by her erstwhile co-owners to the Doromals as interested third persons for the
stipulated contractual price of P30,000.00 is unassailable.
It is admitted in the record (from the Doromals' own evidence and the trial court's factual findings) that the
Doromals (buyers) and the co-owners (sellers) had criminally understated and falsified the contractual price
in the deed of sale as registered with the Register of Deeds to be P30,000.00 instead of P115,250.00 as
"actually paid" by the Doromals, admittedly for the illegal and criminal purpose "to minimize the payment of
the registration fees, stamps and sales tax. 1 (It may be added that such gross understatement of the actual
price was resorted to obviously to minimize the resultant tax liability of the co-owners for income tax or
capital gains from the sale of the property as well as to minimize, if not conceal, the sources and assets of
the Doromals as buyers and make it falsely appear that their capital outlay for the purchase was only onefourth () of the actual price which is a device notoriously availed of by tax evaders to willfully and
criminally evade the payment of taxes justly due to the government).
This criminal and illegal conduct in no way entitles the Doromals to claim callously as against respondent
redemptioner who is merely exercising her legal right of redemption "to be subrogated, upon the same terms
and conditions stipulated in the contract, in the place of the Doromals as third-person buyers [Articles 1619
and 1620, Civil Code] that she may only redeem the property from them by paying the larger amount of
P115,250.00 that they had actually paid the co-owners for their 6/7 share of the property. Such criminal-tax
evasion can in no way be abated if the courts and the law would yet pay heed to the plea of the tax evaders
that they had falsely understated the contract price and that the courts should order the redemptioner to pay
them not the contract price but the larger amount they had actually paid but illegally understated in
order to evade the taxes justly due to the Government. A party to an illegal contract cannot come to court
and ask it to help carry out his illegal objects. 2
For the tax evaders to invoke in court their very act of tax evasion and to ask the courts to sanction the same
by declaring that the understated stipulated price was only for purposes of tax evasion but that for the
exercise of the legal right of redemption, respondent must be ordered by the courts to pay them the larger
amount they had actually paid but falsely understated in the deed would be to put a premium on criminal
conduct and frank cynicism in gross derogation of the law, morals, good customs and public policy.
When the Doromals falsely understated the contractual price of their purchase from respondent's co-owners,
they did so at their own risk and with full knowledge of respondent's right to redeem the property for the
price stated in the contract.
By virtue of the rule of in pari delicto, they cannot even seek recourse against the co-owners to refund to
them the difference between the redemption price (of P30,000.00) and the much larger amount (of
P115,250.00) that they actually paid the co-owners.
If, say, there were no question of redemption but that they had a valid cause for rescission of their purchase
and brought suit therefor, (so that the case were strictly one between the Doromals and their sellers), the
courts would order the return of only the price as officially stated in the deed and not the larger amount (of
P115,250.00) that they had actually paid (but understated for tax evasion purposes) since the law will not
aid either party in pari delicto but will leave the parties where it finds them, or more accurately where they
have placed themselves. Manifestly the law will not aid the Doromals as against respondent-redemptioner
who had no part in their illegal and criminal conduct.

75

Finally, if such notorious tax evasion is to be effectively curbed, and the facts of record in the case at bar are
duly established in the appropriate proceedings, the Doromals and the co-owners-sellers should be
criminally charged for falsification of public documents besides being held liable by the proper authorities for
the full amount of taxes, income and capital gains, documentary stamps, registration fees, etc., that they had
admittedly willfully evaded by the false understatement of the real and actual price in the deed of sale
executed between them.
Footnotes
1 See Rodriguez, 20 SCRA 908, 917; Bough and Bough vs. Cantiveros and Hanopol, 40
Phil. 209.
TEEHANKEE, concurring:
1 Decision of the CFI, Rec. on Appeal, pp. 77-78.
2 Ex dolo malo non oritur action and in pari delicto potior est condition defendentis.
c. Effect on improvements
Case:
G.R. No. L-11284

October 13, 1917

SIMEON BLAS, plaintiff-appellant,


vs.
VICENTE DE LA CRUZ and MARIANO MELENDRES, as sheriff of Rizal, defendants-appellees.
J. Bernales for appellants.
No appearance for appellees.
JOHNSON, J.:
The purpose of the present action was to obtain an injunction against the defendants to prevent them
from destroying certain buildings and improvements upon a certain piece or parcel of land particular
described in paragraph 2 of the complaint. The present action had it original in the following facts:
That sometime prior to the commencement of the present action (March 20, 1911) an action was
commenced in the Court of Land Registration by the defendant Vicente de la Cruz for the registration under
the torrens system of several pieces or parcels of land particularly described in paragraph 1 of that
complaint; that to the registration of said parcel of land the present plaintiff, Simeon Blas, on the 14th day of
June, 1912, presented his opposition, alleging that he was the owner of a portion of the lands described in
the petition of the plaintiff; that a hearing was had in the Court of Land registration; that portion of the land
claimed by Simeon Blas was excluded from the lands included in the petition of the plaintiff Vicente de la
Cruz; that from that decision Vicente de la Cruz appealed to the Supreme Court where, after due hearing
and consideration, the decision of the lower court was modified on the 16th day of March, 1915, 1 and that
portion which was claimed by Simeon Blas was ordered to be registered in the name of Vicente de la Cruz;
that a final judgment was rendered in the cause and the case was returned to the lower court upon the 19
day of April, 1915; that the land involved in the present action is the same land which was brought into
question in the decision of the Supreme Court above referred to.
To the petition of the plaintiff in the present action the defendants demurred. Upon a consideration of
the demurrer the Honorable Jose C. Abreu, judge, sustained the demurrer and dissolved the temporary
injunction theretofore granted and gave the plaintiff an opportunity to amend his petition. Instead of
amending his petition he excepted to the order of the lower court sustaining the demurrer and appealed to
this court.

76

Without discussing the assignments of error in detail, and after an examination of the arguments
presented by the appellants in support of the same, we find that the following question is presented for
solution; Does the decree ordering the registration of land under the Torrens system include the buildings
and improvements thereon when they have not been expressly excluded in said decree? In other words, A
presents a petition for the registration of a part of said parcel. This opposition is overruled and all of the
parcel of land is decreed to be registered in the name of A. May B thereafter, not having made any claim to
said improvements during the proceedings for the registration, claim said building and improvements as his
property and remove the same or prevent the owner of the land under said decree from removing or
destroying the same?
The general purpose of the Torrens system is to forever foreclose litigation concerning the title to land.
Every decree of registration shall bind the land, and quiet title thereto, subject only to the exceptions stated
by the law. The decree of registration shall be conclusive upon and against all persons, unless fraud is
proved within a period of one year after said decree is rendered (section 38 of Act No. 496).
Section 39 of said Act (No. 496), as amended by Act No. 2011, makes certain exceptions to the rule
just stated. Section 39, as amended, provides that, "every applicant receiving a certificate of title in
pursuance of a decree of registration . . . shall hold the same free of all incumbrance except those noted on
said certificate, and any of the following incumbrances which may be subsisting, namely:
First. Liens, claims, or rights arising or existing under the laws or Constitution of the United States
or of the Philippines Islands which the statutes of the Philippine Islands can not require to appear of
record in the registry.
Second. Taxes within two years after the same have become due and payable.
Third. Any public highway, way, private way established by law, or any Government irrigation canal
or lateral therefor, where the certificate of title does not state that the boundaries of such highway,
way, or irrigation canal or lateral thereof, have been determined. 1awphil.net
But if there are easements or other rights appurtenant to a parcel of registered land which for
any reason have failed to be registered, such easements or rights shall remain so appurtenant
notwithstanding such failure, and shall be held to pass with the land until cut off or extinguished by
the registration of the servient estate, or in any other manner.
Does the claim of the plaintiff come within any of the exceptions mentioned in said section 39?
Certainly the contention of the appellant does not come within the provisions of the second and third
exceptions quoted above in said section 39. Neither is there any claim made that his right arises or exists
under the laws of the Constitution of the United States. If his claim falls under any of the provisions of said
section 39 it must be that part of the same which provides for "liens, claims or rights arising or existing under
the laws of the Philippine Islands which the statutes of the Philippine Islands cannot require to appear of
record in the registry." The appellant urges that such claims are provided for under article 453 of the Civil
Code. Said article 453 guarantees to the possessor of real estate, when it is proved that he has occupied
the same in good faith, the benefits of the improvements which he made thereon during his occupation.
Does said article permit the objector, in an action for the registration of the land occupied by him, when he
has failed to make a claim to the improvement during the litigation, to claim said improvements after a
certificate of registration is issued, without his having raised that question during the litigation? If the objector
may, during the pendency of the litigation for the registration of the land, remain silent as to certain rights,
interests or claims existing in or upon the land, and then later, by a separate action, have such interest
litigated, then the purpose of the Torrens system, to wit, to forever foreclose litigation with reference to the
title to said land, will be defeated.
Without attempting at this time to define the character of the "liens, claims, or rights arising or existing
under the laws of the Philippine Islands which the statutes of the Philippine Islands cannot require to appear
of record in the registry Islands cannot require to appear of record in the registry," we are of the opinion that
buildings and improvements upon land are not included in that exception, and that, unless the objector,
during the pendency of the litigation for the registration of land makes claims to improvements of the
character of those in the present action, and does have them excluded from the decree of registration, they
will be included as a part and parcel and appurtenances to the land; and that the objector will not be

77

permitted, in a separate action subsequently brought, to question the right of such improvements. If he may,
then the certificate of registration does not guarantee to the owner of the land the quiet and peaceable
enjoyment of his title which the Torrens system was adopted to secure.
For the foregoing reasons, we are of the opinion and so hold that, inasmuch as the plaintiff herein did
not, during the pendency of the litigation for the registration of the lands in question, have excluded
therefrom and have noted upon the certificate of title his alleged rights and interests in the improvements
mentioned herein and noted upon the certificate of title issued, he thereby lost his right to such
improvements; and therefore, the judgment of the lower court is hereby affirmed. And it is hereby ordered
and decreed that a judgment in accordance herein be entered and that the cause be remanded to the lower
court, with instruction to enter a final judgment in accordance with this decree, unless the plaintiff within a
period of five days from the receipt of the notice of the same amend his original petition. It is so ordered with
costs.
Arellano, C.J., Carson, Araullo, Street and Malcolm, JJ., concur.

Footnotes
1 R. G. No. 9655, not reported.

78