SPOUSES MARIO ONG AND MARIA CARMELITA ONG and DEMETRIO

VERZANO v. SPOUSES ERGELIA OLASIMAN and LEONARDO OLASIMAN

485 SCRA 464 (2006)

The issue of good faith or bad faith of the buyer is relevant only where the subject of the sale is
registered land and the purchaser is buying the same from the registered owner whose title to the land
is clean in such case the purchaser who relies on the clean title of the registered owner is protected if
he is a purchaser in good faith for value.

Paula Verzano sold an unregistered parcel of land covered by Tax Declaration No. 18-270-A 1 in her
name to her niece Bernandita Verzano-Matugas (Bernandita). Bernandita subsequently sold the same
to Spouses Ergelia nd Leonardo Olasiman. Paula thereafter died without an issue and was survived by
her sibling Demetrio Verzano, Victoria Verzano, and the children of her deceased brother Isebero
Verzano, namely Isebero Verzano, Jr. Epifanio Verzano, Bernandita and Estrella Verzano.

Demetrio executed a document entitled ―Extrajudicial Settlement by Sole Heir and Sale‖ where he
adjudicated to himself the subject property. He likewise sold the same to Spouses Carmelita Ong and
Mario Ong.

Spouses Olasiman filed a Complaint against Spouses Ong and Demetrio for annulment of the
―Extrajudicial Settlement by Sole Heir and Sale,‖ quiet of title and damages before the Regional Trial
Court of Dumaguete City. The Regional Trial Court dismissed the complaint. On appeal, the Court of
Appeals reversed the dismissal and ruled that the ―Extrajudicial Settlement by Sole Heir and Sale‖ as
null and void. Consequently, it likewise declared that the sale in favor of Spouses Ong is null and void.

ISSUE: Whether or not the ownership over the parcel of land, by virtue of the ―Extrajudicial
Settlement by Sole Heir and Sale‖, is transferred to Spouses Ong

HELD: When Paula sold to Bernandita by Deed of Absolute Sale dated June 1, 1992 the
parcel of land of which the questioned lot formed part, ownership thereof was transferred to the latter
in accordance with Article 1496 of the Civil Code which provides 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.

The Deed of Absolute Sale in favor of Bernandita contains nothing contrary to an intent to transfer
ownership.

When Paula died on November 26, 1992, she no longer owned the questioned lot and, therefore, her
brother Demetrio could not have inherited it. The ―Extrajudicial Settlement by Sole Heir and Sale‖ did
not thus confer upon Demetrio ownership of the questioned lot; hence, he could not have conveyed it
to Spouses Ong.

The issue of good faith or bad faith of the buyer is relevant only where the subject of the sale is registered
land and the purchaser is buying the same from the registered owner whose title to the land is clean in
such case the purchaser who relies on the clean title of the registered owner is protected if he is a
purchaser in good faith for value. Since the properties in question are unregistered lands, Spouses Ong
as subsequent buyers thereof did so at their peril. Their claim of having bought the land in good faith,
i.e., without notice that some other person has a right to or interest in the property, would not protect
them if it turns out, as it actually did in this case, that their seller did not own the property at the time
of the sale.
G.R. NO. 124242, January 21, 2005
SAN LORENZO DEVELOPMENT CORPORATION VS. CA

FACTS:

On 20 August 1986, the Spouses Lu purportedly sold the two parcels of land to
respondent Pablo Babasanta. The latter made a downpayment of fifty thousand pesos
(P50,000.00) as evidenced by a memorandum receipt issued by Pacita Lu of the same date.
Several other payments totaling two hundred thousand pesos (P200,000.00) were made by
Babasanta. He demanded the execution of a Final Deed of Sale in his favor so he may effect
full payment of the purchase price; however, the spouses declined to push through with the
sale. They claimed that when he requested for a discount and they refused, he rescinded the
agreement. Thus, Babasanta filed a case for Specific Performance.
On the other hand, San Lorenzo Development Corporation (SLDC) alleged that on 3
May 1989, the two parcels of land involved, namely Lot 1764-A and 1764-B, had been sold to
it in a Deed of Absolute Sale with Mortgage. It alleged that it was a buyer in good faith and for
value and therefore it had a better right over the property in litigation.

ISSUE:

Who between SLDC and Babasanta has a better right over the two parcels of land?

RULING:

An analysis of the facts obtaining in this case, as well as the evidence presented by
the parties, irresistibly leads to the conclusion that the agreement between Babasanta and the
Spouses Lu is a contract to sell and not a contract of sale.
The receipt signed by Pacita Lu merely states that she accepted the sum of fifty
thousand pesos (P50,000.00) from Babasanta as partial payment of 3.6 hectares of farm lot.
While there is no stipulation that the seller reserves the ownership of the property until full
payment of the price which is a distinguishing feature of a contract to sell, the subsequent acts
of the parties convince us that the Spouses Lu never intended to transfer ownership to
Babasanta except upon full payment of the purchase price.
Babasanta’s letter dated 22 May 1989 was quite telling. He stated therein that despite
his repeated requests for the execution of the final deed of sale in his favor so that he could
effect full payment of the price, Pacita Lu allegedly refused to do so. In effect, Babasanta
himself recognized that ownership of the property would not be transferred to him until such
time as he shall have effected full payment of the price. Doubtlessly, the receipt signed by
Pacita Lu should legally be considered as a perfected contract to sell.
The perfected contract to sell imposed upon Babasanta the obligation to pay the
balance of the purchase price. There being an obligation to pay the price, Babasanta should
have made the proper tender of payment and consignation of the price in court as required by
law. Glaringly absent from the records is any indication that Babasanta even attempted to
make the proper consignation of the amounts due, thus, the obligation on the part of the sellers
to convey title never acquired obligatory force.
There was no double sale in this case because the contract in favor of Babasanta was
a mere contract to sell; hence, Art. 1544 is not applicable. There was neither actual nor
constructive delivery as his title is based on a mere receipt. Based on this alone, the right of
SLDC must be preferred.
Abarquez v. Court of Appeals,46 this Court had the occasion to rule that if a vendee in a
double sale registers the sale after he has acquired knowledge of a previous sale, the
registration constitutes a registration in bad faith and does not confer upon him any right. If
the registration is done in bad faith, it is as if there is no registration at all, and the buyer who
has taken possession first of the property in good faith shall be preferred.

In Abarquez, the first sale to the spouses Israel was notarized and registered only after the
second vendee, Abarquez, registered their deed of sale with the Registry of Deeds, but the
Israels were first in possession. This Court awarded the property to the Israels because
registration of the property by Abarquez lacked the element of good faith. While the facts in
the instant case substantially differ from that in Abarquez, we would not hesitate to rule in
favor of SLDC on the basis of its prior possession of the property in good faith. Be it noted
that delivery of the property to SLDC was immediately effected after the execution of the
deed in its favor, at which time SLDC had no knowledge at all of the prior transaction by the
Spouses Lu in favor of Babasanta.1a\^/phi1.net

The law speaks not only of one criterion. The first criterion is priority of entry in the registry of
property; there being no priority of such entry, the second is priority of possession; and, in
the absence of the two priorities, the third priority is of the date of title, with good faith as the
common critical element. Since SLDC acquired possession of the property in good faith in
contrast to Babasanta, who neither registered nor possessed the property at any time,
SLDC’s right is definitely superior to that of Babasanta’s.

At any rate, the above discussion on the rules on double sale would be purely academic for
as earlier stated in this decision, the contract between Babasanta and the Spouses Lu is not
a contract of sale but merely a contract to sell. In Dichoso v. Roxas,47 we had the occasion
to rule that Article 1544 does not apply to a case where there was a sale to one party of the
land itself while the other contract was a mere promise to sell the land or at most an actual
assignment of the right to repurchase the same land. Accordingly, there was no double sale
of the same land in that case.
VIRGILIO R. ROMERO vs. HON. COURT OF APPEALS and ENRIQUETA
CHUA VDA. DE ONGSIONG G.R. No. 107207 November 23, 1995
Facts: Petitioner Virgilio R. Romero, a civil engineer, was engaged in the business of production, manufacture
and exportation of perlite filter aids, permalite insulation and processed perlite ore. In 1988, petitioner and his
foreign partners decided to put up a central warehouse in Metro Manila on a land area of approximately 2,000
square meters. Petitioner visited the property of private respondent Enriqueta Chua vda. de Ongsiong and,
except for the presence of squatters in the area, he found the place suitable for a central warehouse.
A contract, denominated “Deed of Conditional Sale,” was executed between petitioner and private respondent
with the pertinent clause “It is hereby agreed, covenanted and stipulated by and between the parties hereto that if
after 60 days from the date of the signing of this contract the VENDOR shall not be able to remove the squatters
from the property being purchased, the downpayment made by the buyer shall be returned/reimbursed by the
VENDOR to the VENDEE.”
Pursuant to the agreement, private respondent filed a complaint for ejectment against Melchor Musa and 29
other squatter families with the MTC. Judgment was rendered ordering the defendants to vacate the premises.
The decision was handed down beyond the 60-day period. Private respondent sought to return the P50,000.00
she received from petitioner since, she said, she could not “get rid of the squatters” on the lot. Atty. Sergio A.F.
Apostol, counsel for petitioner, in his reply, refused the tender and proposes that his client will take it upon
himself to eject the squatters, provided, that expenses which shall be incurred by reason thereof shall be
chargeable to the purchase price of the land.
Meanwhile, the Presidential Commission for the Urban Poor (“PCUD”), asked the MTC for a grace period of 45
days within which to relocate and transfer the squatter families. This request was granted. Atty. Joaquin Yuseco,
Jr., counsel for private respondent, advised Atty. Apostol that the Deed of Conditional Sale had been rendered
null and void by virtue of his client’s failure to evict the squatters from the premises within the agreed 60-day
period. He added that private respondent had “decided to retain the property.”
Private respondent, prompted by petitioner’s continued refusal to accept the return of the P50,000.00 advance
payment, filed with the RTC rescission of the deed of “conditional” sale, plus damages, and for the consignation
of P50,000.00 cash.
MTC held that respondent has no right to rescind since it was she who “violated her obligation to eject the
squatters from the subject property”.

Issue: May the vendor demand the rescission of a contract for the sale of a parcel of land for a cause traceable to
his own failure to have the squatters on the subject property evicted within the contractually-stipulated period

Held: NO. A perfected contract of sale may either be absolute or conditional depending on whether the
agreement is devoid of, or subject to, any condition imposed on the passing of title of the thing to be conveyed or
on the obligation of a party thereto. When ownership is retained until the fulfillment of a positive condition the
breach of the condition will simply prevent the duty to convey title from acquiring an obligatory force. If the
condition is imposed on an obligation of a party which is not complied with, the other party may either refuse to
proceed or waive said condition (Art. 1545, Civil Code). Where, of course, the condition is imposed upon the
perfection of the contract itself, the failure of such condition would prevent the juridical relation itself from coming
into existence.

In determining the real character of the contract, the title given to it by the parties is not as much significant as its
substance. For example, a deed of sale, although denominated as a deed of conditional sale, may be treated as
absolute in nature, if title to the property sold is not reserved in the vendor or if the vendor is not granted the right
to unilaterally rescind the contract predicated on the fulfillment or non-fulfillment, as the case may be, of the
prescribed condition.

The term “condition” in the context of a perfected contract of sale pertains, in reality, to the compliance by one
party of an undertaking the fulfillment of which would beckon, in turn, the demandability of the reciprocal
prestation of the other party. The reciprocal obligations referred to would normally be, in the case of vendee, the
payment of the agreed purchase price and, in the case of the vendor, the fulfillment of certain express warranties
(which, in the case at bench is the timely eviction of the squatters on the property).
The object of the sale, in the case before us, was the lot. Under the agreement, private respondent is obligated to
evict the squatters on the property. The ejectment of the squatters is a condition the operative act of which sets
into motion the period of compliance by petitioner of his own obligation, i.e., to pay the balance of the purchase
price. Private respondent’s failure “to remove the squatters from the property” within the stipulated period gives
petitioner the right to either refuse to proceed with the agreement or waive that condition in consonance with
Article 1545 of the Civil Code. This option clearly belongs to petitioner and not to private respondent.
We share the opinion of the appellate court that the undertaking required of private respondent does not
constitute a “potestative condition dependent solely on his will” that might, otherwise, be void in accordance with
Article 1182 of the Civil Code 17 but a “mixed” condition “dependent not on the will of the vendor alone but also of
third persons like the squatters and government agencies and personnel concerned.” We must hasten to add,
however, that where the so-called “potestative condition” is imposed not on the birth of the obligation but on its
fulfillment, only the obligation is avoided, leaving unaffected the obligation itself.
 JAIME D. ANG v. COURT OF APPEALS AND BRUNO SOLEDAD

567 SCRA 53 (2008)

Even under the principle of solutio indebiti, Ang cannot recover from Soledad the amount
he paid BA Finance since Ang settled the mortgage debt on his own volition and that
Soledad did not benefit therein, the latter not being the one who mortgaged the vehicle.

Under a “car-swapping” scheme, Bruno Soledad sold his Mitsubishi GSR sedan 1982 model to
Jaime Ang. For his part, Ang conveyed to Soledad his Mitsubishi Lancer model 1988. Ang, a
buyer and seller of used vehicles, later offered the Mitsubishi GSR for sale through Far Eastern
Motors, a second-hand auto display center. The vehicle was eventually sold to Paul Bugash.
Before the deed could be registered in Bugash‘s name, however, the vehicle was seized by
virtue of a writ of replevin on account of the alleged failure of Ronaldo Panes, the owner of the
vehicle prior to Soledad, to pay the mortgage debt constituted thereon.

To secure the release of the vehicle, Ang paid BA Finance. Soledad refused to reimburse,
despite repeated demands, drawing Ang to charge him for Estafa with abuse of confidence. By
Resolution, the City Prosecutor‘s Office dismissed the complaint for insufficiency of evidence,
drawing Ang to file for consecutive complaints for damages against Soledad before the
Regional Trial Court (RTC) of Cebu City. Subsequently, the RTC rendered judgment in favor
of Ang “for the sake of justice and equity, and in consonance with the salutary principle of non-
enrichment at another‘s expense. The RTC then ordered Soledad to pay Ang the amount the
latter paid to BA Finance.

Soledad then appealed to the Appellate Court, which reverses the decision of the RTC. The
Court of Appeals dismissed Ang‘s petition on the ground that the filing of said complaint
seeking the awarding of damages for breach of warranty has already prescribed.

Hence, this petition to the High Court.

ISSUE:

1) Whether or not Ang‘s cause of action had not yet prescribed when he filed the complaint
2) Whether or not Ang can recover from Soledad the amount he paid BA Finance on account
of the mortgage debt

HELD:

First Issue

The resolution of the sole issue of whether the complaint had prescribed hinges on a
determination of what kind of warranty is provided in the Deed of Absolute Sale subject of the
present case.

A warranty is a statement or representation made by the seller of goods, contemporaneously

and as part of the contract of sale, having reference to the character, quality or title of the
goods, and by which he promises or undertakes to insure that certain facts are or shall be as
he then represents them. Warranties by the seller may be express or implied. Art. 1546 of the
Civil Code defines express warranty – Any affirmation of fact or any promise by the seller
relating to the thing is an express warranty if the natural tendency of such affirmation or
promise is to induce the buyer to purchase the same, and if the buyer purchases the thing
relying thereon. On the other hand, an implied warranty is that which the law derives by
application or inference from the nature of the transaction or the relative situation or
circumstances of the parties, irrespective of any intention of the seller to create it.

The ruling in Engineering & Machinery Corporation vs. Court of Appeals states that “the
prescriptive period for instituting actions based on a breach of express warranty is that
specified in the contract, and in the absence of such period, the general rule on rescission of
contract, which is four years (Article 1389, Civil Code).”

As for actions based on breach of implied warranty, the prescriptive period is, under Art. 1571
(warranty against hidden defects of or encumbrances upon the thing sold) and Art. 1548
(warranty against eviction), six months from the date of delivery of the thing sold.

In declaring that he owned and had clean title to the vehicle at the time the Deed of Absolute
Sale was forged, Soledad gave an implied warranty of title. In pledging that he “will defend the
same from all claims or any claim whatsoever and will save the vendee from any suit by the
government of the Republic of the Philippines,” Soledad gave a warranty against eviction.

Given Ang‘s business of buying and selling used vehicles, he could not have merely relied on
Soledad‘s affirmation that the car was free from liens and encumbrances. He was expected to
have thoroughly verified the car‘s registration and related documents.

Since what Soledad, as seller, gave was an implied warranty, the prescriptive period to file a
breach thereof is six months after the delivery of the vehicle, following Art. 1571. But even if
the date of filing of the action is reckoned from the date petitioner instituted his first complaint
for damages on November 9, 1993, and not on July 15, 1996 when he filed the complaint
subject of the present petition, the action just the same had prescribed, it having been filed 16
months after July 28, 1992, the date of delivery of the vehicle.

Second Issue
On the merits of his complaint for damages, even if Ang invokes breach of warranty against
eviction as inferred from the second part of the earlier-quoted provision of the Deed of
Absolute Sale, the following essential requisites for such breach: (1) The purchaser has been
deprived of the whole or part of the thing sold; (2) This eviction is by a final judgment; (3) The
basis thereof is by virtue of a right prior to the sale made by the vendor; and (4) The vendor
has been summoned and made co-defendant in the suit for eviction at the instance of the
vendee, have not been met. For one, there is no judgment which deprived Ang of the vehicle.
For another, there was no suit for eviction in which Soledad as seller was impleaded as co-
defendant at the instance of the vendee.

Finally, even under the principle of solutio indebiti which the RTC applied, Ang cannot recover
from Soledad the amount he paid BA Finance. For, as the appellate court observed, Ang settled
the mortgage debt on his own volition under the supposition that he would resell the car. It
turned out that he did pay BA Finance in order to avoid returning the payment made by the
ultimate buyer Bugash. It need not be stressed that Soledad did not benefit from Ang‘s paying
BA Finance, he not being the one who mortgaged the vehicle, hence, did not benefit from the
proceeds thereof.
MARIA LUISA DE LEON ESCALER v. CA, GR No. L-42636, 1985-08-01
Facts:

On March 7, 1958, the spouses Africa V. Reynoso and Jose L. Reynoso sold to petitioners several others, a
parcel of land, situated in Antipolo, Rizal with an area of 239,479 square meters

On April 21, 1961, the Register of Deeds of Rizal and A. Doronilla Resources Development, Inc. filed Case No.
4252 before the Court of First Instance of Rizal for the cancellation of OCT No. 1526 issued in the name of
Angelina C. Reynoso (predecessor-in-interest of private... respondents-vendors) on February 26, 1958 under
Decree No. 62373, LRC Record No. N-13783, on the ground that the property covered by said title is already
previously registered under Transfer Certificate of Title No. 42999 issued in the name of A. Doronilla
Development,... Inc. Petitioners as vendees filed their opposition to the said petition.

On August 31, 1965, herein petitioners, spouses Maria de Leon Escaler and Ernesto Escaler and spouses Cecilia
J. Roxas and Pedro Roxas, filed Civil Case No. 9014 before the Court of First Instance of Rizal against their
vendors, herein private respondents spouses Jose L. Reynoso... and Africa Reynoso for the recovery of the
value of the property sold to them, plus damages on the ground that the latter have violated the vendors'
"warranty against eviction."

Issues:

1) that the Court of Appeals erred in applying strictly to the instant case the provisions of Articles 1558 and
1559 of the New Civil Code;

Ruling:

Art. 1558. The vendor shall not be obliged to make good the proper warranty, unless he is summoned in the
suit for eviction at the instance of the vendee.

In order that a vendor's liability for eviction may be enforced, the following requisites must concur a) there
must be a final judgment; b) the purchaser has been deprived of the whole or part of the thing sold; c) said
deprivation was by virtue of a right prior to the sale made... by the vendor; and d) the vendor has been
summoned and made co-defendant in the suit for eviction at the instance of the vendee.

In the case at bar, the fourth requisite - that of being summoned in the suit for eviction (Case No. 4252) at the
instance of the vendee is not present. All that the petitioners did, per their very admission, was to furnish
respondents, by registered mail, with a copy of... the opposition they (petitioners) filed in the eviction suit.

Decidedly, this is not the kind of notice prescribed by the afore-quoted Articles 1558 and 1559 of the New Civil
Code

The term "unless he is summoned in the suit for eviction at the instance of the... vendee" means that the
respondents as vendor/s should be made parties to the suit at the instance of petitioners-vendees, either by
way of asking that the former be made a co-defendant or by the filing of a third-party complaint against said
vendors.

Nothing of that sort... appeared to have been done by the petitioners in the instant case.

Principles:

All that the petitioners did, per their very admission, was to furnish respondents, by registered mail, with a
copy of... the opposition they (petitioners) filed in the eviction suit. Decidedly, this is not the kind of notice
prescribed by the afore-quoted Articles 1558 and 1559 of the New Civil Code. The term "unless he is
summoned in the suit for eviction at the instance of the... vendee" means that the respondents as vendor/s
should be made parties to the suit at the instance of petitioners-vendees, either by way of asking that the
former be made a co-defendant or by the filing of a third-party complaint against said vendors.