Mindanao Academy vs. Yap [G.R. No. L-17681.  February 26, 1965.]
De Nuqui vs. Yap [G.R. No. L-17682.  February 26, 1965]
En Banc, Makalintal (J): 6 concur, 4 took no part

Facts: By deed entitled “Mutual Agreement,” executed on 10 May 1964, Rosenda A. de Nuqui (widow of Sotero Dionisio) and her son Sotero Dionisio, Jr. sold 3 parcels of residential land in Oroquieta, Misamis Occidental, and another parcel in Ozamis City in favor of Ildefonso D. Yap. Included in the sale were certain buildings situated on said lands as well as laboratory equipment, books, furniture and fixtures used by 2 schools established in the respective properties: the Mindanao Academy in Oroquieta and the Misamis Academy in Ozamis City. The aggregate price stated in the deed was P100,700.00, to be paid according to the terms and conditions specified in the contract. Besides Rosenda and her son Sotero, Jr., both of whom signed the instrument, Adelaida Dionisio Nuesa (a daughter of Rosenda, and married to Wilson Nuesa) is also named therein as co-vendor, but actually did not take part either personally or through her uncle and supposed attorney-in-fact, Restituto Abuton. These three (mother and children) are referred to in the deed as the owners pro-indiviso of the properties sold. The truth, however, was that there were other co-owners of the lands, namely, Erlinda D. Diaz (and Antolin Diaz), Ester Aida D. Bas (and Mauricio O. Bas), Rosalinda D. Belleza (and Apolinario Belleza) and Luz Minda D. Dajao (and Elifio C. Dajao), children also of Rosenda by her deceased husband Sotero Dionisio, Sr., and that as far as the school buildings, equipment, books, furniture and fixtures were concerned, they were owned by the Mindanao Academy, Inc., a corporation operating both the Mindanao Academy in Oroquieta and the Misamis Academy in Ozamis City. The buyer, Ildefonso D. Yap, obtained possession of the properties by virtue of the sale, took over the operation of the two schools and even changed their names to Harvardian Colleges.

Two actions were commenced in the CFI Misamis Occidental; one for annulment of the sale and recovery of rents and damages (Civil Case 1774, filed 3 May 1955) with the Mindanao Academy, Inc., the five children of Rosenda Nuqui who did not take part in the deed of sale, and several other persons who were stockholders of the said corporation (Pedro N. Abuton, Sy Paoco, Josefa Dignum and Perfecto Velasquez), as plaintiffs, and the parties who signed the deed of sale as defendants; and another for rescission (Civil Case 1907, filed 17 July 1956) with Rosenda Nuqui, Sotero Dionisio, Jr. and Erlinda D. Diaz (and the latter’s husband Antolin Diaz) as plaintiffs, and Ildefonso D. Yap as lone defendant. The other 4 children of Rosenda did not join, having previously ceded and quitclaimed their shares in the litigated properties in favor of their sister Erlinda D. Diaz. The actions were tried jointly and on 31 March 1960 the court rendered judgment, declaring the Mutual Agreement null and void ab initio and ordering Ildefonso Yap to pay the costs of the proceedings in both cases. The Court also ordered Yap, in Civil Case 1907, to restore to the plaintiffs in said case all the buildings and grounds described in the Mutual Agreement together with all the permanent improvements thereon; and to pay to the plaintiffs therein the amount of P300.00 monthly from 31 July 1956 up to the time he shall have surrendered the properties in question to the plaintiffs therein, plus P1,000.00 as attorney’s fees to plaintiffs Antolin and Erlinda D. Diaz. The Court ordered Yap, in Civil Case 1774, to restore to the Mindanao Academy, Inc., all the books, laboratory apparatus, furniture and other equipments described in the Mutual Agreement and specified in the Inventory attached to the Records of this case; or in default thereof, their value in the amount of P23,500.00; to return all the Records of the Mindanao Academy and Misamis Academy; and to pay to the plaintiffs stockholders of the Mindanao Academy, Inc., the amount of P10,000.00 as nominal damages; P3,000.00 as exemplary damages; and P2,000.00 as attorney’s fees. These damages being apportioned to each of the plaintiff-stockholders in proportion to their respective interests in the corporation. Ildefonso D. Yap appealed from the judgment.

The Supreme Court affirmed the judgment appealed from but modified it by eliminating therefrom the award of attorney’s fees of P1,000.00 in favor of Erlinda D. Diaz and her husband, and the award of nominal and exemplary damages in Civil Case 1774; and making the award of attorney’s fees in the sum of P2,000.00 payable to counsel for the account of the Mindanao Academy, Inc. instead of the plaintiff stockholders; without pronouncement as to costs.

1.    Mutual Agreement entirely void and non-existent; Question on rescission not categorically ruled on
The mutual agreement dated 10 May 1954 is entirely void and legally non-existent in that the vendors therein ceded to Yap not only their interest, rights, shares and participation in the property sold but also those that belonged to persons who were not parties thereto. This conclusion is premised on two grounds: (a) the contract purported to sell properties of which the sellers were not the only owners, since of the four parcels of land mentioned in the deed their shares consisted only of 7/12, (6/12: Rosenda Nuqui and 1/12 for Sotero, Jr.), while in the buildings, laboratory equipment, books, furniture and fixtures they had no participation at all, the owner being the Mindanao Academy, Inc.; and (b) the prestation involved in the sale was indivisible, and therefore incapable of partial annulment, inasmuch as Yap would not have entered into the transaction except to acquire all of the properties purchased by him.

2.    No bad faith committed by co-owners who did not take part in sale
The quitclaim, in the form of an extrajudicial partition, was made on 6 May 1956, after the action for annulment was filed, wherein, the plaintiffs were not only Erlinda but also the other co-owners who took no part in the sale and to whom there has been no imputation of bad faith. Further, the trial courts’ finding of bad faith is an erroneous conclusion induced by a manifest oversight of an undisputed fact, namely, that on 10 June 1954, just a month after the deed of sale in question, Erlinda D. Diaz did file an action against Ildefonso D. Yap and Rosenda Nuqui, among others, asserting her rights as co-owner of the properties (Case 1646). Finally, bad faith on the part of Erlinda would not militate against the nullity of the sale, considering that it included not only the lands in common by Rosenda Nuqui and her six children but also the buildings and school facilities owned by the Mindanao Academy, Inc., an entity which had nothing to do with the transaction and which could be represented solely by its Board of Trustees.

3.    Vendor and vendee both in bad faith; treated to have acted in good faith vis-à-vis each other
Both vendors and vendee in the sale acted in bad faith and therefore must be treated, vis-a-vis each other, as having acted in good faith. The return of the properties by the vendee is a necessary consequence of the decree of annulment. No part of the purchase price having been paid, as far as the record shows, the trial court correctly made no corresponding order for the restitution thereof. Rosenda Nuqui and her son Sotero, it is true, acted in bad faith when they sold the properties as theirs alone; but so did the defendant Yap when he purchased them with knowledge of the fact that there were other co-owners. Although the bad faith of one party neutralizes that of the other and hence as between themselves their rights would be as if both of them had acted in good faith at the time of the transaction, this legal fiction of Yap’s good faith ceased when they sold the properties as theirs alone.

4.    Erlinda Diaz entitled to recover share of rents in proportion to her own interest; Possessor in good faith entitled to fruits as long as possession is not legally interrupted
Prior to the sale, the Mindanao Academy Inc. was paying P300.00 monthly for its occupancy of the lands on which the buildings are situated. This is the amount the defendant has been ordered to pay to the plaintiffs in Civil Case 1907, beginning 31 July 1956, when he filed his “first pleading” in the case. There can be no doubt that Erlinda D. Diaz is entitled to recover a share of the said rents in proportion to her own interest in the lands and the interest of her four co-owners which she had acquired. A possessor in good faith is entitled to the fruits only so long as his possession is not legally interrupted, and such interruption takes place upon service of judicial summons (Arts. 544 and 1123, Civil Code).

5.    Award of attorney’s fees to Erlinda Diaz erroneous; Erlinda had no cause of action for rescission in Civil Case 1907 as she was not party to the agreement
The award of attorney’s fees to Erlinda D. Diaz and her husband is erroneous. Civil Case 1907, in which said fees have been adjudged, is for rescission (more properly resolution) of the so-called “mutual agreement” on the ground that Yap failed to comply with certain undertakings specified therein relative to the payment of the purchase price. Erlinda Diaz was not a party to that agreement and hence had no cause of action for rescission. The trial court did not decide the matter of rescission because of the decree of annulment it rendered in the other case (Civil Case 1774), wherein the defendants are not only Ildefonso D. Yap but also Rosenda Nuqui and her son Sotero. Erlinda D. Diaz could just as well have refrained from joining as plaintiff in the action for rescission, not being a part to the contract sought to be rescinded and being already one of the plaintiffs in the other action. In other words, it cannot be said with justification that she was constrained to litigate, in Civil Case 1907, because of some cause attributable to the appellant.

6.    Builder in bad faith not entitled to reimbursement (New building)
Yap claims reimbursement for the value of the improvements he allegedly introduced in the schools, consisting of new building worth P8,000.00 and a toilet costing P800.00, besides laboratory equipment, furniture, fixtures and books for the libraries. It should be noted that the judgment of the trial court specifies, for delivery to the plaintiffs (in Civil Case 1907), only “the buildings and grounds described in the mutual agreement together with all the permanent improvements thereon.” If Yap constructed a new building, he cannot recover its value because the construction was done after the filing of the action for annulment, thus rendering him a builder in bad faith who is denied by law any right of reimbursement.

7.    Equipment, books, furniture and fixture brought in by him may be retained by him as they are outside the scope of the judgment
In connection with the equipment, books, furniture and fixtures brought in by him, he is not entitled to reimbursement either, because the judgment does not award them to any of the plaintiffs in the two actions. What is adjudged (in Civil Case 1774) is for Yap to restore to the Mindanao Academy, Inc. all the books, laboratory apparatus, furniture and other equipment “described in the Mutual Agreement and specified in the Inventory attached to the records of this case; or in default thereof, their value in the amount of P23,500.00.” In other words, whatever has been brought in by the defendant is outside the scope of the judgment and may be retained by him.

8.    Stockholders not entitled to nominal and exemplary damages
According to the second amended complaint the stockholders were joined merely pro forma, and “for the sole purpose of the moral damage which has been all the time alleged in the original complaint.” Indeed the interests of the said stockholders, if any, were already represented by the corporation itself, which was the proper party plaintiff; and no cause of action accruing to them separately from the corporation is alleged in the complaint, other than that for moral damages due to “extreme mental anguish, serious anxiety and wounded feelings.” The trial court, however, ruled out the claim for moral damages and no appeal from such ruling has taken. The award for nominal and exemplary damages should be eliminated in toto.

9.    Award for attorney’s fees upheld for the corporation but not to stockholders
The award for attorney’s fees in the amount of P2,000.00 was upheld, although the same should be for the account of the corporation and not of the plaintiff stockholders of the Mindanao Academy, Inc.; and payable to their common counsel as prayed for in the complaint.

10.    Nullity of contract precludes enforcement of its stipulation
A warranty clause in the deeds provides that if any claim shall be filed against the properties or any right, share or interest which are in the possession of the party of the vendors which had been hereby transferred, ceded and conveyed unto the vendee the vendor assumes as it hereby holds itself answerable. It is unnecessary to pass upon the question in view of the total annulment of the sale on grounds concerning which both parties thereto were at fault. The nullity of the contract precludes enforcement of any of its stipulations.

Paulmitan vs. CA [G.R. No. 61584.  November 25, 1992.]
Third Division, Romero (J): 4 concur

Facts: From her marriage with Ciriaco Paulmitan, deceased, Agatona Sagario Paulmitan begot two legitimate children, Pascual and Donato Paulmitan. Agatona Sagario Paulmitan died sometime in 1953 and left the 2 parcels of land located in the Province of Negros Occidental (Lot  757 with an area of 1,946 sq.ms., OCT RO-8376; and Lot 1091 with an area of 69,080 sq.ms., OCT RO-11653). Pascual Paulmitan also died in 1953, apparently shortly after his mother passed away, leaving his children, namely: Alicio, Elena, Abelino, Adelina, Anita, Baking and Anito, all surnamed Paulmitan. Until 1963, the estate of Agatona Sagario Paulmitan remained unsettled and the titles to the two lots remained in the name of Agatona. However, on 11 August 1963, Donato Paulmitan executed an Affidavit of Declaration of Heirship, extrajudicially adjudicating unto himself Lot 757 based on the claim that he is the only surviving heir of Agatona Sagario. The affidavit was filed with the Register of Deeds of Negros Occidental who, on 20 August 1963, cancelled OCT RO-8376 in the name of Agatona Sagario and issued TCT 35979 in Donato’s name. As regards Lot 1091, Donato executed on 28 May 1974 a Deed of Sale over the same in favor of Juliana P. Fanesa, his daughter (married to Rodolfo Fanesa).  In the meantime, sometime in 1952, for non-payment of taxes, Lot 1091 was forfeited and sold at a public auction, with the Provincial Government of Negros Occidental being the buyer. A Certificate of Sale over the land was executed by the Provincial Treasurer in favor of the Provincial Board of Negros Occidental. On 29 May 1974, Juliana P. Fanesa redeemed the property from the Provincial Government of Negros Occidental for the amount of P2,959.09.

On learning of these transactions, the children of the Late Pascual Paulmitan filed on 18 January 1975 with the CFI Negros Occidental (12th Judicial District, Branch IV, Bacolod City, Civil Case 11770) a Complaint against Donato and Juliana to partition the properties plus damages. Donato and Juliana set up the affirmative defense of prescription (complaint being filed 11 years after the issuance of the title) with respect to Lot 757. The trial court issued an order dated 22 April 1976 dismissing the complaint as to the said property upon finding merit in Donato’s and Juliana’s affirmative defense. This order became final after Pascual’s children failed to appeal therefrom.

Trial proceeded with respect to Lot 1091. In a decision dated 20 May 1977, the trial court decided in favor of Pascual’s children as to Lot 1091. According to the trial court, the respondents, as descendants of Agatona Sagario Paulmitan were entitled to ½ of Lot 1091, pro indiviso. The sale by Donato Paulmitan to his daughter, Juliana Fanesa, did not prejudice their rights; and the repurchase by Juliana of the land from the Provincial Government of Negros Occidental did not vest in Juliana exclusive ownership over the entire land but only gave her the right to be reimbursed for the amount paid to redeem the property. The trial court ordered the partition of the land and directed Donato and Juliana to pay pascual’s Children certain amounts representing the latter’s share in the fruits of the land. On the other hand, the children were directed to pay P1,479.55 to Juliana as their share in the redemption price paid by Fanesa to the Provincial Government of Negros Occidental.

On appeal and on 14 July 1982 (CA-GR 62255-R), the Court of Appeals affirmed the trial court’s decision. Hence the petition for review on certiorari.

The Supreme Court denied the petition and affirmed the decision of the Court of Appeals.

1.    Pascual predecease mother, precludes operation of provisions on right of representation
Pascual did not predecease his mother, decedent Agatona Sagario Paulmitan, thus precluding the operation of the provisions in the Civil Code on the right of representation with respect to his seven children.

2.    Rights of succession transmitted at the moment of the decedent’s death; Both Pascual and Donato entitled to ownership
When Agatona Sagario Paulmitan died intestate in 1952, her two (2) sons Donato and Pascual were still alive. Since it is well-settled by virtue of Article 777 of the Civil Code that “[t]he rights to the succession are transmitted from the moment of the death of the decedent,” the right of ownership, not only of Donato but also of Pascual, over their respective shares in the inheritance was automatically and by operation of law vested in them in 1953 when their mother died intestate. At that stage, the children of Donato and Pascual did not yet have any right over the inheritance since “[i]n every inheritance the relative nearest in degree excludes the more distant ones.” Donato and Pascual excluded their children as to the right to inherit from Agatona Sagario Paulmitan, their mother.

3.    Heirs own in common the estate of the decedent before its partition
From the time of the death of Agatona Sagario Paulmitan to the subsequent passing away of her son Pascual in 1953, the estate remained unpartitioned. Donato and Pascual Paulmitan were co-owners of the estate left by their mother as no partition was ever made, pursuant to Article 1078 of the Civil Code, which provides that “where there are two or more heirs, the whole estate of the decedent is, before its partition, owned in common by such heirs, subject to the payment of debts of the deceased.”

4.    Pascual’s children succeeded him in the co-ownership of the property when he died intestate
When Pascual Paulmitan died intestate in 1953, his children succeeded him in the co-ownership of the disputed property. Pascual Paulmitan’s right of ownership over an undivided portion of the property passed on to his children, who, from the time of Pascual’s death, became co-owners with their uncle Donato over the disputed decedent estate.

5.    Fanesa’s claim of ownership
Juliana P. Fanesa, Donato’s daughter, claims ownership over Lot 1091 by virtue of two transactions, namely: (a) the sale made in her favor by her father Donato Paulmitan; and (b) her redemption of the land from the Provincial Government of Negros Occidental after it was forfeited for non-payment of taxes.

6.    Sale of Lot 1091 by Donato to Juliana did not prejudice rights of Pascual’s children over the ½ undivided share
When Donato Paulmitan sold on 28 May 1974 Lot 1091 to his daughter Juliana P. Fanesa, he was only a co-owner with Pascual’s children and as such, he could only sell that portion which may be allotted to him upon termination of the co-ownership. The sale did not prejudice the rights of the children to ½ undivided share of the land which they inherited from their father. It did not vest ownership in the entire land with the buyer but transferred only the seller’s pro indiviso share in the property and consequently made the buyer a co-owner of the land until it is partitioned.

7.    Effect of sale of property by one co-owner without the consent of all co-owners; Article 493: Only the rights of the seller are transferred, buyer becomes co-owner
In Bailon-Casilao v. Court of Appeals, the Court outlined the effects of a sale by one co-owner without the content of all the co-owners.  The rights of a co-owner of a certain property are clearly specified in Article 493 of the Civil Code which provides that “each co-owner shall have the full ownership of his part and of the fruits and benefits pertaining thereto, and he may therefore alienate, assign or mortgage it and even substitute another person in its enjoyment, except when personal rights are involved. But the effect of the alienation or mortgage, with respect to the co owners, shall be limited to the portion which may be allotted to him in the division upon the termination of the co-ownership.” Even if a co-owner sells the whole property as his, the sale will affect only his own share but not those of the other co-owners who did not consent to the sale [Punsalan v. Boon Liat, 44 Phil. 320 (1923)]. This is because under the codal provision, the sale or other disposition affects only his undivided share and the transferee gets only what would correspond to his grantor in the partition of the thing owned in common. [Ramirez v. Bautista, 14 Phil. 528 (1909)]. Thus, it may be deduced that since a co-owner is entitled to sell his undivided share, a sale of the entire property by one co-owner without the consent of the other co-owners is not null and void. However, only the rights of the co-owner-seller are transferred, thereby making the buyer a co-owner of the property.” Thus, in the present case, the sale by Donato Paulmitan of the land to his daughter did not give to the latter ownership over the entire land but merely transferred to her the ½ undivided share of her father, thus making her the co-owner of the land in question with her first cousins.

8.    Redemption does not terminate the co-ownership nor give her title to the entire land
The redemption of the land made by Fanesa did not terminate the co-ownership nor give her title to the entire land subject of the co-ownership. Speaking on the same issue, the Court, in Adille v. Court of Appeals, resolved the same by holding that the right of repurchase may be exercised by a co-owner with respect to his share alone (CIVIL CODE, art. 1612; CIVIL CODE (1889), art. 1514.). While the records show that the property was redeemed in its entirety, the plaintiff shouldering the expenses therefor, that did not make him the owner of all of it. In other words, it did not put to end the existing state of co-ownership (Supra, art. 489). There is no doubt that redemption of property entails a necessary expense.

9.    Right to compel other co-owners to contribute to expenses of preservation of thing owned in common; Payer in redemption holds lien upon the subject property until reimbursed
Article 488 of the Civil Code provides that “each co-owner shall have a right to compel the other co-owners to contribute to the expenses of preservation of the thing or right owned in common and to the taxes. Any one of the latter may exempt himself from this obligation by renouncing so much of his undivided interest as may be equivalent to his share of the expenses and taxes. No such waiver shall be made if it is prejudicial to the co-ownership.” Thus, although Fanesa did not acquire ownership over the entire lot by virtue of the redemption she made, nevertheless, she did acquire the right to be reimbursed for half of the redemption price she paid to the Provincial Government of Negros Occidental on behalf of her co-owners. Until reimbursed, Fanesa holds a lien upon the subject property for the amount due her.

10.    Lease issue not passed on as it is a factual issue; Factual findings of lower courts final and conclusive upon the Supreme Court
Donato and Juliana dispute the order of the trial court, which the Court of Appeals affirmed, for them to pay Pascual’s children P5,000.00 per year from 1966 until the partition of the estate which represents the latter’s share in the fruits of the land. According to the former, the land is being leased for P2,000.00 per year only. This assigned error, however, raises a factual question. The settled rule is that only questions of law may be raised in a petition for review. As a general rule, findings of fact made by the trial court and the Court of Appeals are final and conclusive and cannot be reviewed on appeal.

Almendra vs. IAC [G.R. No. 75111.  November 21, 1991.]
Third Division, Fernan (CJ): 4 concur

Facts: The mother, Aleja Ceno, was first married to Juanso Yu Book with whom she had 3 children named Magdaleno, Melecia and Bernardina, all surnamed Ceno. Sometime in the 1920’s, Juanso Yu Book took his family to China where he eventually died. Aleja and her daughter Bernardina later returned to the Philippines. During said marriage, Aleja acquired a parcel of land which she declared in her name under Tax Declaration 11500. After Juanso Yu Book’s death, Bernardina filed against her mother a case for the partition of the said property in the then CFI Leyte. On 17 August 1970, the lower court rendered a “supplemental decision” finding that the said property had been subdivided into Lots 6354 (13,738 sq.ms.), 6353 (16,604 sq.ms.), 6352 (23,868 sq.ms.) and 6366 (71,656 sq.ms.). The Court declared Bernardina Ojeda owner of and entitled to possession of Lot 6354; Ojeda as owner of and entitled to possession of Lot 6353 without prejudice to whatever rights her sister Melecia Ceno (presently in China) may have over the property; Aleja Almendra as owner of and entitled to possession of Lot 6366; and Aleja Almendra as owner of and entitled to possession of Lot 6352, subject to whatever may be the rights thereto of her son Magdaleno Ceno (presently in China). The Court ordered the parties to bear the fees of the commissioner. Meanwhile, Aleja married Santiago Almendra with whom she had 4 children named Margarito, Angeles, Roman and Delia. During said marriage Aleja and Santiago acquired a 59,196-sq.ms. parcel of land in Cagbolo, Abuyog, Leyte. OCT 10094 was issued therefor in the name of Santiago Almendra married to Aleja Ceno and it was declared for tax purposes in his name. In addition to said properties, Aleja inherited from her father, Juan Geno, a 16,000-sq.ms. parcel of land also in Cagbolo. For his part, her husband Santiago inherited from his mother, Nicolasa Alvero, a 16-sq. ms. parcel of residential land located in Nalibunan, Abuyog, Leyte. While Santiago was alive, he apportioned these properties among Aleja’s children in the Philippines, including Bernardina, who, in turn, shared the produce of the properties with their parents. After Santiago’s death, Aleja sold to her daughter, Angeles Almendra, for P2,000 two parcels of land in the deed of sale dated 10 August 1973 (½ portion or conjugal share of land [TD 22234, OCT 10094], and ½ portion or conjugal share of land [TD 27190] both located in Bo. Cagbolo, Abuyog, Leyte. On 26 December 1973, Aleja sold to her son, Roman Almendra, also for P2,000 a parcel of land described in the deed of sale as located in Cagbolo, Abuyog, Leyte “under T/D 11500 which cancelled T/D 9635; having an area of 6.6181 hec., assessed at P1,580.00.”  On the same day, Aleja sold to Angeles and Roman again for P2,000 yet another parcel of land described in the deed of sale (Lot 6352). Aleja died on 7 May 1975.

On 21 January 1977 Margarito, Delia and Bernardina (plaintiffs) filed a complaint against Angeles and Roman for the annulment of the deeds of sale in their favor, partition of the properties subjects therein and accounting of their produce. From China, their sister Melecia signed a special power of attorney in favor of Bernardina. Magdaleno, who was still in China, was impleaded as a defendant in the case and summons by publication was made on him. Later, the plaintiffs informed the court that they had received a document in Chinese characters which purportedly showed that Magdaleno had died. Said document, however, was not produced in court. Thereafter, Magdaleno was considered as in default without prejudice to the provisions of Section 4, Rule 18 of the Rules of Court which allows the court to decide a case wherein there are several defendants upon the evidence submitted only by the answering defendants. On 30 April 1981, the lower court rendered a decision declaring the deeds of sale to be simulated and therefore null and void; ordering the partition of the estate of the deceased Aleja Ceno among her heirs and assigns; appointing the Acting Clerk of Court, Atty. Cristina T. Pontejos, as commissioner, for the purpose of said partition, who is expected to proceed accordingly upon receipt of a copy of this decision; and to render her report on or before 30 days from said receipt. The expenses of the commissioner shall be borne proportionately by the parties.

The defendants appealed to the then Intermediate Appellate Court which, on 20 February 1986 rendered a decision upholding the validity of the deeds of sale and ordered the partition of the “undisposed” properties left by Aleja and Santiago Almendra and, if an extrajudicial partition can be had, that it be made within a reasonable period of time after receipt of its decision. The plaintiffs filed their motion for reconsideration, which was denied. Hence, the petition for review on certiorari.

The Supreme Court affirmed the decision of the then Intermediate Appellate Court subject to the modifications stated in the present decision. The Court directed the lower court to facilitate with dispatch the preparation and approval of a project of partition of the properties considered unsold under the present decision.

1.    No convincing reason to nullify deeds of sale; Testimony of the notary given more credence
There is no valid, legal and convincing reason for nullifying the questioned deeds of sale. Petitioner had not presented any strong, complete and conclusive proof to override the evidentiary value of the duly notarized deeds of sale. Moreover, the testimony of the lawyer who notarized the deeds of sale that he saw not only Aleja signing and affixing her thumbmark on the questioned deeds but also Angeles and Aleja “counting money between them,” deserves more credence than the self-serving allegations of the petitioners. Such testimony is admissible as evidence without further proof of the due execution of the deeds in question and is conclusive as to the truthfulness of their contents in the absence of clear and convincing evidence to the contrary.

2.    No proof that price (P2,000) was grossly inadequate
The petitioners’ allegations that the deeds of sale were “obtained through fraud, undue influence and misrepresentation,” and that there was a defect in the consent of Aleja in the execution of the documents because she was then residing with Angeles, had not been fully substantiated. They failed to show that the uniform price of P2,000 in all the sales was grossly inadequate. It should be emphasized that the sales were effected between a mother and two of her children in which case filial love must be taken into account.

3.    Defendants proved they have means to purchase the properties
Angeles and Roman amply proved that they had the means to purchase the properties. Petitioner Margarito Almendra himself admitted that Angeles had a sari-sari store and was engaged in the business of buying and selling logs. 20 Roman was a policeman before he became an auto mechanic and his wife was a school teacher.  21

4.    Conjugal property; Aleja cannot claim title for definite portion of the conjugal property before its partition
The 10 August 1973 sale to Angeles of one-half portion of the conjugal property covered by OCT P-10094 may only be considered valid as a sale of Aleja’s one-half interest therein. Aleja could not have sold the particular hilly portion specified in the deed of sale in the absence of proof that the conjugal partnership property had been partitioned after the death of Santiago. Before such partition, Aleja could not claim title to any definite portion of the property for all she had was an ideal or abstract quota or proportionate share in the entire property.

5.    Paraphernal property; Sale valid
The sale of the one-half portion of the parcel of land covered by Tax Declaration 27190 is valid because the said property is paraphernal being Aleja’s inheritance from her own father.

6.    Land subject to Civil Case 4387; Aleja could not have intended the sale of whole property already subdivided
As regards the sale of the property covered by Tax Declaration 11500, since the property had been found in Civil Case 4387 to have been subdivided, Aleja could not have intended the sale of the whole property covered by said tax declaration. She could exercise her right of ownership only over Lot 6366 which was unconditionally adjudicated to her in said case.

7.    Caveat emptor on Lot 6352; Lot still subject to rights of Magdaleno Ceno
Lot 6352 was given to Aleja in Civil Case 4387 “subject to whatever may be the rights thereto of her son Magdaleno Ceno.” A reading of the deed of Sale covering this parcel of land would show that the sale is subject to the condition stated above; hence, the rights of Magdaleno Ceno are amply protected. The role on caveat emptor applies.

Philippine Trust Company vs. PNB [G.R. No. 16483.  December 7, 1921.]
First Division, Johns (J): 7 concur

Facts: The Philippine Trust company and the Philippine National Banks are corporations organized under the laws of the Philippine Islands and domiciled in the city of Manila. Salvador Hermanos was a copartnership and during the month of January 1919, executed to PNB 8 promissory notes aggregating P156,000, payable on demand, and each secured by a quedan, or warehouse receipt, issued by the firm of Nieva, Ruiz & Company. Each note recites that it is payable on demand after date, for value received, and that the firm has deposited “with the said bank as collateral security for the payment of this note, or any note given in extension or renewal thereof, as well as for the payment of any other liability or liabilities of the undersigned to the said bank, due or to become due, whether now existing or hereafter arising, the following property owned by the undersigned.” The note then specifies the number of the quedan and the amount of copra in piculs, and states that the quedan was issued by Nieva, Ruiz & Company. The note for P8,000, dated 18 January 1919, was secured by warehouse Receipt 30; for P20,000, dated 22 January 1919, was secured by Receipt 35; for P20,000, dated 24 January 1919, was secured by Receipt 38; for P20,000, dated 27 January 1919, was secured by Receipt 41; for P14,000, dated 28 January 1919, was secured by Receipt 42; for P18,000, dated 21 January 1919, was secured by Receipt 33; for P18,000, dated 23 January 1919, was secured by Receipt 36; and for P18,000, dated 25 January 1919, was secured by Receipt  39, making a total of 16,051.10 piculs of copra, covered by the warehouse receipts of the firm of Nieva, Ruiz & Company issued to the firm of Salvador Hermanos, and by that firm pledged as collateral to PNB to secure the payment of the eight notes. Each of them further recites that “on the nonperformance of this promise, or upon the non-payment of any of the liabilities above-mentioned, or upon the failure of the undersigned forthwith, with or without notice, to furnish satisfactory additional securities in case of decline, as aforesaid, then and in either such case, this note and all liabilities of the undersigned, or any of them, shall forthwith become due and payable, without demand or notice, and full power and authority are hereby given to said bank to sell, assign transfer and deliver the whole of the said securities, or any part thereof, or any substitutes therefor or any additions thereto, or any other securities or property given unto or left in the possession of or hereafter given unto or left in the possession of the said bank by the undersigned for safe keeping or otherwise, at any brokers’ board or at public or private sale, at the option of said bank or of its president or secretary, without either demand, advertise mentor notice of any kind, which are hereby expressly waived. At any such sale, the said bank may itself purchase the whole or any part of the property sold, free from any right of redemption on the part of the undersigned, which is hereby waived and released.” Stamped in red ink across the face of each quedan are the words “Negotiable Warrant,” and each of them was in the usual form of warehouse receipts. On 10 February 1919, the firm of Salvador Hermanos withdrew from the bank, by and with its consent, warehouse receipts 33, 36, and 39, which the bank was holding as collateral security for each of the 3 18,000-peso notes amounting to P54,000. The total amount of copra evidenced by the receipts withdrawn was 6,024.55 piculs, the declared value of which, shown on the face of such receipts, was P90,368.25. At the time of the withdrawal, the firm executed a writing, promising to return to the bank the warehouse receipts on or before the 27 January, the receipts being guaranteed by the attached certificate of existence of the effects issued by the firm on 8 February 1919. Neither writing was in any manner authenticated by a notary or by a competent public official. The writing of February 10 is in form a receipt from the firm of Salvador Hermanos to the PNB of the quedans, or warehouse receipts, for the copra. The one of February 8 is, in legal effect, the certificate of Salvador Hermanos “that there exist the following articles in our bodegas as follows:” That is to say, that the firm certifies that the property described is in the warehouse of the firm.

On 21 April 1919, Salvador Hermanos filed a petition of insolvency in the CFI Manila. On 3 May 1919, Gregorio Salvador, a member of the firm of Salvador Hermanos, delivered certain goods, wares, and merchandise to and in the warehouse of Nieva, Ruiz & Company, and requested that firm to issue its receipt therefor to and in favor of the PNB, and that, pursuant to such request, that firm did issue 8 quedans to the bank (161 for 32 bales of hemp; 162 for 953 bundles of rattan; 165 for 72 bundles of empty sacks; 167 for 136 sacks of gum; 168 for 1,461 bales of kapok; 175 for 288 packages of Talcum Powder; 176 for 35 packages of cardboard; and 185 for 134 bundles of empty sacks). On and between 6 May 1919 and 7 August 1919, acting under the terms and provisions of its respective notes, the bank sold all of the personal property for which it held warehouse receipts, or which had been surrendered to it by the Hermanos firm, save and except the property described in the three warehouse receipts, which were released and surrendered to that firm on 10 February 1919. Based upon its insolvency petition, and in the ordinary course of business, the firm of Salvador Hermanos was adjudged insolvent, and on 19 July 1919, the Philippine Trust Company was elected assignee of said firm and duly qualified. On 13 September 1919, as such assignee, it made a demand upon the bank for the surrender and delivery of the property described in all of the above receipts.

Upon the bank’s refusal, Philippine Trust Company commenced this action to recover its value alleged to be P242,579.61, claiming that on 21 April 1919, the firm of Salvador Hermanos was the sole and exclusive owner of the property, and that, as to the copra, about 28 June 1919, and after the filing of the insolvency petition, the bank unlawfully seized and converted the copra to its own use, the value of which was P192,260. For a second cause of action, Philippine Trust alleged that, as such assignee, it was the owner of the remaining personal property, and that, after the insolvency petition was filed, the bank unlawfully seized and converted such property to its own use, and that it was of the value of P50,319.61. For answer, the bank makes a general denial, as to each cause of action, of all of the material allegations of the complaint.

The Supreme Court, on the first cause of action, held that in January 1919, the bank became and remained the owner of the 5 quedans 30, 35, 38, 41, and 42; that they were in form negotiable, and that, as such owner, it was legally entitled to the possession and control of the property therein described at the time the insolvency petition was filed and had a right to sell it and apply the proceeds of the sale to its promissory notes, including the 3 notes of P18,000 each, which were formerly secured by the 3 quedans 33, 36, and 39, which the bank surrendered to the firm. That is to say, the bank had a legal right to apply the Proceeds from the property described in the five remaining quedans to the payment of its eight promissory notes. The Court, however reversed the judgment of the lower court as to the second cause of action, and one entered in favor of the Philippine Trust Company and against the PNB, for P40,742.62, the declared value of the property described in quedans Nos. 161 to 185, inclusive, and for the further sum of P7,631.40, the value of the gasoline sold in May, 1919, or a total of P48,374.02, with interest thereon from September 22, 1919, at the rate of 6 per cent per annum, and for the costs and disbursements in the Courts.

1.    Purpose of Act 1956 or the Insolvency Law
Act 1956 of the Philippine Legislature provides for the suspension of payments, the relief of insolvent debtors, the protection of creditors, and the punishment of fraudulent debtors.

2.    Section 1 of Act 1956
Section 1 provides that “this Act shall be known and may be cited as The Insolvency Law, and in accordance with its provisions every insolvent debtor may be permitted to suspend payments or be discharged from his debts and liabilities.”

3.    Section 2 of Act 1956
Section 2 provides that debtor who possesses sufficient property to cover the debts, be it an individual, firm or corporation, and who is unable to meet them at maturity, “may petition that he be declared in the state of suspension of payments by the court, or the judge thereof in vacation.”

4.    Section 3 of Act 1956
Section 3 enacts that upon the filing of the petition, the court shall make an order calling a meeting of creditors specifying the time and place; that notice thereof shall be published in a newspaper, and that “said order shall further contain an absolute injunction forbidding the petitioning debtor from disposing in any manner of his property, except in so far as concerns the ordinary operations of commerce or of industry in which the petitioner is engaged, and, furthermore, from making any payments outside of the necessary or legitimate expenses of his business or industry, so long as the proceedings relative to the suspension of payments are pending, and said proceedings for the purposes of this Act shall be considered to have been instituted from the date of the filing of the petition.”

5.    Section 14 of Act 1956
Section 14, chapter 3, provides that any person owing debts exceeding P1,000 may apply to be discharged from his debts and liabilities by petition to the Court of First Instance in which he has resided for six months preceding the filing of the petition.

6.    Section 18 of Act 1956
Section 18 enacts that upon receiving and filing of the petition, schedule, and inventory, the court, or the judge, shall make an order declaring the petitioner insolvent, and “shall further forbid the payment to the debtor of any debts due to him and the delivery to the debtor, or to any person for him, of any property belonging to him, and the transfer of any property by him, and shall further appoint a time and place for a meeting of the creditors to choose an assignee of the estate.”

7.    Quedans recognized to be owned by PNB
At the time the eight promissory notes were executed, a given quedan, or warehouse receipt, was described and incorporated in the note as to its number, when and by whom issued, and the property it represented, and each receipt was then delivered by the firm to the defendant bank, all of which was during the month of January, 1919. The bank never had the manual possession or the physical control of any of this property until after the insolvency petition was filed, and it is for such reason that the plaintiff claims that it was the property of the firm, and that the defendant should account to the assignee. Each quedan, or warehouse receipt, was specifically described in a given note, and was made a part of it, and the note recites that, for any breach of its terms or conditions, the bank has full power and authority “to sell, assign, transfer and deliver the whole of the said security, or any part thereof, etc.,” and that “at any such sale, the said bank may itself purchase the whole or any part of the property sold, free from any right of redemption on the part of the undersigned, which is hereby waived and released.” In addition, the quedan itself was delivered to and held by the bank, and the warehouseman recognized the bank as the owner of the property. Legally speaking, the owner of the quedans, or warehouse receipts, was the owner of the property described in them, and the quedans were given as collateral to secure promissory notes, which, for value received, were executed to the bank.

8.    The execution of the notes, the physical possession of the negotiable quedan, or warehouse receipt, and the recognition of ownership by the warehouseman, legally carries with it both the title to, and the possession of, the property
The execution of the notes, the physical possession of the negotiable quedan, or warehouse receipt, and the recognition of ownership by the warehouseman, legally carries with it both the title to, and the possession of, the property. In such a case, title is not founded on a public instrument which should be authenticated by a notary or by a competent public official. Legally speaking, the execution of the promissory notes and the pledging of the quedans, or warehouse receipts, as collateral, and the describing of them in the notes, and the manual delivery of the quedan, or warehouse receipt itself, carries with it not only the title, but the legal possession of the property. In other words, as to the property described in the quedans, or warehouse receipts, which were pledged, as collateral, in January, 1919, to secure the eight respective promissory notes, both the title and the possession of that property were delivered to and vested in PNB  in January 31919. Three of those quedans, or warehouse receipts, were returned to the firm by the bank on 10 February 1919, but the bank still owned and held the notes, which were secured but those warehouse receipts, and no part of the debt itself was paid by or through the surrender of the receipts.

9.     Legal effect of the 10 February receipt; Statement of 8 February merely a representation of property inside its warehouse; Writing does not vest ownership of warehoused items to PNB
The legal effect of this receipt is a promise on the part of the firm to return the three quedans on or before 27 January 1919, and a statement that such receipts are guaranteed by the attached certificate of the existence in the warehouse of the property described in the certificate.  The statement of February 8, recites “we hereby certify that there exist the following articles in our bodegas.” Then follows a description of the property. This is nothing but a statement or representation to the effect that the firm has the property in its warehouse. Nothing more. After describing the property, the certificate then says: “And promise that none of the above articles would be removed without consulting first with the Philippine National Bank.” There is no statement or representation of any kind showing when or from whom the property was received, or how it was held, or who was the owner, or when or to whom it would be delivered. When analyzed, this writing is nothing more than a certificate of the firm that the described property was then in its warehouse, and a promise that none of the “articles would be removed without consulting first with the Philippine National Bank.” Such a writing would not transfer the title of the property to the bank, or give it possession, either actual or constructive. It will be noted that both the receipt of February 10 and the certificate and promise of February 8, are signed by the firm of Salvador Hermanos, and that the certificate says that the property was then in the firm’s warehouse, and that neither instrument was in any manner authenticated by a notary or a competent public official, as provided by article 1216 of the Civil Code, and that the property was in the warehouse of the firm.

10.    Article 1863 of the Civil Code; Property not left to the possession of the bank; thus it cannot sell, transfer and deliver the whole or part of said securiies
Article 1863 of the Civil Code provides “In addition to the requisites mentioned in article 1857, it shall be necessary, in order to constitute the contract of pledge, that the pledge be placed in the possession of the creditor or of a third person appointed by common consent.” It appears in the present case however that from the certificate that the property was then in the possession of the firm, who made the certificate, and that it was in the possession of that firm when its insolvency petition was filed on 21 April 1919. It will be noted that the promissory notes executed by the firm to the bank recite that “Full power and authority are hereby given to said bank to sell, assign, transfer and deliver the whole of the said securities, or any part thereof, or any substitutes therefor or any additions thereto, or any other securities or property given unto or left in the possession of or hereafter given unto or left in the possession of the said Bank by the undersigned.” Thus, the power and authority of the bank to sell, assign, or transfer is confined to property which was given unto or left in its possession. None of the property described in the certificate of February 8 was ever given unto or left in the possession of the bank.

11.    Capacity of Philippine Trust Company; Although appointed July 19, power and authority was vested on it 21 April 1919 when the insolvency petition was filed
The insolvency petition was filed 21 April 1919, and the Philippine Trust Co was duly elected and qualified, as assignee, on 19 July 1919, and, as such, it represents both the creditors and the firm. Although it was not appointed until July 1919, yet when it did qualify its right and title to all the property of the firm related back and became vested as of 21 April 1919, when the insolvency petition was filed, and from that time it alone had the power and authority to act for and represent the firm. Under the terms and provisions of Act 1956 of the Philippine Legislature, after it was filed, the power of the firm or any member of it to deliver possession of the property to secure a preexisting debt was suspended pending final adjudication. That is to say, if the debt was not legally secured before the insolvency petition was filed, no member of the firm had any legal right to secure it after the petition was filed, and any attempt to do so would be null and void.

Siy Cong Bieng and Co. vs. Hongkong and Shanghai Banking Corp. [G.R. No. 34655.  March 5, 1932.]
En Banc, Ostrand (J): 6 concur

Facts: Siy Cong Bieng & Co., a corporation engaged in business generally, and Hongkong & Shanghai Banking Corporation, a foreign bank authorized to engage in the banking business in the Philippines, are domiciled in the City of Manila. On 25 June 1926, certain negotiable warehouse receipts were pledged by Otto Ranft to the bank to secure the payment of his preexisting debts to the latter (Siy Cong Bieng as depositor: 1707, Public Warehouse Co., 27 bales; 133, W.F. Stevenson Co, 67 bales; 1722, Public Warehouse Co., 60 bales; 1723, W.F. Stevenson Co, 4 bales; 1634, The Philippine Warehouse Company, 99 bales; 1702, The Philippine Warehouse Company, 39 bales. O. Ranft as depositor: 1918, Public Warehouse Co, 166 bales; 2, Siy Cong Bieng & Co. Inc., 2 bales). The baled hemp covered by the warehouse receipts was worth P31,635; receipts numbers 1707, 133, 1722, 1723, 1634, and 1702 being endorsed in blank by Siy Cong Bieng and Otto Ranft, and numbers 1918 and 2, by Otto Ranft alone. On 25 June 1926, Ranft called at the office of Siy Cong Bieng to purchase hemp (abaca), and he was offered the bales of hemp as described in the quedans. The parties agreed to the price (P31,645), and on the same date the quedans, together with the covering invoice, were sent to Ranft, without having been paid for the hemp, but Siy Cong Bieng’s understanding was that the payment would be made against the same quedans, and it appears that in previous transactions of the same kind between the bank and Siy Cong Bieng, quedans were paid one or two days after their delivery to them. In the evening of the day upon which the quedans in question were delivered to the bank, Ranft died suddenly at his home in the city of Manila, and when Siy Cong Bieng found that such was the case, it immediately demanded the return of the quedans, or the payment of the value, but was told that the quedans had been sent to the bank as soon as they were received by Ranft.

Siy Cong Bieng filed a claim for the sum of P31,645 (the value of 464 bales of hemp deposited in certain bonded warehouses) in the intestate proceedings of the estate of the deceased Otto Ranft, which on an appeal from the decision of the committee on claims, was allowed by the CFI in case 31372 (City of Manila). In the meantime, demand had been made by Siy Cong Bieng on the bank for the return of the quedans (warehouse receipts), or their value, which demand was refused by the bank on the ground that it was a holder of the quedans in due course. Thereupon Siy Cong Bieng filed its first complaint against the bank, wherein it alleged that it had “sold” the quedans in question to the deceased Ranft for cash, but that the said Ranft had not fulfilled the conditions of the sale. Later on, Siy Cong Bieng filed an amended complaint, wherein they changed the word “sold” referred to in the first complaint to the words “attempted to sell”. Upon trial the judge of the lower court rendered judgment in favor of Siy Cong Bieng.

The Supreme Court reversed the appealed judgment and absolved the bank from the complaint; Without costs.

1.    Circumstances involving the quedans
The quedans in question were negotiable in form. They were pledged by Otto Ranft to the bank to secure the payment of his preexisting debts to said bank. Such of the quedans as were issued in the name of Siy Cong Bieng were duly endorsed in blank by Siy Cong Bieng and by Otto Ranft. The two remaining quedans which were issued directly in the name of Otto Ranft were also duly endorsed in blank by him.

2.    Quedans were received by the bank to secure the payment of Ranft’s preexisting debts
When the quedans were negotiated, Otto Ranft was indebted to the Hongkong & Shanghai Banking Corporation in the sum of P622,753.22, which indebtedness was partly covered by quedans. He was also being pressed to deposit additional payments as a further security to the bank.

3.    No evidence that bank is bound to pay back Ranft the amount of the quedans; On the delivery of the quedans, indorser does not own property anymore unless he liquidated his debt with the bank
It has been the practice of the bank in its transactions with Ranft that the value of the quedans has been entered in the current accounts between Ranft and the bank, but there is no evidence to the effect that the bank was at any time bound to pay back to Ranft the amount of any of the quedans. There is also nothing in the record to show that the bank has promised to pay the value of the quedans neither to Ranft nor to Siy Cong Bieng. On the contrary, as stated in the stipulation of facts, the “negotiable warehouse receipts — were pledged by Otto Ranft to the Hongkong & Shanghai Banking Corporation to secure the payment of his preexisting debts to the latter”, and taking into consideration that the quedans were negotiable in form and duly endorsed in blank by Siy Cong Bieng and by Otto Ranft, it follows that on the delivery of the quedans to the bank they were no longer the property of the indorser unless he liquidated his debt with the bank.

4.    No compelling reason to compel bank to investigate indorser
There is nothing in the record which in any manner would have compelled the bank to investigate the indorser, especially as to his authority to negotiate the quedans. The bank had a perfect right to act as it did, and its action is in accordance with sections 47, 38, and 40 of the Warehouse Receipts Act (Act 2137).

5.    Section 47 of the Warehouse Receipts Act; When negotiation not impaired by fraud, mistake or duress
Section 47 (When negotiation not impaired by fraud, mistake, or duress) provides that “the validity of the negotiation of a receipt is not impaired by the fact that such negotiation was a breach of duty on the part of the person making the negotiation, or by the fact that the owner of the receipt was induced by fraud, mistake, or duress to intrust the possession or custody of the receipt to such person, if the person to whom the receipt was negotiated, or a person to whom the receipt was subsequently negotiated, paid value therefor, without notice of the breach of duty, or fraud, mistake, or duress.”

6.    Section 38 of the Warehouse Receipts Act; Negotiation of negotiable receipts by indorsement
Section 38 (Negotiation of negotiable receipts by indorsement) provides that “a negotiable receipt may be negotiated by the indorsement of the person to whose order the goods are, by the terms of the receipt, deliverable. Such indorsement may be in blank, to bearer or to a specified person. . . Subsequent negotiation may be made in like manner.”

7.    Section 40 of the Warehouse Receipts Act; Who may negotiate a receipt
Section 40 (Who may negotiate a receipt) provides that “a negotiable receipt may be negotiated “(a) By the owner thereof, or (b) By any person to whom the possession or custody of the receipt has been entrusted by the owner, if, by the terms of the receipt, the warehouseman undertakes to deliver the goods to the order of the person to whom the possession or custody of the receipt has been entrusted, or if at the time of such entrusting the receipt is in such form that it may be negotiated by delivery.”

8.    Rights of bank over the quedans after indorsement; Section 41 of the Warehouse Receipts Act
The rights the bank acquired over the quedans after indorsement and delivery to it by Ranft are covered by Section 41 of the Warehouse Receipt Act. Section 41 (Rights of person to whom a receipt has been negotiated) provides that “a person to whom a negotiable receipt has been duly negotiated acquires thereby: (a) Such title to the goods as the person negotiating the receipt to him had or had ability to convey to a purchaser in good faith for value, and also such title to the goods as the depositor of person to whose order the goods were to be delivered by the terms of the receipt had or had ability to convey to a purchaser in good faith for value.”

9.    Use of warehouse receipts as documents of title; Intrusting receipts more than delivery, it is to intrust title to the goods; Purchasers for value entitled to rely on representation despite breach of trust and agreement
In the case of the Commercial National Bank of New Orleans vs. Canal-Louisiana Bank & Trust Co. (239 U. S., 520), it was observed that “one who takes by trespass or a finder is not included within the description of those who may negotiate.” (Report of Commissioner on Uniform State Laws, January 1, 1910, p. 204.) Aside from this, the intention is plain to facilitate the use of warehouse receipts as documents of title. Under Section 40, the person who may negotiate the receipt is either the “owner thereof”, or a “person to whom the possession or custody of the receipt has been intrusted by the owner” if the receipt is in the form described. The warehouse receipt represents the goods, but the intrusting of the receipt, as stated, is more than the mere delivery of the goods; it is a representation that the one to whom the possession of the receipt has been so intrusted has the title to the goods. By Section 47, the negotiation of the receipt to a purchaser for value without notice is not impaired by the fact that it is a breach of duty, or that the owner of the receipt was induced “by fraud, mistake, or duress” to intrust the receipt to the person who negotiated it. And, under Section 41, one to whom the negotiable receipt has been duly negotiated acquires such title to the goods as the person negotiating the receipt to him, or the depositor or person to whose order the goods were deliverable by the terms of the receipt, either had or “had ability to convey to a purchaser in good faith for value.” The clear import of these provisions is that if the owner of the goods permits another to have the possession or custody of negotiable warehouse receipts running to the order of the latter, or to bearer, it is a representation of title upon which bona fide purchasers for value are entitled to rely, despite breaches of trust or violations of agreement on the part of the apparent owner.

10.    Siy Cong Bieng estopped to deny bank had valid title to the quedans
Siy Cong Bieng is estopped to deny that the bank had a valid title to the quedans for the reason that Siy Cong Bieng had voluntarily clothed Ranft with all the attributes of ownership and upon which the bank relied.

11.    Equitable estoppel; Where one or two innocent persons must suffer a loss, he who by his conduct made the loss possible must bear it
In the National Safe Deposit vs. Hibbs (229 U. S., 391), certain certificates of stock were pledged as collateral by the defendant in error to the bank, which certificates were converted by one of the trusted employees of the bank to his own use and sold by him. The stock certificates were unqualifiedly endorsed in blank by the defendant when delivered to the bank. The Supreme Court of the United States applied the familiar rule of equitable estoppel that where one of two innocent persons must suffer a loss he who by his conduct made the loss possible must bear it. Thus, when the broker obtained the stock certificates, containing all the indicia of ownership and possible of ready transfer, from one who had possession with the bank’s consent, and who brought the certificates to him, apparently clothed with the full ownership thereof by all the tests usually applied by business men to gain knowledge upon the subject before making a purchase of such property. On the other hand, the bank, for a legitimate purpose, with confidence in one of its own employees, instrusted the certificates to him, with every evidence of title and transferability upon them. The bank’s trusted agent, in gross breach of his duty, whether with technical criminality or not is unimportant, took such certificates, thus authenticated with evidence of title, to one who, in the ordinary course of business, sold them to parties who paid full value for them. In such case we think the principles which underlie equitable estoppel place the loss upon him whose misplaced confidence has made the wrong possible.

12.    No remedy available to Siy Cong Bieng
Siy Cong Bieng has suffered the loss of the quedans, but there is now no remedy available to it. The bank is not responsible for the loss; the negotiable quedans wee duly negotiated to the bank and as far as the record shows, there has been no fraud on the part of the bank.

Azcona vs. Reyes [G.R. No. 39590.  February 6, 1934.]
Second Division, Villa-Real (J): 4 concur

Facts: On 11 October 1920, Florentina Cordero, now deceased, executed a power of attorney authorizing her only daughter, Alberta L. Reyes, to mortgage in her name and representation all her land situated in the municipality of Pola, Mindoro. On 22 October 1920, Reyes, personally and as attorney in fact of her mother Florentina Cordero, in consideration of the sum of P6,500 received from Enrique Azcona, now deceased, sold to the latter, with the right of repurchase within the period of 4 years, 5 parcels of land with certificates of title belonging to her and Cordero. The vendors became lessees of the property sold, at a yearly rental of P780. On 23 October 1920, Reyes, as attorney in fact of Cordero, in consideration of the sum of P5,000 received from Azcona, sold to the latter, with the right of repurchase within the period of 4 years, a parcel of land with certificate of title 58 of the registry of deeds of Mindoro, belonging to Cordero. Cordero became the lessee of said property at a yearly rental of P600. On 1 October 1925, Reyes and Cordero jointly executed a power of attorney authorizing Gregorio Venturanza to sell and encumber all their real and personal including their cattle. Azcona died on 12 May 1925, and was succeeded in all his rights by his only son, Jesus Azcona, to whom the entire estate of his deceased father, together with the credits, was judicially adjudicated.

Inasmuch as neither Reyes nor Cordero, during her lifetime, had exercised her right of redemption within the period of4 years, and inasmuch as they had asked for an extension of time, on 29 November 1926, Gregorio Venturanza, as attorney in fact of Reyes and Cordero, on one side, and Jesus Azcona, on the other, executed a deed whereby the deeds of sale with the right of repurchase dated October 22 and 23, 1920, respectively, were cancelled and their respective amounts of P6,500 and P5,000, together with the sum of P1,000 representing the unpaid accrued interest thereon, or a total amount of P12,500, were converted into a mortgage credit. In order to secure the cancellation of the registration of the alleged sales with the right of repurchase, the parcels of land described in the respective deeds were resold to the vendors and a mortgage was constituted thereon to secure the payment of said mortgage credit of P12,500 within the period of 2 years, extensible to another two years, with interest at 12% per annum. Under said contract the mortgagors Reyes and Cordero were permitted to liquidate said debt by installments in the sum of P2,500 with the interest due, to be paid on December 1 of every year, beginning in 1927. Reyes and Cordero, through Venturanza, paid by way of amortization and interest (P2,500 on 15 February 1927, P2,200 on 17 October 1927, P1,200 on 9 February 1929, P350 on 30 June 1929, and P600 on 20 September 1929; leaving a balance of P8,935.12). Since the last mentioned date, the mortgagors failed to pay amortization and interest so that on 30 June 1932, the unpaid balance thereof together with the unpaid accrued interest amounted to P11,958.05.

. The parties (Jesus Azcona, on one hand; and Alberta Reyes and Gervasio Larracas as special administrator of the estate of Florentina Cordero, on the other) admit and the trial court so found that, although the instruments are in the form of deeds of sale with pacto de retro, in reality they represent mortgage loans. The CFI ordered Reyes, as administratix of Cordero’s estate, to pay Azcona the um of P11,985.05 with 12% interest until fully paid, 10$ of the sum representing expenses and attorney’s fees, and P2 as fees for the registration of the mortgage deed. The court also ordered that in case Reyes fails to pay the sums within 90 days from final judgment, the parcels of land shall be sold at public auction and the proceeds thereof applied to the payment of the sum and the balance delivered to Reyes. Reyes and Larracas appealed separately.

The Supreme Court found no error in the judgment appealed from, and thus affirmed it in toto, with the costs against Reyes and Larracas.

1.    Deeds of sale are not true deeds of pacto de retro sale but of mortgage; Resale mere formality to cancellation of registration and the notation of the mortgage deed
The instruments are not true deeds of sale with pacto de retro but of mortgage, the resale of the parcels of land, made by Jesus Azcona in favor of Reyes and Cordero, is null and void on the ground that, as mere mortgagors, they never ceased to be the owners thereof and that Enrique Azcona, as a mere mortgagee, never acquired any title of ownership thereto. In order for a sale to be valid, it is necessary that the vendor be the owner of the thing sold, inasmuch as it is a principle of law that nobody can dispose of that which does not belong to him. However, the sales with pacto de retro were fictitious for the reason that the contracts entered into by Reyes and the deceased Enrique Azcona were really mortgage in their nature. Therefore, the resale was a mere formality resorted to for the purpose of obtaining the lawful cancellation of the registration thereof in the registry of deeds and the notation of the mortgage deed.

2.    Mortgage deed not void, does not lack consideration or principal obligation which it purports to secure
Reyes received the sum of P6,500 and another sum of P5,000 from the deceased Enrique Azcona, both sums representing the purchase price of certain parcels of land, which were sold with the right of repurchase. The sum of P12,500 which constitutes the cause or consideration of the deed of resale and mortgage Exhibit A is the total of the sums of P6,500 and P5,000 which Reyes, personally and as attorney in fact of Cordero, received from Enrique Azcona, together with the sum of P1,000 representing the unpaid credits passed by inheritance to Jesus Azcona. It cannot be said that the mortgage, executed by Venturanza, as attorney in fact of Reyes and Cordero, in favor of Jesus Azcona, lacks consideration or principal obligation for the fulfillment of which said instrument was executed as security.

3.    Contracts of mortgage loans executed in form (attachment of SPA), binds Cordero
Upon examination of said documents, Reyes made it appear that she acted as Florentina Cordero’s attorney in fact under a power of attorney issued to her by attaching a copy of said power of attorney to the deed in question. In the case of Orden de Dominicos vs. De Coster (50 Phil., 115), the Court held that such form is valid and sufficient under the law. Considered as mere contracts of mortgage loans, the deeds dated 22-23 October 1920 are binding upon Cordero, and compliance with the obligations contracted thereunder may be demanded in her intestate proceedings either as credit in favor of the intestate estate of Enrique Azcona or as credit in favor of Jesus Azcona against Cordero under the mortgage deed.

4.    No statement of facts of alleged usury
In regard to the question of usury raised, although it is true that failure to file a sworn answer to a cross-complaint for the recovery of usurious interest paid implies an admission of the existence of a usurious rate of interest (Lo Bun Chay vs. Paulino, 54 Phil., 144, cited with approval in the case of Ramirez and Polido vs. Bergado, 56 Phil., 810), however, the counterclaim and cross-complaint filed in the present case failed to state facts constituting the alleged usury but merely allege that in payment of a debt of P9,500 Azcona and his predecessor in interest received the amount of P20,130. Such statement does not in itself constitute an allegation of usury and failure to file a reply thereto implies denial of such allegation (Sec. 104, Act No. 190).

5.    Existence of usurious interest not proven; 12% per annum stipulated, Charging compound interest does not make loan usurious
The existence of usurious interest has not been proven during the trial inasmuch as it is stipulated that the vendors, as lessees, would have to pay the sum of P1,380 as yearly rental. Such sum, computed on the basis of a capital of P11,500 gives a rate of interest of only 12% per annum, which is allowed by law (Robinson vs. Sackermann and Postal Savings Bank, 46 Phil., 539). Furthermore, in the deed of resale and mortgage loan, interest at the rate of only 12% per annum is stipulated. The existence of a stipulation to the effect that accrued interest shall bear interest does not imply that the loans in question are usurious inasmuch as it is permitted to charge compound interest (sec. 5, Act No. 2655, as amended by sec. 3 of Act No. 3291; Cu Unjieng e Hijos vs. Mabalacat Sugar Co., 54 Phil., 976).

EDCA Publishing vs. Santos [G.R. No. 80298.  April 26, 1990.]
First Division, Cruz (J): 4 concur

Facts: On 5 October 1981, a person identifying himself as Professor Jose Cruz placed an order by telephone with EDCA Publishing and Distributing Corp. for 406 books, payable on delivery. EDCA prepared the corresponding invoice and delivered the books as ordered, for which Cruz issued a personal check covering the purchase price of P8,995.65. On 7 October 1981, Cruz sold 120 of the books to Leonor Santos who, after verifying the seller’s ownership from the invoice he showed her, paid him P1,700.00. Meanwhile, EDCA having become suspicious over a second order placed by Cruz even before clearing of his first check, made inquiries with the De la Salle College where he had claimed to be a dean and was informed that there was no such person in its employ. Further verification revealed that Cruz had no more account or deposit with the Philippine Amanah Bank, against which he had drawn the payment check. EDCA then went to the police, which set a trap and arrested Cruz on 7 October 1981. Investigation disclosed his real name as Tomas de la Peña and his sale of 120 of the books he had ordered from EDCA to Leonor Santos (and Gerardo Santos, doing business as Santos Bookstore). On the night of said date 7 October 1981, EDCA sought the assistance of the police in Precinct 5 at the UN Avenue, which forced their way into Santos Bookstore and threatened Leonor Santos with prosecution for buying stolen property. They seized the 120 books without warrant, loading them in a van belonging to EDCA, and thereafter turned them over to EDCA. Protesting this high-handed action, the Santos spouses sued for recovery of the books after demand for their return was rejected by EDCA. A writ of preliminary attachment was issued and EDCA, after initial refusal, finally surrendered the books to the Santos spouses.

Ownership of the books was recognized in the Santos spouses by the Municipal Trial Court, which was sustained by the Regional Trial Court, which was in turn sustained by the Court of Appeals. EDCA appealed to the Supreme Court.

The Supreme Court affirmed the challenged decision and denied the petition, with costs against EDCA Publishing.

1.    Article 559 of the Civil Code
Article 559 provides that “The possession of movable property acquired in good faith is equivalent to a title. Nevertheless, one who has lost any movable or has been unlawfully deprived thereof, may recover it from the person in possession of the same. If the possessor of a movable lost or of which the owner has been unlawfully deprived has acquired it in good faith at a public sale, the owner cannot obtain its return without reimbursing the price paid therefor.

2.    Arbitrary action, act of taking the law on own hands, condemned
The Court expresses its disapproval of the arbitrary action of EDCA Publishing in taking the law into its own hands and forcibly recovering the disputed books from the Santos spouses. The circumstance that it did so with the assistance of the police, which should have been the first to uphold legal and peaceful processes, has compounded the wrong even more deplorably. Questions, such as the ownership of the books, are decided not by policemen but by judges and with the use not of brute force but of lawful writs.

3.    Possession of movable property acquired in good faith equivalent to title
The first sentence of Article 559 provides that “the possession of movable property acquired in good faith is equivalent to a title,” thus dispensing with further proof. It cannot be said that the spouses cannot establish their ownership of the disputed books because they have not even produced a receipt to prove they had bought the stock.

4.    Santos a purchaser in good faith, even if books were bought at discount
Leonor Santos first ascertained the ownership of the books from the EDCA invoice showing that they had been sold to Cruz, who said he was selling them for a discount because he was in financial need. The Santos spouses are in the business of buying and selling books and often deal with hard-up sellers who urgently have to part with their books at reduced prices. To Leonor Santos, Cruz must have been only one of the many such sellers she was accustomed to dealing with. It is hardly bad faith for any one in the business of buying and selling books to buy them at a discount and resell them for a profit.

5.    Contract of sale consensual and is perfected upon agreement
The contract of sale is consensual and is perfected once agreement is reached between the parties on the subject matter and the consideration. According to Article 1475 of the Civil Code, “The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts.” Article 1477, on the other hand, provides that “The ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof.” Article 1478 provides that “The parties may stipulate that ownership in the thing shall not pass to the purchaser until he has fully paid the price.”

6.    Rule in the transfer of ownership
Ownership in the thing sold shall not pass to the buyer until full payment of the purchase price only if there is a stipulation to that effect. Otherwise, the rule is that such ownership shall pass from the vendor to the vendee upon the actual or constructive delivery of the thing sold even if the purchase price has not yet been paid. Absent the stipulation, delivery of the thing sold will effectively transfer ownership to the buyer who can in turn transfer it to another.

7.    Effect of non-payment; Relief
Non-payment only creates a right to demand payment or to rescind the contract, or to criminal prosecution in the case of bouncing checks.

8.    Asiatic Commercial Corporation vs. Ang; Company not unlawfully deprived of property, sale valid
In Asiatic Commercial Corporation v. Ang, the company sold some cosmetics to Francisco Ang, who in turn sold them to Tan Sit Bin. Asiatic not having been paid by Ang, it sued for the recovery of the articles from Tan, who claimed he had validly bought them from Ang, paying for the same in cash. Finding that there was no conspiracy between Tan and Ang to deceive Asiatic, the Court of Appeals declared that the company was not unlawfully deprived of the cartons of Gloco Tonic within the scope of this legal provision. It has voluntarily parted with them pursuant to a contract of purchase and sale. The circumstance that the price was not subsequently paid did not render illegal a transaction which was valid and legal at the beginning.

9.    Tagatac vs. Jimenez; Sale voidable due to fraud but subsists as valid until annulled
In Tagatac v. Jimenez, Trinidad C. Tagatac sold her car to Warner Feist, who sold it to Sanchez, who sold it to Jimenez. When the payment check issued to Tagatac by Feist was dishonored, Tagatac sued to recover the vehicle from Jimenez on the ground that she had been unlawfully deprived of it by reason of Feist’s deception. In ruling for Jimenez, the Court of Appeals held that “the fraud and deceit practiced by Feist earmarks this sale as a voidable contract (Article 1390). Being a voidable contract, it is susceptible of either ratification or annulment. If the contract is ratified, the action to annul it is extinguished (Article 1392) and the contract is cleansed from all its defects (Article 1396); if the contract is annulled, the contracting parties are restored to their respective situations before the contract and mutual restitution follows as a consequence (Article 1398). However, as long as no action is taken by the party entitled, either that of annulment or of ratification, the contract of sale remains valid and binding. When Tagatac delivered the car to Feist by virtue of said voidable contract of sale, the title to the car passed to Feist (the title was defective and voidable). Nevertheless, at the time he sold the car to Felix Sanchez, his title thereto had not been avoided and he therefore conferred a good title on the latter, provided he bought the car in good faith, for value and without notice of the defect in Feist’s title (Article 1506). There being no proof on record that Felix Sanchez acted in bad faith, it is safe to assume that he acted in good faith.

10.    Ownership validly transferred to the Santos spouses
Actual delivery of the books having been made, Cruz acquired ownership over the books which he could then validly transfer to the Santos spouses. The fact that he had not yet paid for them to EDCA was a matter between him and EDCA and did not impair the title acquired by the spouses to the books.

11.    Injustice will arise if “unlawfully deprived” would be interpreted in a different manner
One may well imagine the adverse consequences if the phrase “unlawfully deprived” were to be interpreted in the manner premised on the argument that the impostor acquired no title to the books that he could have validly transferred to the spouses. A person relying on the seller’s title who buys a movable property from him would have to surrender it to another person claiming to be the original owner who had not yet been paid the purchase price therefor. The buyer in the second sale would be left holding the bag, so to speak, and would be compelled to return the thing bought by him in good faith without even the right to reimbursement of the amount he had paid for it.

12.    Diligence exercised by Santos, but not by EDCA
Leonor Santos took care to ascertain first that the books belonged to Cruz before she agreed to purchase them. The EDCA invoice Cruz showed her assured her that the books had been paid for on delivery. Santos did not have to go beyond that invoice to satisfy herself that the books being offered for sale by Cruz belonged to him; yet she did. Although the title of Cruz was presumed under Article 559 by his mere possession of the books, these being movable property, Leonor Santos nevertheless demanded more proof before deciding to buy them. By contrast, EDCA was less than cautious — in fact, too trusting — in dealing with the impostor. Although it had never transacted with him before, it readily delivered the books he had ordered (by telephone) and as readily accepted his personal check in payment. It did not verify his identity although it was easy enough to do this. It did not wait to clear the check of this unknown drawer. Worse, it indicated in the sales invoice issued to him, by the printed terms thereon, that the books had been paid for on delivery, thereby vesting ownership in the buyer.

13.    Santos spouses cannot be made to suffer
It would certainly be unfair to make the spouses bear the prejudice sustained by EDCA as a result of its own negligence. There is no justice in transferring EDCA’s loss to the Santoses who had acted in good faith, and with proper care, when they bought the books from Cruz. While the Court sympathized with EDCA for its plight, it is clear that its remedy is not against the spouses but against Tomas de la Peña, who has apparently caused all this trouble.

14.    Santos have the right to complain
The spouses have themselves been unduly inconvenienced, and for merely transacting a customary deal not really unusual in their kind of business. It is they and not EDCA who have a right to complain.

Agricultural and Home Extension Development Group vs. CA [G.R. No. 92310.  September  3, 1992.]
First Division, Cruz (J): 3 concur

Facts: On 29 March 1972, the spouses Andres Diaz and Josefa Mia sold to Bruno Gundran a 19-hectare parcel of land in Las Piñas, Rizal, covered by TCT 287416. The owner’s duplicate copy of the title was turned over to Gundran. However, he did not register the Deed of Absolute Sale because he said he was advised in the Office of the Register of Deeds of Pasig of the existence of notices of lis pendens on the title. On 20 November 1972, Gundran and Agricultural and Home Development Group (AHDG) entered into a Joint Venture Agreement for the improvement and subdivision of the land. This agreement was also not annotated on the title. On 30 August 1976, the spouses Andres Diaz and Josefa Mia again entered into another contract of sale of the same property with Librado Cabautan. On 3 September 1976, by virtue of an order of the CFI Rizal, a new owner’s copy of the certificate of title was issued to the Diaz spouses, who had alleged the loss of their copy. On that same date, the notices of lis pendens annotated on TCT 287416 were canceled and the Deed of Sale in favor of Cabautan was recorded. A new TCT S-33850/T-172 was thereupon issued in his name in lieu of the canceled TCT 287416.

On 14 March 1977, Gundran instituted an action for reconveyance before the CFI Pasay City * against Librado Cabautan and Josefa Mia seeking, among others, the cancellation of TCT 33850/T-172 and the issuance of a new certificate of title in his name. On 31 August 1977, AHDG, represented by Nicasio D. Sanchez, Sr. (later substituted by Milagros S. Bucu), filed a complaint in intervention with substantially the same allegations and prayers as that in Gundran’s complaint. In a decision dated 12 January 1987, Gundran’s complaint and petitioner’s complaint in intervention were dismissed for lack of merit. So was Cabautan’s counterclaims, for insufficiency of evidence.

Upon appeal, this decision was affirmed by the Court of Appeals, with the modification that Josefa Mia was ordered to pay Gundran the sum of P90,000.00, with legal interest from 3 September 1976, plus the costs of suit.

The Supreme Court denied the petition and affirmed in toto the questioned decision; with costs against AHDG.

1.    Article 1544
Under Article 1544 of the Civil Code of the Philippines, it is provided that “If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property. Should 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 the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith.

2.    Preferential right of first to register
The first sale to Gundran was not registered while the second sale to Cabautan was registered. Preferential rights are accorded to Cabautan, who had registered the sale in his favor, as against AHDG’s co-venturer whose right to the same property had not been recorded.

3.    Purchaser in good faith
A purchaser in good faith is defined as “one who buys the property of another without notice that some other person has a right to or interest in such property and pays a full and fair price for the same at the time of such purchase or before he has notice of the claim or interest of some other person in the property.” In the present case, an examination of TCT 287416 discloses no annotation of any sale, lien, encumbrance or adverse claim in favor of Gundran or AHDC.

4.    Registered property under Torrens system; Person charge with notice of burdens noted on the register of title
When the property sold is registered under the Torrens system, registration is the operative act to convey or affect the land insofar as third persons are concerned. Thus, a person dealing with registered land is only charged with notice of the burdens on the property which are noted on the register or certificate of title.

5.    Notices of lis pendes not a lien or encumbrance, merely notice of litigation of property subject to the result of the suit
Notices of lis pendens in favor of other persons were earlier inscribed on the title did not have the effect of establishing a lien or encumbrance on the property affected. Their only purpose was to give notice to third persons and to the whole world that any interest they might acquire in the property pending litigation would be subject to the result of the suit.

6.    Cabautan a purchaser in good faith and for value
Cabautan took the risk of acquiring the property even in the light of notice of lis pendens inscribed in the title. Significantly, three days after the execution of the deed of sale in his favor, the notices of lis pendens were canceled by virtue of the orders of the CFI Rizal, Branch 23, dated 1 and 4 April 1974. Cabautan therefore acquired the land free of any liens or encumbrances and so could claim to be a purchaser in good faith and for value.

7.    No evidence of alleged possession by AHDG
AHDG insists that it was already in possession of the disputed property when Cabautan purchased it and that he could not have not known of that possession. Such knowledge should belie his claim that he was an innocent purchaser for value. However, the courts below found no evidence of the alleged possession, which the Supreme Court must also reject in deference to this factual finding.

8.    Casis vs. CA not applicable; Different issues
The issue in the present case is whether Cabautan is an innocent purchaser for value and so entitled to the priority granted under Article 1544 of the Civil Code. The Casis case, on the other hand, involved the issues of whether or not: 1) certiorari was the proper remedy of the petitioner: 2) the previous petition for certiorari which originated from the quieting of title case was similar to and, hence, a bar to the petition for certiorari arising from the forcible entry case; and 3) the court a quo committed grave abuse of discretion amounting to lack or excess of jurisdiction in issuing the order which dissolved the restraining order issued in connection with the ejectment case. The Court was not called upon in that case to determine who as between the two purchasers of the subject property should be preferred.

9.    Excerpt used by AHDG a narration of background facts and not adopted as a doctrine by the Supreme Court
AHDG invokes the ruling of the lower court in that case to the effect that the registration of the sale in favor of the second purchaser and the issuance of a new certificate of title in his favor did not in any manner vest in him any right of possession and ownership over the subject property because the seller, by reason of their prior sale, had already lost whatever right or interest she might have had in the property at the time the second sale was made. The excerpt was included in the ponencia only as part of the narration of the background facts and was not thereby adopted as a doctrine of the Court. It was considered only for the purpose of ascertaining if the court below had determined the issue of the possession of the subject property pending resolution of the question of ownership. Obviously, the Court could not have adopted that questionable ruling as it would clearly militate against the provision of Article 1544.

10.    No one can sell what he does not own; Article 1544 either an exception to the general rule or a reiteration of the general rule insofar as innocent third parties are concerned
Justice Edgardo L. Paras observed that “No one can sell what he does not own, but this is merely the general rule. Is Art. 1544 then an exception to the general rule? In a sense, yes, by reason of public convenience (See Aitken v. Lao, 36 Phil. 510); in still another sense, it really reiterates the general rule in that insofar as innocent third persons are concerned, the registered owner (in the case of real property) is still the owner, with power of disposition.

11.    Language of Article 1544 clear; Cabautan deemed owner
The language of Article 1544 is clear and unequivocal. In light of its mandate and of the facts established in the present case, Ownership must be recognized in the private respondent, who bought the property in good faith and, as an innocent purchaser for value, duly and promptly registered the sale in his favor.

Radiowealth Finance vs. Palileo [G.R. No. 83432.  May 20, 1991.]
First Division, Gancayco (J): 4 concur

Facts: On 13 April 1970, spouses Enrique Castro and Herminia R. Castro sold to Manuelito Palileo, a parcel of unregistered coconut land situated in Candiis, Mansayaw, Mainit, Surigao del Norte. The sale is evidenced by a notarized Deed of Absolute Sale. The deed was not registered in the Registry of Property for unregistered lands in the province of Surigao del Norte. Since the execution of the deed of sale, Manuelito Palileo who was then employed at Lianga, Surigao del Sur, exercised acts of ownership over the land through his mother Rafaela Palileo, as administratrix or overseer. He has continuously paid the real estate taxes on said land from 1971 until the present.

On 29 November 1976, a judgment was rendered against Enrique T. Castro, in Civil Case 0103145 by the then CFI Manila, Branch XIX, to pay Radiowealth Finance Company, the sum of P22,350.35 with interest thereon at the rate of 16% per annum from 2 November 1975 until fully paid, and the for the sum of P2,235.03 as attorney’s fees, and to pay the costs. Upon the finality of the judgment, a writ of execution was issued. Pursuant to said writ, the provincial Sheriff Marietta E. Eviota, through Deputy Provincial Sheriff Leopoldo Risma, levied upon and finally sold at public auction the subject land that Castro had sold to Palileo. A certificate of sale was executed by the Provincial Sheriff in favor of Radiowealth Finance Company, being the only bidder. After the period of redemption had expired, a deed of final sale was also executed by the same Provincial Sheriff. Both the certificate of sale and the deed of final sale were registered with the Registry of Deeds.

Learning of what happened to the land, Palileo filed an action for quieting of title over the same. After a trial on the merits, the court a quo rendered a decision in his favor. On appeal (CA-GR CV 10788), the decision of the trial court was affirmed. Hence, the petition for review on certiorari.

The Supreme Court affirmed the decision of the Court of Appeals; without costs.

1.    Article 1544; No ambiguity with respect to lands registered under the Torrens System
Article 1544 of the Civil Code provides that in case of double sale of an immovable property, ownership shall be transferred: (1) to the person acquiring it who in good faith first recorded it in the Registry of Property; (2) in default thereof, to the person who in good faith was first in possession; and (3) in default thereof, to the person who presents the oldest title, provided there is good faith. There is no ambiguity regarding the application of the law with respect to lands registered under the Torrens System.

2.    Section 51 of PD 1529; Registration an operative act to convey or affect registered lands insofar as third persons are concerned
Section 51 of Presidential Decree No. 1529 (amending Section 50 of Act No. 496 clearly provides that the act of registration is the operative act to convey or affect registered lands insofar as third persons are concerned. Thus, a person dealing with registered land is not required to go behind the register to determine the condition of the property. He is only charged with notice of the burdens on the prope