Sanchez vs.

Rigos 45 SCRA 368 June 1972 FACTS: In an instrument entitled "Option to Purchase," executed on April 3, 1961, defendant-appellant Severina Rigos "agreed, promised and committed ... to sell" to plaintiff-appellee Nicolas Sanchez for the sum of P1,510.00 within two (2) years from said date, a parcel of land situated in the barrios of Abar and Sibot, San Jose, Nueva Ecija. It was agreed that said option shall be deemed "terminated and elapsed," if Sanchez shall fail to exercise his right to buy the property" within the stipulated period. On March 12, 1963, Sanchez deposited the sum of Pl,510.00 with the CFI of Nueva Ecija and filed an action for specific performance and damages against Rigos for the latters refusal to accept several tenders of payment that Sanchez made to purchase the subject land. Defendant Rigos contended that the contract between them was only a unilateral promise to sell, and the same being unsupported by any valuable consideration, by force of the New Civil Code, is null and void." Plaintiff Sanchez, on the other hand, alleged in his compliant that, by virtue of the option under consideration, "defendant agreed and committed to sell" and "the plaintiff agreed and committed to buy" the land described in the option. The lower court rendered judgment in favor of Sanchez and ordered Rigos to accept the sum Sanchez judicially consigned, and to execute in his favor the requisite deed of conveyance. The Court of Appeals certified the case at bar to the Supreme Court for it involves a question purely of law. ISSUE: Was there a contract to buy and sell between the parties or only a unilateral promise to sell? COURT RULING: The Supreme Court affirmed the lower courts decision. The instrument executed in 1961 is not a "contract to buy and sell," but merely granted plaintiff an "option" to buy, as indicated by its own title "Option to Purchase." The option did not impose upon plaintiff Sanchez the obligation to purchase defendant Rigos' property. Rigos "agreed, promised and committed" herself to sell the land to Sanchez for P1,510.00, but there is nothing in the contract to indicate that her aforementioned agreement, promise and undertaking is supported by a consideration "distinct from the price" stipulated for the sale of the land. The lower court relied upon Article 1354 of the Civil Code when it presumed the existence of said consideration, but the said Article only applies to contracts in general. However, it is not Article 1354 but the Article 1479 of the same Code which is controlling in the case at bar because the latters 2nd paragraph refers to "sales" in particular, and, more specifically, to "an accepted unilateral promise to buy or to sell." Since there may be no valid contract without a cause or consideration, the promisor is not bound by his promise and may, accordingly, withdraw it. Pending notice of its withdrawal, his accepted promise partakes, however, of the nature of an offer to sell which, if accepted, results in a perfected contract of sale. Upon mature deliberation, the Court reiterates the doctrine laid down in the Atkins case and deemed abandoned or modified the view adhered to in the Southwestern Company case. Serra vs CA 229 SCRA 60, G.R. No. 103338 January 4, 1994 FACTS: Petitioner is the owner of a 374 square meter parcel of land in Masbate, Masbate. Sometime in 1975, private respondent Rizal Commercial Banking Corp., in its desire to put up a branch in Masbate, Masbate, negotiated with petitioner for the purchase of the then unregistered property. On May 20, 1975, a contract of lease with option to buy was contracted by the parties. Pursuant to said contract, a binding and other improvements were constructed on the land which housed the branch office of RCBC in Masbate, Masbate. Within three years from the signing of the contract, petitioner

complied with his part of the agreement by having the property registered and placed under the TORRENS SYSTEM, for which OCT was issued by the Register of Deeds of the Province of Masbate. Petitioner alleges that as soon as he had the property registered, he kept on pursuing the manager of the branch to effect the sale of the lot as per their agreement. It was not until September 4, 1984, however, when the respondent bank decided to exercise its option and informed petitioner, of its intention to buy the property at the agreed price of not greater than P210.00 per square meter or a total of P78,430.00. But much to the surprise of the respondent, petitioner replied that he is no longer selling the property. Hence, a complaint for specific performance and damages were filed by respondent against petitioner. In the complaint, respondent alleged that during the negotiations it made clear to petitioner that it intends to stay permanently on property once its branch office is opened unless the exigencies of the business requires otherwise. Aside from its prayer for specific performance, it likewise asked for an award of P50,000.00 for attorneys tees PIOO,OOO.OO as exemplary damages and the cost of the suit. ISSUES: 1. Whether or not the disputed contract is a contract of adhesion. 2. Whether or not the petitioner may be compelled to exercise the option to buy before the time expires. 3. Whether or not there was no consideration to support the option, distinct from the price, hence the option cannot be exercised. HELD: 1. No. A contract of adhesion is one wherein a party usually a corporation, prepares the stipulations in the contract while the other party merely affixes his signature or his adhesion thereto. These types of contract are as binding as ordinary contracts. Because in reality, the party who adheres to the contract is free to reject it entirely although this Court will not hesitate to rule out blind adherence to terms where facts and circumstances will show that it is basically one-sided. We do not find the situation in the present case to be inequitable. Petitioner is a highly educated man, who, at the time of the trial was already a CPALawyer, and when he entered into the contract, was already a CPA, holding a respectable position with the Metropolitan Manila Commission. It is evident that a man of his stature should have been more cautious in transactions he enters into, particularly where it concerns valuable properties. He is amply equipped to drive a hard bargain if he would be so minded to. 2. No. In a unilateral promise to sell, where the debtor fails to withdraw the promise before the acceptance by the creditor, the transaction becomes a bilateral contract to sell and to buy, because upon acceptance by the creditor of the offer to sell by the debtor, there is already a meeting of the minds of the parties as to the thing which is determinate and the price which is certain. In which case, the parties may then reciprocally demand performance. Jurisprudence has taught us that an optional contract is a privilege existing only in one party the buyer. For a separate consideration paid, he is given the right to decide to purchase or not, a certain merchandise or properly, at any time within the agreed period, at a fixed price. This being his prerogative, he may not be compelled to exercise the option to buy before the time expires. 3. Yes. A price is considered certain if it is so with reference to another thing certain or when the determination thereof is left to the judgment of a specified person or persons. And generally, gross inadequacy of price does not affect a contract of sale. Contracts are to be construed according to the sense ai1d meaning of the terms which the parties themselves have used. In the present dispute, there is evidence to show that the intention of the parties is to peg the price at P210 per square meter. EQUATORIAL REALTY V. MAYFAIR (November 21, 1996) FACTS: Petitioner Carmelo and Bauermann Inc. leased its parcel of land with 2storey building to respondent Mayfair Theater Inc. They entered a contract which provides that if the LESSOR should desire to sell the leased premises, the LESSEE shall be given 30-days exclusive option to purchase the same.

Carmelo informed Mayfair that it will sell the property to Equatorial. Mayfair made known its interest to buy the property but only to the extent of the leased premises. Notwithstanding Mayfairs intention, Carmelo sold the property to Equatorial. ISSUE: WON the sale of the property to Equatorial is valid. HELD: The sale of the property should be rescinded because Mayfair has the right of first refusal. Both Equatorial and Carmelo are in bad faith because they knew of the stipulation in the contract regarding the right of first refusal. The stipulation is a not an option contract but a right of first refusal and as such the requirement of a separate consideration for the option, has no applicability in the instant case. The consideration is built in the reciprocal obligation of the parties. In reciprocal contract, the obligation or promise of each party is the consideration for that of the other. (Promise to lease in return of the right to first refusal) With regard to the impossibility of performance, only Carmelo can be blamed for not including the entire property in the right of first refusal. Court held that Mayfair may not have the option to buy the property. Not only the leased area but the entire property.

(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void. This provision means that should the vendee or the purchaser of a personal property default in the payment of two or more of the agreed installments, the vendor or the seller has the option to avail any of these 3 remedieseither to exact fulfillment by the purchaser of the obligation, or to cancel the sale, or to foreclose the mortgage on the purchased personal property, if one was constituted. These remedies have been recognized as an alternative, not cumulative, that the exercise of one should bar the exercise of the others. In the present case, it is not disputed that IFC had taken possession of the car purchased by the Nonatos after the spouses defaulted in their payments. The defense of IFC that it the repossession of the vehicle was only for the purpose of appraising its value and for storage and safekeeping pending full payment of the spouses is untenable. The receipt issued by IFC to the spouses when it took possession of the vehicle that the vehicle could be redeemed within 15 days. This could only mean that should the spouses fail to redeem the car within the period provided, IFC would retain permanent possession of the vehicle. IFC even notified the spouses Nonato that the value of the car was not sufficient to cover the balance of the purchase price and there was no attempt at all on the part of the company to return the car.

The acts performed by IFC are consistent with the conclusion that it had opted to cancel the sale of the vehicle. Therefore, it is barred from exacting payment from the petitioners of the balance of the price of the vehicle which it had already repossessed. Borbon II v. Servicewide specialist, 258 SCRA 634 (1996)

SPOUSES NONATO V. IAC & INVESTOR'S FINANCE CORP 140 SCRA 255 (1985) FACTS: In 1976, Spouses Restituto Nonato and Ester Nonato purchased a volkswagen from the Peoples Car Inc on installment basis. 1. To secure their complete payment, Nonato executed a promissory note and a chattel mortgage in favor of Peoples Car Inc. Subsequently, Peoples Car Inc assigned its rights and interest over the note and mortagge in favor of Investors Finance Corp (IFC). For failure of the spouses to pay two or more installments, despite demands, the car was repossessed by IFC. Despite repossession, IFC still demanded from Nonato that they pay the balance of the price of the car. IFC, then, filed a complaint for the payment of the price of the car with damages Nonato, in their defense, argued that when the company repossessed the car, IFC had, by that act, effectively cancelled the sale of the vehicle. As such, it was barred from exacting the recovery of the unpaid balance of the purchase price as mandated by Art 1484. The trial court rendered in favor of IFC and ordered the spouses Nonato pay the balance of the purchase price of the car with interest. CA affirmed the same. ISSUE: WON a vendor or his assignee, who had cancelled the sale of a motor vehicle for failure of the buyer to pay two or more of the stipulated installments, may also demand payment of the balance of the purchase price HELD: No. The applicable law in the case at bar is Art 1484 which provides that: In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies: (1) Exact fulfillment of the obligation, should the vendee fail to pay; (2) Cancel the sale, should the vendee's failure to pay cover two or more installments;

FACTS: -Daniel Borbon and Francisco Borbon purchased from Pangasinan AutoMart Inc. Brand new 1984 Isuzu KCD 20 crew cab and signed a promissory note payable in 12 monthly installments. -To secure the promissory note, the Borbons executed a chattel mortgage over the vehicle. -The right of Pangasinan Automart Inc was later assigned to Filinvest Credit Corporation with notice to the Borbons. -FCC in turn assigned all its rights, interest and title over the promissory note and the chattel mortgage to Sevicewide Specialists. -When the Borbons failed to comply with their obligation, Servicewide Specialist filed an action for replevin for the foreclosure of the mortgage property. -The Borbons claimed that they were not in default because Pangasinan Automart delivered a vehicle different from what they have intended to buy and despite communication, the latter was not able to replace the vehicle until it was seized by the court. -Sustaining the decision of the court a quo, the appellate court upheld the award of liquidated damages and attorneys fees in favor of Servicewide Specialists. HELD: -The remedies under Article 1484 of the Civil Code are not cumulative but alternative and exclusive, which means, that "x x x Should the vendee or purchaser of a personal property default in the payment of two or more of the agreed installments, the vendor or seller has the option to avail of any of these three remedies either to exact fulfillment by the purchaser of the obligation, or to cancel the sale, or to foreclose the mortgage on the purchased personal property, if one was constituted. These remedies have been recognized as alternative, not cumulative, that the exercise of one would bar the exercise of the others."

2.

3.

4.

5.

6.

-When the seller assigns his credit to another person, the latter is likewise bound by the same law. Accordingly, when the assignee forecloses on the mortgage, there can be no further recovery of the deficiency, and the sellermortgagee is deemed to have renounced any right thereto. A contrario, in the event the seller-mortgagee first seeks, instead, the enforcement of the additional mortgages, guarantees or other security arrangements, he must then be held to have lost by waiver or non-choice his lien on the chattel mortgage of the personal property sold by any mortgaged back to him, although, similar to an action for specific performance, he may still levy on it. -In ordinary alternative obligations, a mere choice categorically and unequivocally made and then communicated by the person entitled to exercise the option concludes the parties. The creditor may not thereafter exercise any other option, unless the chosen alternative proves to be ineffectual or unavailing due to no fault on his part. This rule, in essence, is the difference between alternative obligations, on the one hand, and alternative remedies, upon the other hand, where, in the latter case, the choice generally becomes conclusive only upon the exercise of the remedy. For instance, in one of the remedies expressed in Article 1484 of the Civil Code, it is only when there has been a foreclosure of the chattel mortgage that the vendee-mortgagor would be permitted to escape from a deficiency liability. Thus, if the case is one for specific performance, even when this action is selected after the vendee has refused to surrender the mortgaged property to permit an extrajudicial foreclosure, that property may still be levied on execution and an alias writ may be issued if the proceeds thereof are insufficient to satisfy the judgment credit. So, also, a mere demand to surrender the object which is not heeded by the mortgagor will not amount to a foreclosure, but the repossession thereof by the vendor-mortgagee would have the effect of foreclosure Magna Financial Services Group vs Colarina Ponente: Chico Nazario Facts: Elias Colarina bought on installment from Magna Financial Services Group, Inc., 1 unit of Suzuki Multicab. After making a down payment, Colarina executed a PN for the balance of P229,284. To secure payment thereof, Colarina executed an integrated PN and deed of chattel mortgage over the motor vehicle. Colarina failed to pay the monthly amortization beginning January 1999, accumulating an unpaid balance of P131,607. Despite repeated demands, he failed to make the necessary payment. Magna Financial Services Group, Inc. filed a Complaint for Foreclosure of Chattel Mortgage with Replevin before the MTCC. Upon filing of a bond, a writ of replevin was issued. Colarina who voluntarily surrendered physical possession of the vehicle to the Sheriff. After declaring Colarina in default, the trial court ruled against defendant and ordered him to pay the sum of P131,607 plus penalty charges, attorneys fees and cost. In case of nonpayment, the multicab shall be sold at public auction. The RTC affirmed. The CA rendered its decision ruling that the courts erred in ordering the defendant to pay the unpaid balance of the purchase price irrespective of the fact that the complaint was for the foreclosure of the chattel mortgage. Issue: What is the true nature of a foreclosure of chattel mortgage under Article 1484(3) Ratio: Our Supreme Court in Bachrach Motor Co., Inc. v. Millan held: Undoubtedly the principal object of the above amendment (referring to Act 4122 amending Art. 1454, Civil Code of 1889) was to remedy the abuses committed in connection with the foreclosure of chattel mortgages. This amendment prevents mortgagees from seizing the mortgaged property, buying it at foreclosure sale for a low price and then bringing the suit against the mortgagor for a deficiency judgment. The almost invariable result of this procedure was that the mortgagor found himself minus the property and still owing practically the full amount of his original indebtedness. In its complaint, Magna Financial prayed for the principal sum of P131,607, attorneys fees etc. It is further prayed that pendent lite, an Order of Replevin issue commanding the Provincial Sheriff at Legazpi City or any of his deputies to take such multicab into his custody and, after judgment, upon default in the payment of the amount adjudged due to the plaintiff, to sell said chattel at public auction in accordance with the chattel mortgage law. In its Memorandum before us, petitioner resolutely declared that it has opted for the remedy provided under Article 1484(3) CC that is, to foreclose the chattel mortgage. It is, however, unmistakable from the Complaint that petitioner preferred to avail itself of the first and third remedies under Article 1484, at the same time suing for replevin. For this reason, the Court of Appeals justifiably set aside the decision of the RTC. Perusing the Complaint, the petitioner, under its prayer number 1, sought for the payment of the unpaid amortizations which is a remedy that is provided under Article 1484(1) of the

Civil Code, allowing an unpaid vendee to exact fulfillment of the obligation. At the same time, petitioner prayed that Colarina be ordered to surrender possession of the vehicle so that it may ultimately be sold at public auction, which remedy is contained under Article 1484(3). Such a scheme is not only irregular but is a flagrant circumvention of the prohibition of the law. By praying for the foreclosure of the chattel, Magna Financial Services Group, Inc. renounced whatever claim it may have under the promissory note. Article 1484, paragraph 3, provides that if the vendor has availed himself of the right to foreclose the chattel mortgage, he shall have no further action against the purchaser to recover any unpaid balance of the purchase price. Any agreement to the contrary shall be void. In other words, in all proceedings for the foreclosure of chattel mortgages executed on chattels which have been sold on the installment plan, the mortgagee is limited to the property included in the mortgage. Contrary to petitioners claim, a contract of chattel mortgage, which is the transaction involved in the present case, is in the nature of a conditional sale of personal property given as a security for the payment of a debt, or the performance of some other obligation specified therein, the condition being that the sale shall be void upon the seller paying to the purchaser a sum of money or doing some other act named. If the condition is performed according to its terms, the mortgage and sale immediately become void, and the mortgagee is thereby divested of his title. On the other hand, in case of non payment, foreclosure is one of the remedies available to a mortgagee by which he subjects the mortgaged property to the satisfaction of the obligation to secure that for which the mortgage was given. Foreclosure may be effected either judicially or extrajudicially, that is, by ordinary action or by foreclosure under power of sale contained in the mortgage. It may be effected by the usual methods, including sale of goods at public auction. Extrajudicial foreclosure, as chosen by the petitioner, is attained by causing the mortgaged property to be seized by the sheriff, as agent of the mortgagee, and have it sold at public auction in the manner prescribed by Section 14 of Act No. 1508, or the Chattel Mortgage Law. This rule governs extrajudicial foreclosure of chattel mortgage. In sum, since the petitioner has undeniably elected a remedy of foreclosure under Article 1484(3) of the Civil Code, it is bound by its election and thus may not be allowed to change what it has opted for nor to ask for more. On this point, the Court of Appeals correctly set aside the trial courts decision and instead rendered a judgment of foreclosure as prayed for by the petitioner. Issue: WON there has been an actual foreclosure of the vehicle

Ratio: In the case at bar, there is no dispute that the subject vehicle is already in the possession of the petitioner, Magna Financial Services Group, Inc. However, actual foreclosure has not been pursued, commenced or concluded by it. Where the mortgagee elects a remedy of foreclosure, the law requires the actual foreclosure of the mortgaged chattel. Thus, in Manila Motor Co. v. Fernandez, our Supreme Court said that it is actual sale of the mortgaged chattel in accordance with Sec. 14 of Act No. 1508 that would bar the creditor (who chooses to foreclose) from recovering any unpaid balance. And it is deemed that there has been foreclosure of the mortgage when all the proceedings of the foreclosure, including the sale of the property at public auction, have been accomplished. Be that as it may, although no actual foreclosure as contemplated under the law has taken place in this case, since the vehicle is already in the possession of Magna Financial Services Group, Inc. and it has persistently and consistently avowed that it elects the remedy of foreclosure, the Court of Appeals, thus, ruled correctly in directing the foreclosure of the said vehicle without more. G.R. No. L-25951 June 30, 1969

FILIPINAS INVESTMENT & FINANCE CORPORATION, plaintiff-appellant, vs. JULIAN R. VITUG, JR. and SUPREME SALES & DEVELOPMENT CORPORATION, defendants-appellees. Facts: Julian Vitug executed a promissory note to Supreme Sales in the amount of Php 14,605 payable in monthly installments for purchasing a car and was secured by a chattel mortgage. On the same day , Supreme Sales negotiated the promissory note to plaintiff ,Filipinas Investment assigning all the rights, title and interest including the right of recourse against Supreme Sales should Julian Vitug failed to pay. Defendant defaulted in payment. Plaintiff secured possession of the mortgaged vehicle by means of a writ of replevin duly obtained from the court but Vitug surrendered the car. Thereafter, said car cas sold to public auction but the proceeds left a deficiency of Php 8,349. According to plaintiff , Supreme Sales is still liable to them by virtue of their negotiated promissory note with a right of recourse. The lower decided the case in favor of Supreme Sales.

Issue: WON Filipinas Investment can recover the deficiency of Php8,349 against Supreme Sales by virtue of their agreement with recourse? RULING: Yes, Filipinas Investment can recover the balance from Supreme Sales because it negotiated in favor of plaintiff the promissory note on a with recourse basis whereby in case of the failure and/or refusal of the maker thereof, defendant Julian R. Vitug, Jr. ,to pay the obligation under the said promissory note, plaintiff shall have the right to recourse against the said defendant corporation{Supreme Sales} GABRIEL V. MABANTA| Sandoval-Gutierrez G.R. No. 142403 | March 26, 2003 FACTS: On October 25, 1975, spouses Mabanta mortgaged both lots with the Development Bank of the Philippines (DBP) as collateral for a loan of P14,000.00. 5 years later, respondents sold the lots to Susana Soriano with right of repurchase within 2 years. The spouses failed to repurchase; Sometime in 1984, respondents were able to convince Alejandro Gabriel (petitioner) to purchase the lots from Soriano. As a result, Soriano cancelled the contract and transferred all her rights to Gabriel. Petitioner cultivated the lots and caused the restructuring of petitioners loan with DBP. However, they found out that Spouses Tan already paid the loan and that the mortgage was already cancelled. Thereafter, spouses Tan tried to eject petitioners. As a result, petitioner filed a complaint before the RTC for specific performance, reconveyance and damages. During the proceeding, it turned out that it was the Tans daughter TAN-REYES who bought the lots and registered the property. The trial court ruled in favor of herein petitioners and declared the sale between respondents and Tan-Reyes as null and void. On appeal, the CA modified the TCs decision and declared as valid the second sale.

existence of a defect in his vendors title will not make him an innocent purchaser for value, if it afterwards develops that the title was in fact defective, and it appears that he had such notice of the defect as would have led to its discovery had he acted with that measure of precaution which may reasonably be required of a prudent man in a like situation. xxx [Leung Yee vs. F. L. Strong Machinery, Co. and Williamson] RULING: The Supreme Court REVERSED and SET ASIDE the CAs ruling; and REINSTATED the decision of the Trial Court. Carbonell vs. Court of Appeals, and Poncio Carbonell vs. Court of Appeals, and Poncio 69 SCRA 99 January 1976 FACTS: On January 27, 1955, respondent Jose Poncio executed a private memorandum of sal e of his parcel of land with improvements situated in San Juan, Rizal in favor o f petitioner Rosario Carbonell who knew that the said property was at that time subject to a mortgage in favor of the Republic Savings Bank (RSB) for the sum of P1,500.00. Four days later, Poncio, in another private memorandum, bound himsel f to sell the same property for an improved price to one Emma Infante for the su m of P2,357.52, with the latter still assuming the existing mortgage debt in fav or of the RSB in the amount of P1,177.48. Thus, in February 2, Poncio executed a formal registerable deed of sale in her (Infante's) favor. So, when the first b uyer Carbonell saw the seller Poncio a few days afterwards, bringing the formal deed of sale for the latter's signature and the balance of the agreed cash payme nt, she was told that he could no longer proceed with formalizing the contract w ith her (Carbonell) because he had already formalized a sales contract in favor of Infante. To protect her legal rights as the first buyer, Carbonell registered on February 8, 1955 with the Register of Deeds her adverse claim as first buyer entitled to the property. Meanwhile, Infante, the second buyer, was able to register the sa le in her favor only on February 12, 1955, so that the transfer certificate of t itle issued in her name carried the duly annotated adverse claim of Carbonell as the first buyer. The trial court declared the claim of the second buyer Infante to be superior to that of the first buyer Carbonell, a decision which the Court of Appeals reversed. Upon motion for reconsideration, however, Court of Appeals annulled and set aside its first decision and affirmed the trial court s decision. ISSUE: Who has the superior right over the subject property? COURT RULING: The Supreme Court reversed the appellate court s decision and declared the first buy er Carbonell to have the superior right over the subject property, relying on Ar ticle 1544 of the Civil Code. Unlike the first and third paragraphs of said Arti cle 1544, which accord preference to the one who first takes possession in good faith of personal or real property, the second paragraph directs that ownership of immovable property should be recognized in favor of one "who in good faith fi rst recorded" his right. Under the first and third paragraphs, good faith must c haracterize the prior possession, while under the second paragraph, good faith m ust characterize the act of anterior registration. When Carbonell bought the lot from Poncio on January 27, 1955, she was the only buyer thereof and the title of Poncio was still in his name solely encumbered by bank mortgage duly annotated thereon. Carbonell was not aware - and she could n ot have been aware - of any sale to Infante as there was no such sale to Infante then. Hence, Carbonell's prior purchase of the land was made in good faith whic h did not cease after Poncio told her on January 31, 1955 of his second sale of the same lot to Infante. Carbonell wanted to meet Infante but the latter refused so to protect her legal rights, Carbonell registered her adverse claim on Febru ary 8, 1955. Under the circumstances, this recording of Carbonell s adverse claim sh ould be deemed to have been done in good faith and should emphasize Infante's ba d faith when the latter registered her deed of sale 4 days later.

ISSUE/S: Whether or not the second sale between respondent and Tan-Reyes was valid. HELD: No. Zenaida Tan is not a purchaser in good faith and she cannot seek refuge behind her certificate of title. [a) She was informed that the land was mortgaged in the DBP; b) She readily agreed to buy the land on that same day. c) She did not inquire further into the status of the land. d) She did not go and see the land first. e) She immediately go to the DBP the following day and paid the mortgage obligation] True, Article 1544 of the Civil Code provides that should immovable property be sold to different vendees, the ownership shall belong to the person who in good faith first recorded it in the registry of property. Unfortunately, the registration made by Zenaida (Tan) Reyes of her deed of sale was not in good faith. For this reason in accordance with the same Article 1544, the land shall pertain to the person who in good faith was first in possession. There is no question that it is the Gabriels who are in possession of the land. DOCTRINE/S: Mere registration of title is not enough, good faith must concur with the registration. To be entitled to priority, the second purchaser must not only establish prior recording of his deed, but must have acted in good faith, without knowledge of the existence of another alienation by the vendor to the other. xxx One who purchases a real estate with knowledge of a defect of title in his vendor cannot claim that he has acquired title thereto in good faith as against the true owner of the land or of an interest therein; and the same rule must be applied to one who has knowledge of facts which should have put him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the title of his vendor. A purchaser cannot close his eyes to facts which should put a reasonable man upon his guard, and then claim that he acted in good faith under the belief that there was no defect in the title of the vendor. His mere refusal to believe that such a defect exists, or his willful closing of his eyes to the possibility of the

Dagupan Trading vs. Macam 14 SCRA 99 May 1965 FACTS: Sammy Maron and his seven brothers and sisters were pro-indiviso owners of a parcel of unregistered land located in barrio Parayao, Binmaley, Pangasinan. In 1955, while their application for registration of said land under Act No. 496 was pending, they executed, on June 19 and on September 21, two deeds of sale conveying the property to herein respondent Rustico Macam who thereafter took possession of the property and made substantial improvements upon it. On October 14, 1955, OCT No. 6942 covering the land was issued in the name of the Marons, free from all liens and encumbrances. On August 4, 1956, however, by virtue of a final judgment of the Municipal Court of Manila in a civil case in favor of Manila Trading and Supply Co. (Manila Trading) against Sammy Maron, levy was made upon whatever interest he had in the subject property. Thereafter, said interest was sold at public auction to the judgment creditor Manila Trading. The corresponding notice of levy, certificate of sale and the sheriff's certificate of final sale in favor of Manila Trading - because nobody exercised the right of redemption were duly registered, and on March 1, 1958, the latter sold all its rights and title in the property to herein petitioner Dagupan Trading Company (Dagupan Trading). On September 4, 1958, Dagupan Trading filed an action against Macam, praying that it be declared owner of one-eighth portion of the subject property. The CFI of Pangasinan dismissed the said complaint, and the Court of Appeals affirmed its decision. ISSUE: Who has the superior right over the one-eight portion of the subject property? COURT RULING: The Supreme Court likewise affirmed both decisions of the lower courts. At the time of the levy, Sammy Maron already had no interest on the one-eight portion of the property he and his siblings have inherited because for a considerable time prior to the levy, said interest had already been conveyed upon Macam "fully and irretrievably" - as the Court of Appeals held. Consequently, the subsequent levy made on the property for the purpose of satisfying the judgment rendered against Sammy Maron in favor of the Manila Trading Company was void and of no effect. The unregistered sale and the consequent conveyance of title and ownership in favor Macam could not have been cancelled and rendered of no effect upon the subsequent issuance of the Torrens title over the entire parcel of land. Moreover, upon the execution of the deed of sale in his favor by Sammy Maron, Macam had immediately taken possession of the land conveyed as its new owner and introduced considerable improvements upon it himself. To deprive him, therefore, of the same by sheer force of technicality would be against both justice and equity. Cruz vs. Cabaa 129 SCRA 656 June 1984 FACTS: In June 1965, respondent Leodegaria Cabaa sold the subject property to respondent spouses Teofilo Legaspi and Iluminada Cabaa (spouses Legaspi) under their contract entitled Bilihang Muling Mabibili which stipulated that Cabaa can repurchase the land within one year from December 31, 1966. The said land was not repurchased, however, so the spouses Legaspi took possession of the said property. Later, Cabaa requested that the land title be lent to her in order to mortgage the property to the Philippine National Bank (PNB), to which the spouses Legaspi yielded. On October 21, 1968, Cabaa formally sold the land to spouses Legaspi by way of an absolute sale. The spouses Legaspi then attempted to register the deed of sale, but failed because they could not present the owner's duplicate

of title which was still in the possession of the PNB as mortgage. Subsequently, they were able to register the document of sale on May 13, 1969 under Primary Entry No. 210113 of the Register of Deeds of Quezon Province. On November 29, 1968, Cabaa sold the same property to herein petitioner Abelardo Cruz (now deceased), who, in turn, tried to register the deed of sale on September 3, 1970. However, he was informed that Cabaa had already sold the property to the spouses Legaspi, so he was only able to register the land in his name on February 9, 1971. The CFI of Quezon Province declared the spouses Legaspi as the true and rightful owners of the subject property and the land title that Cruz had acquired as null and void. The Court of Appeals affirmed said decision, but ordered Cabaa reimburse to Cruz's heirs the amounts of P2,352.50, which the late petitioner Abelardo Cruz paid to PNB to discharge the mortgage obligation of Cabaa in favor of said bank, and the amount of P3,397.50, representing the amount paid by said Abelardo Cruz to her as consideration of the sale with pacto de retro of the subject property. ISSUE: Who is the rightful owner of the subject property? COURT RULING: The Supreme Court affirmed the decision of the appellate court with modification ordering and sentencing respondent Leodegaria Cabaa to reimburse and pay to petitioner's heirs the total sum of P5,750.00. There is no question that spouses Legaspi were the first buyers, first on June 1, 1965 under a sale with right of repurchase and later on October 21, 1968 under a deed of absolute sale and that they had taken possession of the land sold to them; that Abelardo Cruz was the second buyer under a deed of sale dated November 29, 1968, which to ail indications, contrary to the text, was a sale with right of repurchase for ninety (90) days. There is no question, either, that spouses Legaspi were the first and the only ones to be in possession of the subject property. The knowledge of the first sale Abelardo Cruz had gained defeats his rights even if he is first to register the second sale, since such knowledge taints his prior registration with bad faith. This is the price exacted by Article 1544 of the Civil Code. Before the second buyer can obtain priority over the first, he must show that he acted in good faith throughout (i.e. in ignorance of the first sale and of the first buyer's rights) - from the time of acquisition until the title is transferred to him by registration or failing registration, by delivery of possession. The second buyer must show continuing good faith and innocence or lack of knowledge of the first sale until his contract ripens into full ownership through prior registration as provided by law." Nuguid vs CA 171 SCRA 213, G.R. No. 77423 March 13, 1989 FACTS: The deceased spouses Victorino and Crisanta dela Rosa were the registered owners of a parcel of land situated in Bataan, and covered by OCT. Victorino dela Rosa (widowed by then) sold one half of the said property to Juliana Salazar for P 95.00. This sale was not registered. Immediately after the sale, Juliana Salazar constructed a house on the lot she purchased. Petitioner spouses caused the registration of a document entitled Kasulatan ng Partihan at Bilihan. In this document, Marciana dela Rosa, Victoria Buenaventura, Ernesto Buenaventura, Virgilio Buenaventura, and Felicisimo Buenaventura-all heirs of Victorino and Crisanta dela Rosa- sold to the petitioners the entire area of the property for the sum of P300.00. Subsequently, the OCT was cancelled by the Register of Deeds, and TCT was issued in the names of the petitioners. The private respondents claim that the document is a forged deed. The petitioners assert that the land subject of this case was offered to them for sale by Nicolas dela Rosa who then claimed that he had already purchased the shares of the heirs over the subject property as evidenced by a private document entitled Kasunduan. The RTC dismissed the complaint filed by the private respondents, but on appeal, this was reversed by the Court of Appeals. Hence, this petition.

ISSUE: Whether or not the subsequent sale is valid, the petitioner spouses being purchasers in good faith. HELD: Yes.The Original Certificate of Title No. 3778 covering the entire property was clean and free from any annotation of an encumbrance, and there was nothing whatsoever to indicate on its face any vice or infirmity in the title of the registered owners-the spouses Victorino and Crisanta dela Rosa. Thus, the petitioners could not have known of the prior sale to Juliana Salazar as, precjsely, it was not registered. The general rule is that if the property sold is registered land, the purchaser in good faith has a right to rely on the certificate of title and is under no duty to go behind it to look for flaws. This notwithstanding, the petitioners did not rely solely upon the certificate of title. They personally inspected the subject property. Undeniably, they found the same to be occupied by two houses, one belonging to a certain Doray dela Rosa and the other to spouses Pedro Guevarra and Pascuala Tolentino, parents of the respondents Guevarras. Upon being informed of the petitioners desire to purchase the land, Doray dela Rosa apparently offered to sell her house, which offer was accepted by the petitioners. As regards the spouses Guevarra, we find no reason to disturb the trial courts finding that they themselves requested that they be allowed to refrain on the property until such time that the petitioners would need the entire premises; and in lieu of rentals to the petitioners, they offered to continue paying the real estate taxes for one-half of the property as this was their arrangement with the previous owners-to which request the petitioners acceded. Evidently, neither Doray dela Rosa nor the spouses Guevarra professed ownership over the portions of land they were occupying; on the contrary, by their actuations they expressly acknowledged that they were not the real owners of the said property. The spouses Guevarra, in particular, made no mention of the prior unregistered sale to their predecessor-in-interest, Juliana Salazar. Thus, when the petitioners registered the sale in their favor with the Register of Deeds, they did so without any knowledge about the prior sale in favor of Juliana Salazar. The petitioners, therefore, had acted in good faith.