Sales Cases Set 4 Atty Busmente

EN BANC
[G.R. No. L-30817. September 29, 1972.]
DOMINADOR DIZON, doing business under the firm name

"Pawnshop of Dominador Dizon" , petitioner, vs. LOURDES G. SUNTAY ,
respondent.
Andres T . Velarde for petitioner.

Rafael B. Suntay for respondent.
SYLLABUS
1. CIVIL LAW; PROPERTY; OWNERSHIP AND POSSESSION; RIGHT OF

OWNER OF IMMOVABLE PROPERTY UN-LAWFULLY DEPRIVED THEREOF; CASE AT
BAR. — A diamond ring valued at P5,500.00 was delivered by respondent Lourdes C.
Suntay to a certain Clarita R. Sison for sale on commission. After the lapse of a
considerable time without the latter having returned the ring nor its purchase price,
demands were made upon her by the owner upon which a pawnshop ticket, the receipt
of the pledge with petitioner Dominador Dizon's pawnshop, ,was delivered. Since what
was done was violative of the terms of the agency, there was an attempt to recover
possession by an action for recovery and by the provisional remedy of replevin. The
dispossessed owner having prevailed, both in the lower and in the Court of Appeals, the
matter was then elevated to this Court by petitioner grounded on estoppel. HELD: The
invocation of estoppel is unavailing. Respondent-owner Lourdes G. Suntay has in her
favor the protection accorded by Art. 559 of the Civil Code which 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 therefore."
2. REMEDIAL LAW; ESTOPPEL; BASIS. — Estoppel as known to the Rules of
Court and prior to that, to the Court of Civil Procedure has its roots in equity. Good faith
is its basis. It is a response to the demands of moral right and natural justice.
3. ID.; ID.; REQUISITES. — For estoppel to exist, it is indispensable that there
be a declaration, act or omission by the party who is sought to be bound. Nor is this all.
It is equally a requisite that he, who would claim the bene ts of such a principle must
have altered his position, having been so intentionally and deliberately led to comport
himself thus, by what was declared or what was done or failed to be done. If thereafter
a litigation arises, the former would not be allowed to disown such act, declaration or
omission. A court is to see to it that there is no turning back on one's word or a
repudiation of one's act.
4. ID.; ID.; PETITIONER IN CASE AT BAR CANNOT SUCCESSFULLY INVOKE
THE PRINCIPLE OF ESTOPPEL; REASONS. — Petitioner cannot assert that his appeal
nds support in the doctrine of estoppel. Neither the promptings of equity nor the
mandates of moral tight and natural justice come to his rescue. He is engaged in a
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business where presumably ordinary prudence would manifest itself to ascertain
whether or not an individual who is offering a jewelry by way of pledge is entitled to do
so. If no such care be taken, perhaps because of the di culty of resisting opportunity
for pro t, he should be the last to complain if thereafter the right of the true owner of
such jewelry should be recognized. The law for this sound reason accords the latter
protection.
TEEHANKEE, J., Concurring:
1. CIVIL LAW; PROPERTY; RIGHT OF OWNER OF MOVABLE PROPERTY
UNLAWFULLY DEPRIVED THEREOF; TERM "UNLAWFULLY DEPRIVE" IN ARTICLE 559
OF THE CIVIL CODE. — If our legislature had intended to narrow their scope of the term
"unlawfully deprived" to "stolen" as advocate by Tolentino, it certainly would have
adopted and used such narrower term rather than the broad language of article 464 off
the old Spanish Civil Code with its long-established and accepted meaning in
accordance with our jurisprudence.
2. ID.; ID.; ID; CRIMINAL CONVICTION OF EMBEZZLER, NOT NECESSARY. —
The contention that the owner may recover the lost article of which he has been
unlawfully deprived without reimbursement of the sum received by the "embezzler, is to
add a requirement that is not in the codal article and to unduly prejudice the victim of
embezzlement, as pointed out by the Court in Arenas vs. Raymundo, 19 Phil. 47.
3. ID.; ID.; ID.; RIGHT OF DISPOSSESSED OWNER TO RECOVER DOES NOT
PRECLUDE THE RIGHT OF THE POSSESSOR TO ADEQUATE PROTECTION AND
OPPORTUNITY TO CONTEST THE OWNER'S CLAIM OF RECOVERY. — The civil action
that the owner must resort to for the recovery of his personal property of which he has
been unlawfully deprived as against the possessor (where the latter refuses to honor
the claim, presumably on same valid doubts as to the genuineness of the claim) gives
the possessor every adequate protection and opportunity to contest the owner's claim
of recovery. The owner must therein establish by competent evidence his lawful claim,
and show to the court's satisfaction his lawful ownership of the article claimed and that
he had been unlawfully deprived thereof.
DECISION
FERNANDO , J : p
In essence there is nothing novel in this petition for review of a decision of the
Court of Appeals a rming a lower court judgment sustaining the right of an owner of a
diamond ring, respondent Lourdes G. Suntay, as against the claim of petitioner
Dominador Dizon, who owns and operates a pawnshop. The diamond ring was turned
over to a certain Clarita R. Sison, for sale on commission, along with other pieces of
jewelry of respondent Suntay. It was then pledged to petitioner. Since what was done
was violative of the terms of the agency, there was an attempt on her part to recover
possession thereof from petitioner, who refused. She had to le an action then for its
recovery. She was successful, as noted above, both in the lower court and thereafter in
the Court of Appeals. She prevailed as she had in her favor the protection accorded by
Articles 559 of the Civil Code. 1 The matter was then elevated to us by the petitioner.
Ordinarily, our discretion would have been exercised against giving due course to such
petition for review. The vigorous plea however, grounded on estoppel, by his counsel,
Atty. Andres T. Velarde, persuaded us to act otherwise. After a careful perusal of the
respective contentions of the parties, we fail to perceive any su cient justi cation for a
departure from the literal language of the applicable codal provision as uniformly
interpreted by this Court in a number of decisions. The invocation of estoppel is
therefore unavailing. We affirm.
The statement of the case as well as the controlling facts may be found in the
Court of Appeals decision penned by Justice Perez. Thus: "Plaintiff is the owner of a
three-carat diamond ring valued at P5,500.00. On June 13, 1962, the plaintiff and Clarita
R. Sison entered into a transaction wherein the plaintiff's ring was delivered to Clarita R.
Sison for sale on commission. Upon receiving the ring, Clarita R. Sison executed and
delivered to the plaintiff the receipt . . . The plaintiff had already previously known
Clarita R. Sison as the latter is a close friend of the plaintiff's cousin and they had
frequently met each other at the place of the plaintiff's said cousin. In fact, about one
year before their transaction of June 13, 1962 took place, Clarita R. Sison received a
piece of jewelry from the plaintiff to be sold for P500.00, and when it was sold, Clarita
R. Sison gave the price to the plaintiff the latter's ring, the plaintiff made demands on
Clarita R. Sison for the return of her ring but the latter could not comply with the
demands because, without the knowledge of the plaintiff, on June 15, 1962 or three
days after the ring above-mentioned was received by Clarita R. Sison from the plaintiff,
said ring was pledge by Melia Sison, niece of the husband of Clarita R. Sison, evidently
in connivance with the latter, with the defendant's pawnshop for P2,600.00 . . ." 2 Then
came this portion of the decision under review: "Since the plaintiff insistently demanded
from Clarita R. Sison the return of her ring, the latter nally delivered to the former the
pawnshop ticket . . . which is the receipt of the pledge, with the defendant's pawnshop
of the plaintiff's ring. When the plaintiff found out that Clarita R. Sison pledged, she took
steps to le a case of estafa against the latter with the scal's o ce. Subsequently
thereafter, the plaintiff, through her lawyer, wrote a letter . . . date September 22, 1962,
to the defendant asking for the delivery to the plaintiff of her ring pledged with
defendant's pawnshop under pawnshop receipt serial-B No. 65606, dated June 15,
1962 . . . Since the defendant refused to return the ring, the plaintiff led the present
action with the Court of First Instance of Manila for the recovery of said ring, with
P500.00 as attorney's fees and costs. The plaintiff asked for the provisional remedy of
replevin by the delivery of the ring to her, upon her ling the requisite bond, pending the
nal determination of the action. The lower court issued the writ of replevin prayed for
by plaintiff and the latter was able to take possession of the ring during the pendency
of the action upon her ling the requisite bond." 3 It was then noted that the lower court
rendered judgment declaring that plaintiff, now respondent Suntay, had the right to the
possession, of the ring in question. Petitioner Dizon, as defendant, sought to have the
judgment reversed by the Court of Appeals. It did him no good. The decision of May 19,
1969, now on review, affirmed the decision of the lower court.
In the light of the facts as thus found by the Court of Appeals, well-nigh
conclusive on use , with the applicable law being what it is, this petition for review
cannot prosper. To repeat, the decision of the Court of Appeals stands.
1. There is a fairly recent restatement of the force and affect of the governing
codal norm in De Gracia v. Court of Appeals. 4 Thus: "The controlling provision is Article
559 of the Civil Code. It reads thus: "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 of which the owner has been unlawfully
deprived, has acquired nit in good faith at a public sale, the owner cannot obtain its
return without reimbursing the price paid therefor.' Respondent Angelina D. Guevarra,
having been unlawfully deprived of the diamond ring in question, was entitled to recover
it from petitioner Consuelo S. de Gracia who was found in possession of the same. The
only exception the law allows is when there is acquisition in faith of the possessor at a
public sale, in which case the owner cannot obtain its return without reimbursing the
price. As authoritatively interpreted in Cruz v. Pahati, the right of the owner cannot be
defeated even by proof that there was good faith in the acquisition by the possessor.
There is a reiteration of this principle in Azinar v. Yapdiangco. Thus: 'Su ce it to say in
this regard that the right of the owner to recover personal property acquired in good
faith by another, is based on his being dispossessed without his consent. The common
law principle that were one of two innocent persons must suffer by a fraud perpetrated
by another, the law imposes the loss upon the party who, by his misplaced con dence,,
has enabled the fraud to be committed, cannot be applied in a case which is covered by
an express provision of the new Civil Code, speci cally Article 559. Between a common
law principle and a statutory provision, the latter must prevail in this jurisdiction.'" 5
2. It must have been a recognition of the compulsion exerted by the above
authoritative precedents that must have caused petitioner to invoke the principle of
estoppel. There is clearly a misapprehension. Such a contention is devoid of any
persuasive force.
Estoppel as known to the Rules of Court 6 and prior to that to the Court of Civil
Procedure, 7 has its roots in equity. Good faith is its basis. 8 It is a response to the
demands of moral right and natural justice. 9 For estoppel to exist though, it is
indispensable that there be a declaration, act or omission by the party who is sought to
be bound. Nor is this all. It is equally a requisite that he, who would claim the bene ts of
such a principle, must have altered his position, having been so intentionally and
deliberately led to comport himself thus, by what was declared or what was done or
failed to be done. If thereafter a litigation arises, the former would not be allowed to
disown such act, declaration or omission. The principle comes into full play. It may
successfully be relied upon. A court is to see to it then that there is no turning back on
one's word or a repudiation of one's act. So it has been from our earliest decisions. As
Justice Mapa pointed out in the rst case, a 1905 decision, Rodriguez v. Martinez, 1 0 a
party should not be permitted "to go against his own acts to the prejudice of[another].
Such a holding would be contrary to the most rudimentary principles of justice and law."
1 1 He is not, in the language of Justice Torres, in Irlanda v. Pitargue, 1 2 promulgated in
1912 "allowed to gainstay [his] own acts or deny rights which [he had] previously
recognized." 1 3 Some of the later cases are to the effect that an unquali ed and
unconditional acceptance of an agreement forecloses a claim for interest not therein
provided. 1 4 Equally so the circumstances that about a month after the date of the
conveyance, one of the parties informed the other of his being a minor, according to
Chief Justice Paras, "is of no moment had already estopped him from disavowing the
contract." 1 5 It is easily understandable why, under the circumstances disclosed,
estoppel is a frail reed to hang on to. There was clearly the absence of an act or
omission, as a result of which a position had been assumed by petitioner, who if such
elements were not lacking, could not thereafter in law be prejudiced by his relief in what
had been misrepresented to him. 1 6 As was put by Justice Labrador, "a person claimed
to be estopped must have knowledge of the fact that his voluntary acts would deprive
him of some rights because said voluntary acts are inconsistent with said rights. 1 7 To
recapitulate, there is this pronouncement not so long ago, from the pen of Justice
Makalintal, who rea rmed that estoppel "has its origin in equity and, being based on
moral right and natural whenever the special circumstances of a case so demand." 1 8
How then can petitioner in all seriousness assert that his appeal nds support in
the doctrine of estoppel? Neither the prompting of equity not the mandates of moral
right and natural justice come to his rescue. He is engaged in a business where
presumably ordinary prudence would manifest itself to ascertain whether or not an
individual who is offering a jewelry by way of a pledge is entitled to do so. If no such
care be taken, perhaps because of the di culty of resisting opportunity for pro t, he
should be the last to complain if thereafter the right of the true owner of such jewelry
should be recognized. The law for this sound reason accords the latter protection. So it
has always been since Varela v. Finnick, 1 9 a 1907 decision. According to Justice
Torres: "In the present case not only has the ownership and the origin of the jewels
misappropriated been unquestionably proven but also that the accused, acting
fraudulently and in bad faith,, disposed of them and pledged them contrary to
agreement, with no right of ownership, and to the prejudice of the injured party, who
was thereby illegally deprived of said jewels; therefore, in accordance with the
provisions of article 464, the owner has an absolute right to recover the jewel the jewels
from the possession of whosoever holds them, . . ." 2 0 There have been many other
decisions to the same effect since then. At least nine may be cited. 2 1 Nor could any
other outcome be expected, considering the civil code provisions both in the former
Spanish legislation 2 2 and in the present Code. 2 3 Petitioner ought to have been on his
guard before accepting the pledge in question. Evidently there was no such precaution
availed of. He therefore, has only himself to blame for the x he is now. It would be to
stretch the concept of estoppel to the breaking point if his contention were to prevail.
Moreover, there should have been a realization on his part that courts are not likely to
be impressed with a cry of distress authorized to impose a higher rate of interest
precisely due to the greater risk assumed by him. A predicament of this nature then
does not su ce to call for less than undeviating adherence to the literal terms of a
codal provision. Moreover, while the activity he is engaged in is no doubt legal, it is not
to be lost sight of that it thrives on taking advantage of the necessities precisely of that
element of our population whose lives are blighted by extreme poverty. From whatever
angle the question is viewed then, estoppel certainly cannot be justly invoked.
WHEREFORE, the decision of the Court of Appeals of May 19, 1969 is a rmed,
with cost against petitioner.
Concepcion, C.J., Zaldivar, Makasiar, Antonio and Esguerra, JJ., concur.
Makalintal and Barredo,, JJ., did not take part.
Castro, J., reserves his vote.
Separate Opinions
TEEHANKEE , J., concurring:
I concur in the main opinion of Mr. Justice Fernando tracing and con rming the
long settled and uniform jurisprudence since 1905 based on the express statutory
provision of article 559 of our Civil Code (formerly article 464 of the old Civil Code) that
the owner "who has lost any movable or has been unlawfully deprived thereof may
recover it from the person in possession of the same," the only exception expressly
provided in the codal article being that "if the possessor of a movable lost 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." 1
Senator Tolentino's submittal in his commentaries on the Civil Code "that the
better view is to consider 'unlawfully deprived' as limited to unlawful taking, such as
theft or robbery, and should not include disposition through abuse of con dence. Thus,
if the owner has entrusted personal property to a bail, such as for transportation,
pledge, loan or deposit, without transmitting ownership,, and the latter alienates it to a
third person who acquires it in good faith, the owner cannot recover from such third
person, "is, as he himself admits, based on the express provision of the French Code
which allows the true owner of personal property to recover it from the possessor in
good faith without reimbursement only "if it has been stolen from him." He concedes
likewise that "our Code, following the Spanish Code, uses broader language than that
used in the French Code" — since our Code provides that the owner who has been
"unlawfully deprived" of personal property may recover it from the possessor without
reimbursement, with the sole exception where the possessor acquired the article in
good faith at a public sale. 2
He thus concedes nally that "(T)here are writers who believe that the phrase
'unlawfully deprived' in our Code does not have the same meaning as stolen in the
French code; that it is used in the general sense, and is not used in the speci c sense of
deprivation by robbery or theft. Under this view, it extends to all cases where there has
been no valid transmission of ownership, including the case where the proprietor has
entrusted the thing to a borrower, depository, or lessee who has sold the same. It is
believed that the owner in such case is undoubtedly unlawfully deprived of his property,
and may recover the same from a possessor in good faith" (citing De Buen: 2-II Colin &
Capitant 1008; 1 Bonet 234) 3 and cites the long unbroken line of decisions of the
Court of Appeals and of this Court up-holding the import of the broader language of the
codal article in question.
Indeed, if our legislature had intended to narrow the scope of the term "unlawfully
deprived" to "stolen" as advocated by Tolentino, it certainly would have adopted and
used such a narrower term rather than the broad language of article 464 of the old
Spanish Civil Code with our jurisprudence.
Petitioner's contentions at bar had long been disposed of in the Court's 1911
decision of Arenas vs. Raymundo, 4 per Mr. Justice Florentino Torres, reiterating the
doctrine of the earlier cases and holding that
"Even supposing that the defendant Raymundo had acted in good faith in
accepting the pledge of the jewelry in litigation, even then he would not be entitled
to retain it until the owner thereof reimburse him for the amount loaned to the
embezzler, since the said owner of the jewelry, the plaintiff, did not make any
contract with the pledge, that would obligate him to pay the amount loaned to
Perello, and the trial record does not disclose any evidence, even circumstantial,
that the plaintiff Arenas consented to or had knowledge of the pledging of her
jewelry in the pawnshop of the defendant.
"For this reason, and because Concepcion Perello was not the legitimate
owner of the jewelry which she pledged to the defendant Raymundo, for a certain
sum that she received from the latter as a loan, the contract of pledge entered into
by both is, of course, null and void, and consequently the jewelry so pawned can
not served as security for the payment of the sum loaned, nor can the latter be
collected out of the value of the said jewelry.
"Article 1857 of the Civil Code prescribes as one of the essential requisites
of the contracts of pledge and of mortgage, that the thing pledged or mortgaged
must belong to the person who pledges or mortgages it. This essential requisite
for the contract of pledge between Perello and the defendant being absent as the
former was not the owner of the jewelry given in pledge, the contract is as devoid
of value and force as if it had not been made, and as it was executed with marked
violation of an express provision of the law, it can not confer upon the defendant
any rights in the pledged jewelry, nor impose any obligation toward him on the
part of the owner thereof, since the latter was deprived of her possession by
means of the illegal pledging of the said jewelry, a criminal act.
"Between the supposed good faith of the defendant Raymundo and the
undisputed good faith of the plaintiff Arenas, the owner of the jewelry, neither law
nor justice permit that the latter, after being the victim of embezzlement, should
have to choose one of the two extremes of a dilemma, both of which, without
legal ground or reason, are injurious and prejudicial to her interests and rights,
that is, she must either lose her jewelry or pay a large sum received by the
embezzler as a loan from the defendant, when the plaintiff Arenas is not related
to the latter by any legal or contractual bond out of which legal obligations arise.
xxx xxx xxx

"The business of pawnshops, in exchange for the high and onerous
interest which constitutes its enormous pro ts, is always exposed to the
contingency of receiving in pledge or security for the loan, jewels and other
articles that have been robbed, stolen, or embezzled from their legitimate owners;
and as the owner of the pawnshop accepts the pledging of jewelry from the rst
bearer who offers the same and asks for money on it, without assuring himself
whether such bearer is or is not the owner thereof, he can cot, by such procedure,
except from the law better and more preferential protection than the owner of the
jewels or other articles, who was deprived thereof by means of a crime and is
entitled to be excused by the courts.
"Antonio Matute, the owner of another pawnshop, being convinced that he

was wrong, refrained from appealing from the judgment wherein he was
sentenced to return, without redemption, to the plaintiffs, another jewel of great
value which had been pledged to him by the same Perello. He undoubtedly had in
mind some of the previous decisions of this court, one of which was against
himself."
By the same token, the contention that the owner may recover the lost article of
which he has been unlawfully deprived without reimbursement of the sum received by
the embezzler from the pawnshop only after a criminal conviction of the embezzler, is
to add a requirement that is not in the codal article and to unduly prejudice the victim of
embezzlement, as pointed out by the Court in Arenas, supra.
The civil action that the owner must resort to for the recovery of his personal
property of which he has been unlawfully deprived as against the possessor (where the
latter refuses to honor the claim, presumably on same valid doubts as to the
genuineness of the claim) gives the possessor every adequate protection and
opportunity to contest the owner's claim to recovery. The owner must therein establish
by competent evidence his lawful claim, and show to the court's satisfaction his lawful
ownership of the article claimed and that he had been unlawfully deprived thereof.
I therefore nd no reason to set aside the long settled interpretation given by our
jurisprudence to article 559 (formerly article 464) of our Civil Code in accordance with
its clear and unambiguous language, as reaffirmed in the case at bar.
Footnotes
1. Article 559 reads as follows: "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, any 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. Appendix A to Petitioner's Brief, pp. I-II.
3. Ibid, pp. II-III.

4. L-20264, January 30, 1971, 37 SCRA 129.
5. Ibid, pp. 134-135. Cruz v. Pahati is reported in 98 Phil. 788 (1956) and Aznar v.
Yapdiangco, L-18536, promulgated on March 31, 1965 in 13 SCRA 486.
6. According to the Rules of Court, Rule 131, Sec. 3(a): "Whenever a partly has, by his
own declaration, act or omission, intentionally and deliberately led another to
believe a particular thing true, and to act upon such belief, he cannot, in any
litigation arising out of such declaration, act or omission, be permitted to falsify it;
. . ."
7. Section 331, Act 190 (1901).
8. Cf. Herman v. Radio Corporation of the Philippines, 50 Phil. 490 (1927).
9. Cf. "The doctrine of estoppel having its origin in equity, and therefore being based
on moral right and natural justice, its applicability of Tobaco, 43 Phil. 610,, 614
(1992).
10. 5 Phil. 67. Other cases follow: Municipality of Oas v. Roa, 7 Phil. 20 (1906);
Trinidad v. Ricafort, 7 Phil. 449 (1907); Fabie v. The City of Manila, 10 Phil. 64
(1908); United States v. Macaspac, 12 Phil. 26 (1908); Chinese Chamber of
Commerce v. Pua Te Ching, 14 Phil. 222 (1909) and Amancio v. Pardo, 20 Phil.
313 (1911).
11. Ibid, p. 69.
12. 22 Phil. 383. Cf. In re estate of Enriquez and Reyes 29 Phil. 167 (1915); Hernaez
v. Hernaez, 32 Phil. 77 (1915); Joaquin v. Mitsumine,, 34 Phil. 858 (1916); Lopez
v. Abelarde, 36 Phil. 563 (1917); Henry B. Peadbody & Co. v. Bromfield and Ross,
38 Phil. 841 (1918); Herman v. Radio Corp. of the Phil. 504 (1935) and Ortua v.
Rodriguez, 63 Phil, 809 (1963).
13. Ibid, p. 392.

14. Gozun v. Republic of the Philippines, 84 Phil. 159 (1949).
15. Sia Suan v. Alcantara, 85 Phil. 669, 672 (1950).
16. Cf. Borlaza v. Ramos, 89 Phil. 464 (1951).
17. Board of Directors v. Alandy, 109 Phil. 1058, 1069 (1960).
18. Castillo v. Court of Appeals, L-18046, March 31, 1964, 10 SCRA 549, 553-554. Cf.
Calderon v. Medina, L-17634, Oct. 29, 1966, 18 SCRA 583; Bucay v. Paulino, L-
25775, April 26, 1968, 23 SCRA 249; Saura Import and Export Co. v. Solidum, L-
24514, July 31, 1968, 24 SCRA 574; Fieldmen's Insurance Co. v. Vda. de Songco,
L-24833, Sept. 23, 1968, 25 SCRA 70; De Castro v. Ginete, L-30058, March 28,
1969, 27 SCRA 623; Lazo v. Republic Surety, L-27365,, Jan. 30, 1970, 31 SCRA
329; Kalao v. Luz, L-27782, July 31, 1970, 34 SCRA 337; Ramos v. Central Bank, L-
29352, Oct. 4, 1971, 41 SCRA 565.
19. 9 Phil. 482.
20. Ibid, p. 486.
21. Cf. U.S. v. Meñez, 11 Phil. 430 (1908); Arenas v. Raymundo, 19 Phil. 46 (1911);
Reyes v. Ruiz, 27 Phil. 458 (1914); United States v. Sotelo, 28 Phil. 147 (1914);
People v. Alejano, 54 Phil. 987 (1930); Gacula v. Martinez, 88 Phil. 142 (1952);
Cruz v. Pahati, 98 Phil. 788 (1956); Aznar v. Yapdiangco, L-18536, March 31,
1965, 13 SCRA 486.
22. Civil Code of Spain of 1889.
23. Republic Act 386 (1950).
TEEHANKEE, J., concurring:
1. Emphasis in cited article supplied.
2. Tolentino's Civil Code, Vol. II, p. 265, emphasis copied.

3. Idem, pp. 262-263.
4. 19 Phil. 47, emphasis supplied.

FIRST DIVISION
[G.R. No. 80298. April 26, 1990.]
EDCA PUBLISHING & DISTRIBUTING CORP. , petitioner, vs. THE SPOUSES

LEONOR and GERARDO SANTOS, doing business under the name and
style of "SANTOS BOOKSTORE," and THE COURT OF APPEALS ,
respondents.
Emiliano S. Samson, R. Balderrama-Samson, Mary Anne B. Samson for petitioner.

Cendaña, Santos, Delmundo & Cendaña for private respondents.
DECISION
CRUZ , J : p
The case before us calls for the interpretation of Article 559 of the Civil Code and raises
the particular question of when a person may be deemed to have been "unlawfully
deprived" of movable property in the hands of another. The article runs in full as follows:
ART. 559. 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.
The movable property in this case consists of books, which were bought from the
petitioner by an impostor who sold it to the private respondents. Ownership of the books
was recognized in the private respondents by the Municipal Trial Court, 1 which was
sustained by the Regional Trial Court, 2 which was in turn sustained by the Court of
Appeals. 3 The petitioner asks us to declare that all these courts have erred and should be
reversed.
This case arose when on October 5, 1981, a person identifying himself as
Professor Jose Cruz placed an order by telephone with the petitioner company for
406 books, payable on delivery. 4 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. 5 On October 7, 1981, Cruz sold 120 of the books
to private respondent Leonor Santos who, after verifying the seller's ownership
from the invoice he showed her, paid him P1,700.00. 6
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. 7 EDCA then went to the
police, which set a trap and arrested Cruz on October 7, 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 the private respondents. 8
On the night of the same date, EDCA sought the assistance of the police in Precinct 5 at
the UN Avenue, which forced their way into the store of the private respondents 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 the petitioner. 9
Protesting this high-handed action, the private respondents sued for recovery of the books
after demand for their return was rejected by EDCA. A writ of preliminary attachment was
issued and the petitioner, after initial refusal, finally surrendered the books to the private
respondents. 1 0 As previously stated, the petitioner was successively rebuffed in the three
courts below and now hopes to secure relief from us.
To begin with, the Court expresses its disapproval of the arbitrary action of the petitioner
in taking the law into its own hands and forcibly recovering the disputed books from the
private respondents. 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 like the one at bar are decided not by
policemen but by judges and with the use not of brute force but of lawful writs.
Now to the merits.
It is the contention of the petitioner that the private respondents have not established their
ownership of the disputed books because they have not even produced a receipt to prove
they had bought the stock. This is unacceptable. Precisely, 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.
The argument that the private respondents did not acquire the books in good faith has
been dismissed by the lower courts, and we agree. 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. Private
respondents 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.
But the real issue here is whether the petitioner has been unlawfully deprived of the books
because the check issued by the impostor in payment therefor was dishonored.
In its extended memorandum, EDCA cites numerous cases holding that the owner who has
been unlawfully deprived of personal property is entitled to its recovery except only where
the property was purchased at a public sale, in which event its return is subject to
reimbursement of the purchase price. The petitioner is begging the question. It is putting
the cart before the horse. Unlike in the cases invoked, it has yet to be established in the
case at bar that EDCA has been unlawfully deprived of the books.
The petitioner argues that it was, because the impostor acquired no title to the books that
he could have validly transferred to the private respondents. Its reason is that as the
payment check bounced for lack of funds, there was a failure of consideration that nullified
the contract of sale between it and Cruz.
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 the Civil Code: cdll
ART. 1475. 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.
xxx xxx xxx
ART. 1477. The owner ship of the thing sold shall be transferred to the
vendee upon the actual or constructive delivery thereof.
ART. 1478. The parties may stipulate that ownership in the thing shall not
pass to the purchaser until he has fully paid the price.
It is clear from the above provisions, particularly the last one quoted, that 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.
Non-payment only creates a right to demand payment or to rescind the contract, or to
criminal prosecution in the case of bouncing checks. But absent the stipulation above
noted, delivery of the thing sold will effectively transfer ownership to the buyer who can in
turn transfer it to another.
In Asiatic Commercial Corporation v. Ang , 1 1 the plaintiff 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:
Yet the defendant invoked Article 464 1 2 of the Civil Code providing, among other
things that "one who has been unlawfully deprived of personal property may
recover it from any person possessing it." We do not believe that the plaintiff has
been 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. LLjur
In Tagatac v. Jimenez, 1 3 the plaintiff sold her car to Feist, who sold it to Sanchez, who sold
it to Jimenez. When the payment check issued to Tagatac by Feist was dishonored, the
plaintiff 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:
The point of inquiry is whether plaintiff-appellant Trinidad C. Tagatac has been
unlawfully deprived of her car. At first blush, it would seem that she was
unlawfully deprived thereof, considering that she was induced to part with it by
reason of the chicanery practiced on her by Warner L. Feist. Certainly, swindling,
like robbery, is an illegal method of deprivation of property. In a manner of
speaking, plaintiff-appellant was "illegally deprived" of her car, for the way by
which Warner L. Feist induced her to part with it is illegal and is punished by law.
But does this "unlawful deprivation" come within the scope of Article 559 of the
New Civil Code?
xxx xxx xxx
. . . The fraud and deceit practiced by Warner L. Feist earmarks this sale as a
voidable contract (Article 1390 N.C.C.). 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, N.C.C.) and the contract is cleansed from all its
defects (Article 1396, N.C.C.); 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, N.C.C.).
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
plaintiff-appellant Trinidad C. Tagatac delivered the car to Feist by virtue of said
voidable contract of sale, the title to the car passed to Feist. Of course, the title
that Feist acquired 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, N.C.C.). There
being no proof on record that Felix Sanchez acted in bad faith, it is safe to
assume that he acted in good faith.
The above rulings are sound doctrine and reflect our own interpretation of Article 559 as
applied to the case before us.
Actual delivery of the books having been made, Cruz acquired ownership over the books
which he could then validly transfer to the private respondents. 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 private respondents to the books.
One may well imagine the adverse consequences if the phrase "unlawfully deprived" were
to be interpreted in the manner suggested by the petitioner. 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.
It bears repeating that in the case before us, 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. 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. Cdpr
Surely, the private respondent 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.
It would certainly be unfair now to make the private respondents bear the prejudice
sustained by EDCA as a result of its own negligence. We cannot see the 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 we sympathize with the petitioner for its plight, it is clear that its remedy is not
against the private respondents but against Tomas de la Peña, who has apparently caused
all this trouble. The private respondents 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.
WHEREFORE, the challenged decision is AFFIRMED and the petition is DENIED, with costs
against the petitioner.
Narvasa, Gancayco, Griño-Aquino and Medialdea, JJ., concur.
Footnotes
1. Presided by Judge Jose B. Herrera.

2. Presided by Judge Ernesto S. Tengco.
3. Buena, J., with Castro-Bartolome and Cacdac, Jr., JJ., concurring.

4. Rollo, pp. 9-10.
5. Ibid., p. 10.
6. Id., p. 37; TSN, Orig. Records, pp. 215-219.
7. Rollo, p. 10.
8. Ibid., p.11.
9. Id., p. 37.
10. Id., p. 38.
11. Vol. 40, O.G.S. No. 15, p.102.
12. Substantially reproduced in what is now Article 559.

13. Vol. 53, O.G. No. 12, p. 3792.

FIRST DIVISION
[G.R. No. 75364. November 23, 1988.]
ANTONIO LAYUG , petitioner, vs. INTERMEDIATE APPELLATE COURT

and RODRIGO GABUYA , respondents.
Francisco Ma. Garcia for petitioner.

Moises F . Dalisay, Sr. for private respondent.
SYLLABUS
1. REMEDIAL LAW; CIVIL PROCEDURE; APPEAL. — Findings of fact of the Court of

Appeals are conclusive and generally binding even on the Supreme Court.
2. CIVIL LAW; CIVIL CODE; CONTRACTS; INTERPRETATION. — Under Article 1374 of
the Civil Code, the stipulations of a contract shall be interpreted together "attributing to the
doubtful ones that sense which may result from all of them taken jointly."
3. ID.; ID.; EQUITY; NOT APPLICABLE WHERE THERE IS A STATUTE IN FORCE AND
APPLICABLE. — The principle of equity and the general provisions of the Civil Code may
not be applied in the resolution of the controversy where there is an adequate remedy at
law available to the parties.
4. ID.; ID.; ID.; SALES OF REAL ESTATE ON INSTALLMENT. — Republic Act 6552
governs sales of real estate on installments. It recognizes the vendor's right to cancel such
contracts upon failure of the vendee to comply with the terms of the sale, but at the same
time gives the buyer, subject to conditions provided by law, a one month grace period for
every year of installment payment made and if the contract is cancelled, a refund of cash
surrender value.
DECISION
NARVASA , J : p
Involved in the appellate proceedings at bar is a contract for the purchase on installments
by Antonio Layug of twelve (120 lots owned by Rodrigo Gabuya, situated at Barrio Bara-as,
Iligan City. The contract, entered into on October 4, 1978, set the price for the lots at
P120,000.00 payable in three (3) yearly installments, viz:
"1. P40,000.00, Philippine Currency, upon the signing of this
agreement/contract.
"2. Another P40,000.00 after twelve (12) months or one year from the signing
of the contract/agreement.
"3. The balance of P40,000.00 after 24 months or two years from the signing
of the contract/agreement."

The contract also provided for the automatic cancellation of the contract and forfeiture
of all installments thus far paid, which would be considered as rentals for the use of the
lots, to wit:
". . . (S)hould the vendee fail to pay any of the yearly installments when due or
otherwise fail to comply with any of the terms and conditions herein stipulated,
then this deed of conditional sale shall automatically and without any further
formality, become null and void, and all sums so paid by the vendee by reason
thereof, shall be considered as rentals and the vendor shall then and there be free
to enter into the premises, take possession thereof or sell the properties to any
other party." 1
Layug paid the first two annual installments, totalling P80,000.00. But he failed to pay the
last installment of P40,000.00, which fell due on October 5, 1980. Gabuya made several
informal demands for payment; and when all these proved unavailing, he made a formal
written demand therefor under date of April 18, 1981 which was sent to and received by
Layug by registered mail. When this, too, went unheeded, Gabuya finally brought suit in the
Court of First Instance of Lanao del Norte for the annulment of his contract with Layug and
for the recovery of damages. 2
The Trial Court's judgment went against Layug. It declared the contract of conditional sale
cancelled, and forfeited in Gabuya's favor all payments made by Layug, considering them
as rentals for the 12 lots for the period from the perfection of the contract in 1978 to June
11, 1981, besides requiring him to pay attorney's fees. 3 The judgment was, on appeal,
affirmed by the Court of Appeals, except that it made the application of the forfeited
payments, as rentals, extend up to the date of its decision: August 30, 1985. 4
The Appellate Court overruled Layug's claim that the contract had not fixed the date for the
payment of the third and last installment and consequently, he could not be considered to
have defaulted in the payment thereof. A reading of the contract immediately makes
possible the determination of the due dates of each yearly installment intended by the
parties; the first, on October 4, 1978, the date of execution of the contract; the second,
after 12 months or 1 year "from the signing of the contract/agreement," or on October 5,
1979, and the third, or last, after "24 months from . . . (such) signing," or on October 5,
1980." That it was so understood by Layug is established by the evidence. As observed by
the Court of Appeals, when Layug 'paid the first (second, actually) yearly installment of
P40,000.00 on January 24, 1980, or three (3) months and twenty (20) days beyond
October 4, 1979, he paid an additional amount of P800.00 as interest. If he did not agree
that the first (second) installment was due on October 4, 1979, it puzzles Us why he had to
pay an additional amount of P800.00 which was included in the receipt, Exhibit '6'." 5
Correctly overruled, too, was Layug's other claim that there was some doubt as to the
amount of the balance of his obligation — by his computation he only owed P30,000.00,
since there was an advance payment of P10,000.00 made by him for which he should be
credited — and this had to be first resolved before his obligation to pay the last installment
could be exigible. The Court of Appeals declared this to be but a lame excuse for his
delinquency; the P10,000.00 was in truth part payment of the first installment of
P40,000.00; for had it been otherwise, the document of sale would have reflected it as a
separate and distinct payment from the first installment of P40,000.00 paid upon the
signing of the agreement; but Layug subscribed to the contract without asking for its
revision. According to the Court of Appeals, "If the theory of the defendant-appellant that
the P10,000.00 was separate and distinct from the down payment of P40,000.00, then the
balance as set forth in subpars. 2 and 3 quoted above should have been (correspondingly
amended, e.g.,) P35,000.00 each, or a total of P70,000.00 for both installments, instead of
P40,000.00 per installment, or a total Of P80,000.00." 6
Prescinding from the well established and oft applied doctrine that the findings of fact of
the Court of Appeals are conclusive and generally binding even on this Court, 7 nothing in
the record has been brought to our attention to justify modification, much less reversal, of
those findings.
Petitioner adverts to the stipulation in his contract (a) granting him, as vendee, a "30 days
grace period within which to pay" any yearly installment not paid within the time fixed
therefor, and (b) declaring him liable, in the event of his failure to pay within the grace
period, "for interest at the legal rate." He argues that the stipulation indicates that
rescission was not envisioned as a remedy against a failure to pay installments; such
failure was not ground for abrogating the contract but merely generated liability for
interest at the legal rate. The argument is unimpressive. It would negate the explicit
provision that the failure to pay any of the yearly installments when due (or to comply with
any other covenant) would automatically render the contract null and void. The stipulations
of a contract shall be interpreted together, the law says, 8 attributing to the doubtful ones
that sense which may result from all of them taken jointly. The grace period clause should
be read conjointly with the stipulation on rescission, and in such a manner as to give both
full effect. It is apparent that there is no such inconsistency between the two as would
support a hypothesis that one cannot be given effect without making the other a dead
letter. The patent and logical import of both provisions, taken together, is that when the
vendee fails to pay any installment on its due date, he becomes entitled to a grace period
of 30 days to cure that default by paying the amount of the installment plus interest; but
that if he should still fail to pay within the grace period, then rescission of the contract
takes place. It was for the judicial affirmation of this plain proposition that the private
respondent instituted the original action for annulment which has given rise to this appeal.
Layug posits that, at the very least, he is entitled to a conveyance of at least 8 of the 12
lots subject of the conditional sale, on the theory that since the total price of the 12 lots
was P120,000.00, each lot then had a value of P10,000.00 and, therefore, with his
P80,000.00, he had paid in full the price for 8 lots. In support, he invokes our earlier rulings
in Legarda Hermanos v. Saldaña 9 and Calasanz v. Angeles. 1 0 The cited precedents are
however inapplicable. In Legarda Hermanos, the contract of sale provided for payment of
the price of two (2) subdivision lots at P1,500.00 each, exclusive of interest, in 120
monthly installments, and at time of default, the buyer had already paid P3,582.00,
inclusive of interest; and in Calasanz, the agreement fixed a price of P3,720.00 with
interest at 7% per annum, and at time of default, the buyer had paid installments totaling
P4,533.38, inclusive of interest. Upon considerations of justice and equity and in light of
the general provisions of the civil law, we resolved in Legarda Hermanos to direct the
conveyance of one of the lots to the buyer since he had already paid more than the value
thereof, and in Calasanz, to disallow cancellation by the seller and direct transfer of title to
the buyer upon his payment of the few installments yet unpaid. In both said cases, we
strove to equitably allocate the benefits and losses between the parties to preclude undue
enrichment by one at the expense of the other; and by this norm, Layug cannot be
permitted to claim that all his payments should be credited to him in their entirety, without
regard whatever to the damages his default might have caused to Gabuya.
It is not however possible, in any event, to apply the rulings in Legarda Hermanos and
Calasanz to the case at bar; i.e., to resort to principles of equity and the general provisions
of the Civil Code in resolution of the controversy. That was done in the cited cases
because there was at then no statute specifically governing the situation. It was not so as
regards the instant case. At the time of the execution of the contract in question, and the
breach thereof, there was a statute already in force and applicable thereto, Republic Act
No. 6552. 1 1 This statute makes unnecessary if not indeed improper, a resort to analogous
provisions of the Civil Code. It also precludes a resort to principles of equity it being
axiomatic that where there is an adequate remedy at law available to the parties, equity
should not come into play. 1 2 And it allows a mitigation of the impact of the stringent
contractual provisions on Layug and makes possible the grant of some measure of relief
to him under the circumstances of the case.
R.A. 6552 governs sales of real estate on installments. It recognizes the vendor's right to
cancel such contracts upon failure of the vendee to comply with the terms of the sale, but
imposes, chiefly for the latter's protection, certain conditions thereon. We have had
occasion to rule that "even in residential properties," the Act "recognizes and reaffirms the
vendor's right to cancel the contract to sell upon breach and non-payment of the stipulated
installments . . ." 1 3
The law provides inter alia 1 4 that "in all transactions or contracts involving the sale or
financing of real estate on installment payments, including residential condominium
apartments, . . ., 1 5 where the buyer has paid at least two years of installments, the buyer is
entitled to the following rights in case he defaults in the payment of succeeding
installments:
[Grace Period]
"(a) To pay, without additional interest, the unpaid installments due within the
total grace period earned by him which is hereby fixed at the rate of one month
grace period for every year of installment payments made: Provided, That this
right shall be exercised by the buyer only once in every five years of the life of the
contract and its extensions, if any;
[Refund of "Cash Surrender Value"]
"(b) If the contract is cancelled, the seller shall refund to the buyer the cash
surrender value of the payments on the property equivalent to fifty percent of the
total payments made and, after five years of installments, an additional five
percent every year but not to exceed ninety per cent of the total payments made;
Provided, That the actual cancellation of the contract shall take place after thirty
days from receipt by the buyer of the notice of cancellation or the demand for
rescission of the contract by a notarial act and upon full payment of the cash
surrender value to the buyer."
In the case at bar, Layug had paid two (2) annual installments of P40,000.00 each. He is
deemed therefore, in the words of the law, to have " paid at least two years of
installments." He therefore had a grace period of "one month . . . for every year of
installment payments made," or two (2) months (corresponding to the two years of
installments paid) from October 5, 1980 within which to pay the final installment. That he
made no payment within this grace period is plain from the evidence. He has thus been left
only with the right to a refund of the "cash surrender value of the payments on the property
equivalent to fifty percent of the total payments made," or P40,000.00 (i.e., 1/2 of the total
payments of P80,000.00). Such refund will be the operative act to make effective the
cancellation of the contract by Gabuya, conformably with the terms of the law. The
additional formality of a demand on Gabuya's part for rescission by notarial act would
appear, in the premises, to be merely circuitous and consequently superfluous.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED particularly in so far as it
authorizes and sanctions the cancellation by private respondent Gabuya of his contract of
sale with petitioner Layug, but is MODIFIED only in the sense that such cancellation shall
become effective and fully operative only upon payment to the latter's satisfaction of the
"cash surrender value" of his payments, in the sum of P40,000.00. No costs.
Cruz, Gancayco, Griño-Aquino and Medialdea, JJ ., concur.
Footnotes
1. Rollo, p. 216.
2. Id., p. 43. The suit was docketed as Case No. IV-726 and was raffled to Branch IV of the
Court.
3. Rollo, p. 61: Brief for Appellant, p. 2.
4. The ponente was Quetulio-Losa, J ., with whom concurred Gaviola, Jr. and Luciano, JJ .
5. Rollo, p. 56.
6. Rollo, p. 57.
7. Estate of Rodolfo Jalandoni, etc. v. C.A, 144 SCRA 334; Republic v. I.A.C., 145 SCRA 25;
Balde v. CA., 150 SCRA 365; Cu Bie v. I.A.C., 154 SCRA 599; Knecht v. C.A., G.R. No.
65114, February 23, 1988.
8. ART. 1374, Civil Code.
9. 55 SCRA 328.
10. 135 SCRA 323.
11. Effective Sept. 14, 1972.
12. 27 Am. Jr. 2d., p. 522.

13. Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc., 86 SCRA 308.
14. Sec. 3.
15. ". . . but excluding industrial lots, commercial buildings and sale to tenants under
Republic Act Numbered Thirty-eight hundred forty-four, as amended by Republic Act
Numbered Sixty-three hundred eighty-nine.

THIRD DIVISION
[G.R. No. 119745. June 20, 1997.]
POWER COMMERCIAL AND INDUSTRIAL CORPORATION , petitioner,

vs . COURT OF APPEALS, SPOUSES REYNALDO and ANGELITA R.
QUIAMBAO and PHILIPPINE NATIONAL BANK , respondents.
Solis, Medina & Magno Law Offices for petitioner.

Clara Dumandan-Singh Law Offices for private respondents.
SYLLABUS
1. CIVIL LAW; CONTRACT; SALE; TYPES OF DELIVERY, CONSTRUED. — The Civil

Code provides that delivery can either be (1) actual (Article 1497) or (2) constructive
(Articles 1498-1501). Symbolic delivery (Article 1498), as a species of constructive
delivery, effects the transfer of ownership through the execution of a public document. Its
e cacy can, however, be prevented if the vendor does not possess control over the thing
sold, in which case this legal ction must yield to reality. The Court has consistently held
that: [ Addison vs. Felix, 38 Phil. 404,408 (1918); Vda de Sarmiento vs Lesaca, 108 Phil.
900, 902-903 (1960); and Danguilan vs Intermediate Appellate Court, 168 SCRA 22, 32,
November 28, 1988.) ". . . (I)n order that this symbolic delivery may produce the effect of
tradition, it is necessary that the vendor shall have had such control over the thing sold that
. . . its material delivery could have been made. It is not enough to confer upon the
purchaser the ownership and the right of possession. The thing sold must be placed in his
control When there is no impediment whatever to prevent the thing sold passing into the
tenancy of the purchaser by the sole will of the vendor, symbolic delivery through the
execution of a public instrument is su cient. But if, notwithstanding the execution of the
instrument, the purchaser cannot have the enjoyment and material tenancy of the thing and
make use of it himself or through another in his name, because such tenancy and
enjoyment are opposed by the interposition of another will, then ction yields to reality —
the delivery has not been effected." ETaSDc
2. ID.; ID.; ID.; BREACH OF WARRANTY AGAINST EVICTION; WHEN PRESENT. —

A breach of warranty against eviction requires the concurrence of the following
circumstances: (1) The purchaser has been deprived of the whole or part of the thing sold;
(2) This eviction is by a nal judgment; (3) The basis thereof is by virtue of a right prior to
the sale made by the vendor; and (4) The vendor has been summoned and made co-
defendant in the suit for eviction at the instance of the vendee. In the absence of these
requisites, a breach of the warranty against eviction under Article 1547 cannot be
declared.
3. ID.; ID.; ID.; SOLUTIO INDEBITI; CONSTRUED; NOT APPLICABLE IN CASE AT
BAR. — Contrary to the contention of petitioner that a return of the payments it made to
PNB is warranted under Article 2154 of the Code, solutio indebiti does not apply in this
case. This doctrine applies where: (1) a payment is made when there exists no binding
relation between the payor, who has no duty to pay, and the person who received the
payment, and (2) the payment is made through mistake, and not through liberality or some
other cause. The quasi-contract of solution indebiti is one of the concrete manifestations
CD Technologies Asia, Inc. 2018 cdasiaonline.com
of the ancient principle that no one shall enrich himself unjustly at the expense of another.
But as shown earlier, the payment of the mortgage was an obligation petitioner assumed
under the contract of sale. There is no unjust enrichment where the transaction, as in this
case, is quid pro quo, value for value. aCHcIE
DECISION
PANGANIBAN , J : p
Is the seller's failure to eject the lessees from a lot that is the subject of a contract
of sale with assumption of mortgage a ground (1) for rescission of such contract and (2)
for a return by the mortgagee of the amortization payments made by the buyer who
assumed such mortgage?
Petitioner posits an affirmative answer to such question in this petition for review on
certiorari of the March 27, 1995 Decision 1 of the Court of Appeals, Eighth Division, in CA-
G.R. CV Case No. 32298 upholding the validity of the contract of sale with assumption of
mortgage and absolving the mortgagee from the liability of returning the mortgage
payments already made. 2
The Facts
Petitioner Power Commercial & Industrial Development Corporation, an industrial
asbestos manufacturer, needed a bigger o ce space and warehouse for its products. For
this purpose, on January 31, 1979, it entered into a contract of sale with the spouses
Reynaldo and Angelita R. Quiambao, herein private respondents. The contract involved a
612 sq. m. parcel of land covered by Transfer Certi cate of Title No. S-6686 located at the
corner of Bagtican and St Paul Streets, San Antonio Village, Makati City. The parties agreed
that petitioner would pay private respondents P108,000.00 as down payment, and the
balance of P295,000.00 upon the execution of the deed of transfer of the title over the
property. Further, petitioner assumed, as part of the purchase price, the existing mortgage
on the land. In full satisfaction thereof, he paid P79,145.77 to Respondent Philippine
National Bank ("PNB" for brevity).
On June 1, 1979, respondent spouses mortgaged again said land to PNB to
guarantee a loan of P145,000.00, P80,000.00 of which was paid to respondent spouses.
Petitioner agreed to assume payment of the loan.
On June 26, 1979, the parties executed a Deed of Absolute Sale With Assumption of
Mortgage which contained the following terms and conditions: 3
"That for and in consideration of the sum of Two Hundred Ninety-Five
Thousand Pesos (P295,000.00) Philippine Currency, to us in hand paid in cash,
and which we hereby acknowledge to be payment in full and received to our entire
satisfaction, by POWER COMMERCIAL AND INDUSTRIAL DEVELOPMENT
CORPORATION, a 100% Filipino Corporation, organized and existing under and by
virtue of Philippine Laws with o ces located at 252-C Vito Cruz Extension, we
hereby by these presents SELL, TRANSFER and CONVEY by way of absolute sale
the above described property with all the improvements existing thereon unto the
said Power Commercial and Industrial Development Corporation, its successors
and assigns, free from all liens and encumbrances.
"We hereby certify that the aforesaid property is not subject to nor covered
by the provisions of the Land Reform Code — the same having no agricultural
lessee and/or tenant.
"We hereby also warrant that we are the lawful and absolute owners of the
above described property, free from any lien and/or encumbrance, and we hereby
agree and warrant to defend its title and peaceful possession thereof in favor of
the said Power Commercial and Industrial Development Corporation, its
successors and assigns, against any claims whatsoever of any and all third
persons; subject, however, to the provisions hereunder provided to wit: aisadc
That the above described property is mortgaged to the Philippine National

Bank, Cubao, Branch, Quezon City for the amount of one hundred forty- ve
thousand pesos, Philippine, evidenced by document No. 163, found on page No.
34 of Book No. XV, Series of 1979 of Notary Public Herita L. Altamirano registered
with the Register of Deeds of Pasig (Makati), Rizal . . .;
That the said Power Commercial and Industrial Development Corporation

assumes to pay in full the entire amount of the said mortgage above described
plus interest and bank charges, to the said mortgagee bank, thus holding the
herein vendor free from all claims by the said bank;
That both parties herein agree to seek and secure the agreement and
approval of the said Philippine National Bank to the herein sale of this property,
hereby agreeing to abide by any and all requirements of the said bank, agreeing
that failure to do so shall give to the bank rst lieu (sic) over the herein described
property."
On the same date, Mrs. C.D. Constantino, then General Manager of petitioner-
corporation, submitted to PNB said deed with a formal application for assumption of
mortgage. 4
On February 15, 1980, PNB informed respondent spouses that, for petitioner's
failure to submit the papers necessary for approval pursuant to the former's letter dated
January 15, 1980, the application for assumption of mortgage was considered withdrawn;
that the outstanding balance of P145,000.00 was deemed fully due and demandable; and
that said loan was to be paid in full within fifteen (15) days from notice. 5
Petitioner paid PNB P41,880.45 on June 24, 1980 and P20,283.14 on December 23,
1980, payments which were to be applied to the outstanding loan. On December 23, 1980,
PNB received a letter from petitioner which reads: 6
"With regard to the presence of the people who are currently in physical
occupancy of the (l)ot . . . it is our desire as buyers and new owners of this lot to
make use of this lot for our own purpose, which is why it is our desire and
intention that all the people who are currently physically present and in
occupation of said lot should be removed immediately.
"For this purpose we respectfully request that . . . our assumption of
mortgage be given favorable consideration, and that the mortgage and title be
transferred to our name so that we may undertake the necessary procedures to
make use of this lot ourselves.
"It was our understanding that this lot was free and clear of problems of
this nature, and that the previous owner would be responsible for the removal of
the people who were there. Inasmuch as the previous owner has not been able to
keep his commitment, it will be necessary for us to take legal possession of this
lot inorder (sic) to take physical possession."
On February 19, 1982, PNB sent petitioner a letter as follows: 7

"(T)his refers to the loan granted to Mr. Reynaldo Quiambao which was
assumed by you on June 4, 1979 for P101,500.00. It was last renewed on
December 24, 1980 to mature on June 4, 1981.
"A review of our records show that it has been past due from last maturity
with interest arrearages amounting to P25,826.08 as of February 19, 1982. The
last payment received by us was on December 24, 1980 for P20,283.14. In order
to place your account in current form, we request you to remit payments to cover
interest, charges, and at least part of the principal."
On March 17, 1982, petitioner led Civil Case No. 45217 against respondent
spouses for rescission and damages before the Regional Trial Court of Pasig, Branch 159.
Then, in its reply to PNB's letter of February 19, 1982, petitioner demanded the return of
the payments it made on the ground that its assumption of mortgage was never approved.
On May 31, 1983, 8 while this case was pending, the mortgage was foreclosed. The
property was subsequently bought by PNB during the public auction. Thus, an amended
complaint was filed impleading PNB as party defendant.
On July 12, 1990, the trial court 9 ruled that the failure of respondent spouses to
deliver actual possession to petitioner entitled the latter to rescind the sale, and in view of
such failure and of the denial of the latter's assumption of mortgage, PNB was obliged to
return the payments made by the latter. The dispositive portion of said decision states: 1 0
"IN VIEW OF ALL THE FOREGOING, the Court hereby renders judgment in
favor of plaintiff and against defendants:
(1) Declaring the rescission of the Deed of Sale with
Assumption of Mortgage executed between plaintiff and defendants
Spouses Quiambao, dated June 26, 1979;
(2) Ordering defendants Spouses Quiambao to return to

plaintiff the amount of P187,144.77 (P108,000.00) plus (P79,145.77) with
legal interest of 12% per annum from date of ling of herein complaint,
that is, March 17, 1982 until the same is fully paid;
(3) Ordering defendant PNB to return to plaintiff the amount of
P62,163.59 (P41,880.45 and P20,283.14) with 12% interest thereon from
date of herein judgment until the same is fully paid.
"No award of other damages and attorney's fees, the same not being
warranted under the facts and circumstances of the case.
"The counterclaim of both defendants spouses Quiambao and PNB are

dismissed for lack of merit.
"No pronouncement as to costs.

"SO ORDERED."
On appeal by respondent — spouses and PNB, Respondent Court of Appeals

reversed the trial court. In the assailed Decision, it held that the deed of sale between
respondent spouses and petitioner did not obligate the former to eject the lessees from
the land in question as a condition of the sale, nor was the occupation thereof by said
lessees a violation of the warranty against eviction. Hence, there was no substantial breach
to justify the rescission of said contract or the return of the payments made. The
dispositive portion of said Decision reads: 1 1
"WHEREFORE, the Decision appealed from is hereby REVERSED and the
complaint led by Power Commercial and Industrial Development Corporation
against the spouses Reynaldo and Angelita Quiambao and the Philippine
National Bank is DISMISSED. No costs."
Hence, the recourse to this Court.

Issues
Petitioner contends that: (1) there was a substantial breach of the contract between
the parties warranting rescission; and (2) there was a "mistake in payment" made by
petitioner, obligating PNB to return such payments. In its Memorandum, it speci cally
assigns the following errors of law on the part of Respondent Court: 12
"A. Respondent Court of Appeals gravely erred in failing to consider in its
decision that a breach of implied warranty under Article 1547 in relation to
Article 1545 of the Civil Code applies in the case-at-bar.
"B. Respondent Court of Appeals gravely erred in failing to consider in its

decision that a mistake in payment giving rise to a situation where the
principle of solutio indebiti applies in obtaining in the case-at-bar."
The Court's Ruling

The petition is devoid of merit. It fails to appreciate the difference between a
condition and a warranty and the consequences of such distinction.
Conspicuous Absence of an Imposed Condition
The alleged "failure" of respondent spouses to eject the lessees from the lot in
question and to deliver actual and physical possession thereof cannot be considered a
substantial breach of a condition for two reasons: rst, such "failure" was not stipulated as
a condition — whether resolutory or suspensive — in the contract; and second, its effects
and consequences were not specified either. 13
The provision adverted to by petitioner does not impose a condition or an obligation
to eject the lessees from the lot. The deed of sale provides in part: 1 4
"We hereby also warrant that we are the lawful and absolute owners of the
above described property, free from any lien and/or encumbrance, and we hereby
agree and warrant to defend its title and peaceful possession thereof in favor of
the said Power Commercial and Industrial Development Corporation, its
successors and assigns, against any claims whatsoever of any and all third
persons; subject, however, to the provisions hereunder provided to wit."
By his own admission, Anthony Powers, General Manager of petitioner-corporation,

did not ask the corporation's lawyers to stipulate in the contract that Respondent Reynaldo
was guaranteeing the ejectment of the occupants, because there was already a proviso in
said deed of sale that the sellers were guaranteeing the peaceful possession by the buyer
of the land in question. 15 Any of obscurity in a contract, if the above-quoted provision can
be described, must be construed against the party who caused it. 1 6 Petitioner itself
caused the obscurity because it omitted this alleged condition when its lawyer drafted
said contract.
If the parties intended to impose on respondent spouses the obligation to eject the
tenants from the lot sold, it should have included in the contract a provision similar to that
referred to in Romero vs. Court of Appeals, 1 7 where the ejectment of the occupants of the
lot sold by private respondent was the operative act which set into motion the period of
petitioner's compliance with his own obligation, i.e., to pay the balance of the purchase
price. Failure to remove the squatters within the stipulated period gave the other party the
right to either refuse to proceed with the agreement or to waive that condition of
ejectment in consonance with Article 1545 of the Civil Code. In the case cited, the contract
speci cally stipulated that the ejectment was a condition to be ful lled; otherwise, the
obligation to pay the balance would not arise. This is not so in the case at bar.
Absent a stipulation therefor, we cannot say that the parties intended to make its
nonful llment a ground for rescission. If they did intend this, their contract should have
expressly stipulated so, In Ang vs. C.A., 1 8 rescission was sought on the ground that the
petitioners had failed to ful ll their obligation "to remove and clear" the lot sold, the
performance of which would have given rise to the payment of the consideration by private
respondent. Rescission was not allowed, however, because the breach was not substantial
and fundamental to the fulfillment by the petitioners of the obligation to sell.
As stated, the provision adverted to in the contract pertains to the usual warranty
against eviction, and not to a condition that was not met. The terms of the contract are so
clear as to leave no room for any other interpretation. 1 9
Furthermore, petitioner was well aware of the presence of the tenants at the time it
entered into the sales transaction. As testi ed to by Reynaldo, 2 0 petitioner's counsel
during the sales negotiation even undertook the job of ejecting the squatters. In fact,
petitioner actually led suit to eject the occupants. Finally, petitioner in its letter to PNB of
December 23, 1980 admitted that it was the "buyer(s) and new owner(s) of this lot."
Effective Symbolic Delivery
The Court disagree with petitioner's allegation that the respondent spouses failed to
deliver the lot sold. Petitioner asserts that the legal ction of symbolic delivery yielded to
the truth that, at the execution of the deed of sale, transfer of possession of said lot was
impossible due to the presence of occupants on the lot sold. We find this misleading.
Although most authorities consider transfer of ownership as the primary purpose of
sale; delivery remains an indispensable requisite as our law does not admit the doctrine of
transfer of property by mere consent. 2 1 The Civil Code provides that delivery can either be
(1) actual (Article 1497) or (2) constructive (Articles 1498-1501). Symbolic delivery
(Article 1498), as species of constructive delivery, effects the transfer of ownership
through the execution of a public document. Its e cacy can, however, be prevented if the
vendor does not possess control over the thing sold, 2 2 in which case this legal ction
must yield to reality.
The key word is control, not possession, of the land as petitioner would like us to
believe. The Court has consistently held that: 2 3
". . . (I)n order that this symbolic delivery may produce the effect of
tradition, it is necessary that the vendor shall have had such control over the thing
sold that . . . its material delivery could have been made. It is not enough to confer
upon the purchaser the ownership and the right of possession. The thing sold
must be placed in his control. When there is no impediment whatever to prevent
the thing sold passing into the tenancy of the purchaser by the sole will of the
vendor, symbolic delivery through the execution of a public instrument is
su cient. But if, notwithstanding the execution of the instrument, the purchaser
cannot have the enjoyment and material tenancy of the thing and make use of it
himself or through another in his name, because such tenancy and enjoyment are
opposed by the interposition of another will, then ction yields to reality — the
delivery has not been effected."
Considering that the deed of sale between the parties did not stipulate or infer
otherwise, delivery was effected through the execution of said deed. The lot sold had been
placed under the control of petitioner; thus, the ling of the ejectment suit was
subsequently done. It signi ed that its new owner intended to obtain for itself and to
terminate said occupants' actual possession thereof. Prior physical delivery or possession
is not legally required and the execution of the deed of sale is deemed equivalent to
delivery. 2 4 This deed operates as a formal or symbolic delivery of the property sold and
authorizes the buyer to use the document as proof of ownership. Nothing more is required.
Requisites of Breach of Warranty Against Eviction
Obvious to us in the ambivalent stance of petitioner is its failure to establish any
breach of the warranty against eviction. Despite its protestation that its acquisition of the
lot was to enable it to set up a warehouse for its asbestos products and that failure to
deliver actual possession thereof defeated this purpose, still no breach of warranty
against eviction can be appreciated because the facts of the case do not show that the
requisites for such breach have been satis ed. A breach of this warranty requires the
concurrence of the following circumstances:
(1) The purchaser has been deprived of the whole or part of the thing sold;
(2) This eviction is by a final judgment;
(3) The basis thereof is by virtue of a right prior to the sale made by the
vendor; and
(4) The vendor has been summoned and made co-defendant in the suit for
eviction at the instance of the vendee. 2 5
In the absence of these requisites, a breach of the warranty against eviction under
Article 1547 cannot be declared.
Petitioner argues in its memorandum that it has not yet ejected the occupants of
said lot, and not that it has been evicted therefrom. As correctly pointed out by
Respondent Court, the presence of lessees does not constitute an encumbrance of the
land, 2 6 nor does it deprive petitioner of its control thereof.
We note, however, that petitioner's deprivation of ownership and control nally
occurred when it failed and/or discontinued paying the amortizations on the mortgage,
causing the lot to be foreclosed and sold at public auction. But this deprivation is due to
petitioner's fault, and not to any act attributable to the vendor-spouses.
Because petitioner failed to impugn its integrity, the contract is presumed, under the
law, to be valid and subsisting.
Absence of Mistake In Payment
Contrary to the contention of petitioner that a return of the payments it made to
PNB is warranted under Article 2154 of the Code, solutio indebiti does not apply in this
case. This doctrine applies where: (1) a payment is made when there exists no binding
relation between the payor, who has no duty to pay, and the person who received the
payment, and (2) the payment is made through mistake, and not through liberality or some
other cause. 2 7
In this case, petitioner was under obligation to pay the amortizations on the
mortgage under the contract of sale and the deed of real estate mortgage. Under the deed
of sale (Exh. "2"), 2 8 both parties agreed to abide by any and all the requirements of PNB in
connection with the real estate mortgage. Petitioner was aware that the deed of mortgage
(Exh. "C") made it solidarily, and, therefore, primarily 2 9 liable for the mortgage obligation.
30
"(e) The Mortgagor shall neither lease the mortgaged property . . . nor
sell or dispose of the same in any manner, without the written consent of the
Mortgagee. However, if not withstanding this stipulation and during the existence
of this mortgage, the property herein mortgaged, or any portion thereof, is . . . sold,
it shall be the obligation of the Mortgagor to impose as a condition of the sale,
alienation or encumbrance that the vendee, or the party in whose favor the
alienation or encumbrance is to be made, should take the property subject to the
obligation of this mortgage in the same terms and condition under which it is
constituted, it being understood that the Mortgagor is not in any manner relieved
of his obligation to the Mortgagee under this mortgage by such sale, alienation or
encumbrance; on the contrary both the vendor and the vendee, or the party in
whose favor the alienation or encumbrance is made shall be jointly and severally
liable for said mortgage obligations. . . ."
Therefore, it cannot be said that it did not have a duty to pay to PNB the
amortization on the mortgage.
Also, petitioner insists that its payment of the amortization was a mistake because
PNB disapproved its assumption of mortgage after it failed to submit the necessary
papers for the approval of such assumption.
But even if petitioner was a third party in regard to the mortgage of the land
purchased, the payment of the loan by petitioner was a condition clearly imposed by the
contract of sale. This fact alone disproves petitioner's insistence that there was a
"mistake" in payment. On the contrary, such payments were necessary to protect its
interest as a "the buyer(s) and new owner(s) of the lot."
The quasi-contract of solutio indebiti is one of the concrete manifestations of the
ancient principle that no one shall enrich himself unjustly at the expense of another. 3 1 But
as shown earlier, the payment of the mortgage was an obligation petitioner assumed
under the contract of sale. There is no unjust enrichment where the transaction, as in this
case, is quid pro quo, value for value.
All told, respondent Court did not commit any reversible error which would warrant
the reversal of the assailed Decision. cdtai
WHEREFORE, the petition is hereby DENIED, and the assailed Decision is AFFIRMED.
SO ORDERED.
Narvasa, C .J ., Davide, Jr. and Melo, JJ ., concur.
Francisco, J ., is on leave.
Footnotes
1. Penned by J. Jesus M. Elbinias and concurred in by JJ. Lourdes K. Tayao-Jaguros and
B.A. Adefuin-Dela Cruz.
2. Rollo, p. 34.
3. Records, pp. 361-362.
4. Records, pp. 261-264.
5. Records, p. 306.
6. Records, p. 298.
7. Records, p. 299.
8. Notice of Extra-Judicial Sale, Records, p. 372.

9. The decision was penned by then Judge (now Justice of the Court of Appeals) Maria
Alicia M. Austria.
10. Rollo, p. 44.
11. Rollo, p. 34.
12. Rollo, p. 148.
13. Article 1458, 2nd paragraph, Civil Code, and Romero vs. Court of Appeals, 250 SCRA
223, 232, November 23, 1995.
14. Records, p. 361.
15. TSN, April 1, 1987, pp. 19-21; and rollo, p. 147.

16. Article 1377, Civil Code; Ang vs. Court of Appeals, 170 SCRA 286, 294, February 13,
1989; and Lim Yhi Luya vs. Court of Appeals, 99 SCRA 668, 682-683, September 11,
1980.
17. Supra, p. 234.
18. Supra, p. 296.
19. Article 1370, Civil Code; Ang vs. C.A., ibid, p. 295; Sy vs. Court of Appeals, 131 SCRA
116, 124, July 31, 1984; Labasan vs. Lacuesta, 86 SCRA 16, 21, October 30, 1978.
20. TSN, November 4, 1983, p. 23 and November 14, 1983, pp. 28-30.
21. Article 1477 & 1495, Civil Code; Fidelity & Deposit Co. vs. Wilson, 8 Phil. 51, 56-57
(1907); Tan Leonco vs. Go Inqui, 8 Phil. 531, 534 (1907); and Kuenzle & Streiff vs. Macke
& Chandler, 14 Phil. 610, 611-612 (1909).
22. Addison vs. Felix, 38 Phil. 404, 408 (1918); Vda. de Sarmiento vs. Lesaca, 108 Phil. 900,
902-903 (1960); and Danguilan vs. Intermediate Appellate Court, 168 SCRA 22, 32,
November 28, 1988.
23. Ibid.
24. Manuel R. Dulay Enterprises, Inc. vs. Court of Appeals, 225 SCRA 678, 687, August 27,
1993.
25. Escaler v. Court of Appeals, 138 SCRA 1, 7, August 1, 1985; Canizares Tiana v. Torrejos,
21 Phil. 127, 130 (1911); Bautista vs. Laserna, 72 Phil. 506, 510 (1941); and Jovellano
vs. Lualhati, 47 Phil. 371, 373 (1925).
26. Investment & Development Corp. vs. Court of Appeals, 162 SCRA 636, 641-642, June
27, 1988.
27. Velez vs. Balzarza, 73 Phil. 630, 632 (1942); City of Cebu vs. Judge Piccio, 110 Phil.
558, 563 (1960); and Andres vs. Manufacturers Hanover & Trust Corporation, 177 SCRA
618, 622, September 15, 1989.
29. Article 1216, Civil Code.
31. Ibid., and Ramie Textiles, Inc. vs. Mathay, Sr., 89 SCRA 586, 592, April 30, 1979.

EN BANC
[G.R. No. 12342. August 3, 1918.]
A. A. ADDISON , plaintiff-appellant, vs . MARCIANA FELIX and BALBINO

TIOCO , defendants-appellees.
Thos. D. Aitken, for appellant

Modesto Reyes and Eliseo Ymzon, for appellees.
SYLLABUS
1. VENDOR AND PURCHASER; DELIVERY; EXECUTION OF PUBLIC

INSTRUMENT. — It is the duty of the vendor to deliver the thing sold. Symbolic delivery
by the execution of a public Instrument is equivalent to actual delivery only when the
thing sold is subject to the control of the vendor.
2. ID.; ID.; RESCISSION. — If the vendor fails to deliver the thing sold the
vendee may elect to rescind the contract.
DECISION
FISHER , J : p
By a public instrument dated June 11, 1914, the plaintiff sold to the defendant
Marciana Felix, with the consent of her husband, the defendant Balbino Tioco, four
parcels of land, described in the instrument. The defendant Felix paid, at the time of the
execution of the deed, the sum of P3,000 on account of the purchase price, and bound
herself to pay the remainder in installments, the rst of P2,000 on July 15, 1914, the
second of P5,000 thirty days after the issuance to her of a certi cate of title under the
Land Registration Act, and further, within ten years from the date of such title, P10 for
each cocoanut tree in bearing and P5 for each such tree not in bearing, that might be
growing on said four parcels of land on the date of the issuance of title to her, with the
condition that the total price should not exceed P85,000. It was further stipulated that
the purchaser was to deliver to the vendor 25 per centum of the value of the products
that she might obtain from the four parcels "from the moment she takes possession of
them until the Torrens certificate of title be issued in her favor.
It was also covenanted that "within one year from the date of the certi cate of
title in favor of Marciana Felix, this latter may rescind the present contract of purchase
and sale, in which case Marciana Felix shall be obliged to return to me, A. A. Addison,
the net value of all the products of the four parcels sold, and I shall be obliged to return
to her, Marciana Felix, all the sums that she may have paid me, together with interest at
the rate of 10 per cent per annum."
In January, 1915, the vendor, A. A. Addison, led suit in the Court of First Instance
of Manila to compel Marciana Felix to make payment of the rst installment of P2,000,
demandable, in accordance with the terms of the contract of sale aforementioned, on
July 15, 1914, and of the interest in arrears, at the stipulated rate of 8 per cent per
annum. The defendant, jointly with her husband, answered the complaint and alleged by
way of special defense that the plaintiff had absolutely failed to deliver to the defendant
the lands that were the subject matter of the sale, notwithstanding the demands made
upon him for this purpose. She therefore asked that she be absolved from the
complaint, and that, after a declaration of the rescission of the contract of the purchase
and sale of said lands, the plaintiff be ordered to refund the P3,000 that had been paid
to him on account, together with the interest agreed upon, and to pay an indemnity for
the losses and damages which the defendant alleged she had suffered through the
plaintiff's nonfulfilment of the contract.
The evidence adduced shows that after the execution of the deed of sale the
plaintiff, at the request of the purchaser, went to Lucena, accompanied by a
representative of the latter, for the purpose of designating and delivering the lands
sold. He was able to designate only two of the four parcels, and more than two-thirds
of these two were found to be in the possession of one Juan Villafuerte, who claimed to
be the owner of the parts so occupied by him. The plaintiff admitted that the purchaser
would have to bring suit to obtain possession of the land (sten. notes, record, p. 5). In
August, 1914, the surveyor Santamaria went to Lucena, at the request of the plaintiff
and accompanied by him, in order to survey the land sold to the defendant; but he
surveyed 'only two parcels, which are those occupied mainly by the brothers Leon and
Julio Villafuerte. He did not survey the other parcels, as they were not designated to him
by the plaintiff. In order to make this survey it was necessary to obtain from the Land
Court a writ of injunction against the occupants, and for the purpose of the issuance of
this writ the defendant, in June, 1914, led an application with the Land Court for the
registration in her name of the four parcels of land described in the deed of sale
executed in her favor by the plaintiff. The proceedings in the matter of this application
were subsequently dismissed, for failure to present the required plans within the period
of the time allowed for the purpose.
The trial court rendered judgment in behalf of the defendant, holding the contract
of sale to be rescinded and ordering the return to the plaintiff of the P3,000 paid on
account of the price, together with interest thereon at the rate of 10 per cent per
annum. From this judgment the plaintiff appealed.
In decreeing the rescission of the contract, the trial judge rested his conclusion
solely on the indisputable fact that up to that time the lands sold had not been
registered in accordance with the Torrens system, and on the terms of the second
paragraph of clause (h) of the contract, whereby it is stipulated that ". . . within one year
from the date of the certi cate of title in favor of Marciana Felix, this latter may rescind
the present contract of purchase and sale . . . ."
The appellant objects, and rightly, that the cross complaint is not founded on the
hypothesis of the conventional rescission relied upon by the court, but on the failure to
deliver the land sold. He argues that the right to rescind the contract by virtue of the
special agreement not only did not exist from the moment of the execution of the
contract up to one year after the registration of the land, but does not accrue until the
land is registered. The wording of the clause, in fact, substantiates the contention. The
one year's deliberation granted to the purchaser was to be counted "from the date of
the certi cate of title . . .." Therefore the right to elect to rescind the contract was
subject to a condition, namely, the issuance of the title. The record shows that up to the
present time that condition has not been ful lled; consequently the defendant cannot
be heard to invoke a right which depends on the existence of that condition. If in-the
cross-complaint it had been alleged that the ful llment of the condition was impossible
for reasons imputable to the plaintiff, and if this allegation had been proven, perhaps
the condition would have been considered as ful lled (arts. 1117, 1118, and 1119, Civ.
Code); but this issue was not presented in the defendant's answer.
However, although we are not in agreement with the reasoning found in the
decision appealed from, we consider it to be correct in its result. The record shows that
the plaintiff did not deliver the thing sold. With respect to two of the parcels of land, he
was not even able to show them to the purchaser; and as regards the other two, more
than two-thirds of their area was in the hostile and adverse possession of a third
person.
The Code imposes upon the vendor the obligation to deliver the thing sold. The
thing is considered to be delivered when it is placed "in the hands and possession of
the vendee." (Civ. Code, art. 1462.) It is true that the same article declares that the
execution of a public instrument is equivalent to the delivery of the thing which is the
object of the contract, but, in order that this symbolic delivery may produce the effect
of tradition, it is necessary that the vendor shall have had such control over the thing
sold that, at the moment of the sale, its material delivery could have been made. It is not
enough to confer upon the purchaser the ownership and the right of possession. The
thing sold must be placed in his control. When there is no impediment whatever to
prevent the thing sold passing into the tenancy of the purchaser by the sole will of the
vendor, symbolic delivery through the execution of a public instrument is su cient. But
if, notwithstanding the execution of the instrument, the purchaser cannot have the
enjoyment and material tenancy of the thing and make use of it himself or through
another in his name, because such tenancy and enjoyment are opposed by the
interposition of another will, then ction yields to reality — the delivery has not been
effected.
As Dalloz rightly says (Gen. Rep., vol. 43, p. 174) in his commentaries on article
1604 of the French Civil Code, "the word 'delivery' expresses a complex idea . . . the
abandonment of the thing by the person who makes the delivery and the taking control
of it by the person to whom the delivery is made."
The execution of a public instrument is su cient for the purposes of the
abandonment made by the vendor, but it is not always su cient to permit of the
apprehension of the thing by the purchaser.
The supreme court of Spain, interpreting article 1462 of the Civil Code, held in its
decision of November 10, 1903, (Civ. Rep., vol. 96, p. 560) that this article "merely
declares that when the sale is made through the means of a public instrument, the
execution of this latter is equivalent to the delivery of the thing sold: which does not and
cannot mean that this ctitious tradition necessarily implies the real tradition of the
thing sold, for it is incontrovertible that, while its ownership still pertains to the vendor
(and with greater reason if it does not), a third person may be in possession of the
same thing; wherefore, though, as a general rule, he who purchases by means of a
public instrument should be deemed . . . to be the possessor in fact, yet this
presumption gives way before proof to the contrary."
It is evident, then, in the case at bar, that the mere execution of the instrument
was not a ful llment of the vendor's obligation to deliver the thing sold, and that from
such nonful llment arises the purchaser's right to demand, as she has demanded, the
rescission of the sale and the return of the price. (Civ. Code, arts. 1506 and 1124.)
Of course if the sale had been made under the express agreement of imposing
upon the purchaser the obligation to take the necessary steps to obtain the material
possession of the thing sold, and it were proven that she knew that the thing was in the
possession of a third person claiming to have property rights therein, such agreement
would be perfectly valid. But there is nothing in the instrument which would indicate,
even implicitly, that such was the agreement. It is true, as the appellant argues, that the
obligation was incumbent upon the defendant Marciana Felix to apply for and obtain
the registration of the land in the new registry of property; but from this it cannot be
concluded that she had to await the nal decision of the Court of Land Registration, in
order to be able to enjoy the property sold. On the contrary, it was expressly stipulated
in the contract that the purchaser should deliver to the vendor one-fourth "of the
products . . . of the aforesaid four parcels from the moment when she takes
possession of them until the Torrens certi cate of title be issued in her favor." This
obviously shows that it was not foreseen that the purchaser might be deprived of her
possession during the course of the registration proceedings, but that the transaction
rested on the assumption that she was to have, during said period, the material
possession and enjoyment of the four parcels of land.
Inasmuch as the rescission is made by virtue of the provisions of law and not by
contractual agreement, it is not the conventional but the legal interest that is
demandable
It is therefore held that the contract of purchase and sale entered into by and
between the plaintiff and the defendant on June 11, 1914, is rescinded, and the plaintiff
is ordered to make restitution of the sum of P3,000 received by him on account of the
price of the sale, together with interest thereon at the legal rate of 6 per cent per annum
from the date of the ling of the complaint until payment, with the costs of both
instances against the appellant. So ordered.
Torres, Johnson, Street, Malcolm and Avanceña, JJ., concur.

THIRD DIVISION
[G.R. No. 151212. September 10, 2003.]
TEN FORTY REALTY AND DEVELOPMENT CORP., Represented by its

President, VERONICA G. LORENZANA , petitioner, vs . MARINA CRUZ ,
respondent.
Oscar L. Karaan for petitioner.

Carmelino M. Roque for respondent.
SYNOPSIS
Galino allegedly sold the property in question to petitioner in 1996, then sold the
same property to respondent in, 1998. Petitioner argued that being the rst buyer, it has a
better right to own the realty.
In denying the petition, the Supreme Court applied Article 1544 of the Civil Code. In
case of double sale of immovable property, the law gives preferential right to the buyer
who in good faith rst recorded it in the registry of property. In the absence of the required
inscription, the person who in good faith was rst in possession has the better right to
own the realty. Petitioner in this case admitted that its Deed of Sale had not been recorded
in the Registry of Deeds. Subject property had also not been delivered to petitioner, hence,
as between the two buyers, respondent was first in actual possession of the property. aTEHIC
SYLLABUS
1. REMEDIAL LAW; SPECIAL CIVIL ACTIONS; UNLAWFUL DETAINER; OWNER'S

PERMISSION OR TOLERANCE MUST HAVE BEEN PRESENT AT THE BEGINNING OF
INTRUDER'S OCCUPATION OF THE PREMISES; CASE AT BAR.— In its Complaint, petitioner
alleged that, having acquired the subject property from Barbara Galino on December 5,
1996, it was the true and absolute owner thereof; that Galino had sold the property to
Respondent Cruz on April 24, 1998; that after the sale, the latter immediately occupied the
property, an action that was merely tolerated by petitioner; and that, in a letter given to
respondent on April 12, 1999, petitioner had demanded that the former vacate the
property, but that she refused to do so. Petitioner thereupon prayed for judgment ordering
her to vacate the property and to pay reasonable rentals for the use of the premises,
attorney's fees and the costs of the suit. The above allegations appeared to show the
elements of unlawful detainer. They also conferred initiatory jurisdiction on the MTCC,
because the case was led a month after the last demand to vacate — hence, within the
one-year prescriptive period. . . To justify an action for unlawful detainer, the permission or
tolerance must have been present at the beginning of the possession. However, what was
actually proven by petitioner was that possession by respondent had been illegal from the
beginning. While the Complaint was crafted to be an unlawful detainer suit, petitioner's real
cause of action was for forcible entry, which had already prescribed. Consequently, the
MTCC had no more jurisdiction over the action. TcEaDS
2. CIVIL LAW; SPECIAL CONTRACTUAL; SALES, BUYER ACQUIRES THE THING

UPON ITS DELIVERY; PETITIONER DID NOT GAIN CONTROL AND POSSESSION OF
PROPERTY IN CASE AT BAR.— In a contract of sale, the buyer acquires the thing sold only
upon its delivery "in any of the ways speci ed in Articles 1497 to 1501, or in any other
manner signifying an agreement that the possession is transferred from the vendor to the
vendee." With respect to incorporeal property, Article 1498 lays down the general rule: the
execution of a public instrument shall be equivalent to the delivery of the thing that is the
object of the contract if, from the deed, the contrary does not appear or cannot be clearly
inferred. However, ownership is transferred not by contract but by tradition or delivery.
Nowhere in the Civil Code is it provided that the execution of a Deed of Sale is a conclusive
presumption of delivery of possession of a piece of real estate. This Court has held that
the execution of a public instrument gives rise only to a prima facie presumption of
delivery. Such presumption is destroyed when the delivery is not effected because of a
legal impediment. . . In the case at bar it is undisputed that petitioner did not occupy the
property from the time it was allegedly sold to it on December 5, 1996 or at any time
thereafter. SHECcT
3. ID.; ID.; ID.; DOUBLE SALE OF IMMOVABLE PROPERTY; ORDER OF

PREFERENCE; CASE AT BAR.— The ownership of immovable property sold to two different
buyers at different times is governed by Article 1544 of the Civil Code. . . Galino allegedly
sold the property in question to petitioner on December 5, 1996 and, subsequently, to
respondent on April 24, 1998. Petitioner thus argues that being the rst buyer, it has a
better right to own the realty. However, it has not been able to establish that its Deed of
Sale was recorded in the Registry of Deeds of Olongapo City. Its claim of an unattested
and unveri ed notation on its Deed of Absolute Sale is not equivalent to registration. It
admits that, indeed, the sale has not been recorded in the Registry of Deeds. In the
absence of the required inscription, the law gives preferential right to the buyer who in
good faith is rst in possession. . . Earlier, we ruled that the subject property had not been
delivered to petitioner; hence, it did not acquire possession either materially or
symbolically. As between the two buyers, therefore, respondent was rst in actual
possession of the property.
DECISION
PANGANIBAN , J : p
In an ejectment suit, the question of ownership may be provisionally ruled upon for
the sole purpose of determining who is entitled to possession de facto. In the present
case, both parties base their alleged right to possess on their right to own. Hence, the
Court of Appeals did not err in passing upon the question of ownership to be able to
decide who was entitled to physical possession of the disputed land.
The Case
Before us is a Petition for Review 1 under Rule 45 of the Rules of Court, seeking to
nullify the August 31, 2001 Decision 2 and December 19, 2001 Resolution 3 of the Court of
Appeals (CA) in CA-G.R. SP No. 64861. The dispositive portion of the assailed Decision is
as follows:
"WHEREFORE, premises considered, the petition is hereby DISMISSED and
the Decision dated May 4, 2001 is hereby AFFIRMED." 4
The assailed Resolution denied petitioner's Motion for Reconsideration.
The Facts
The facts of the case are narrated by the CA as follows:
"A complaint for ejectment was led by [Petitioner Ten Forty Realty and
Development Corporation] against . . . [Respondent Marina Cruz] before the
Municipal Trial Court in Cities (MTCC) of Olongapo City, docketed as Civil Case
4269, which alleged that: petitioner is the true and absolute owner of a parcel of
lot and residential house situated in #71 18th Street, E.B.B. Olongapo City,
particularly described as:
'A parcel of residential house and lot situated in the above-

mentioned address containing an area of 324 square meters more or less
bounded on the Northeast by 041 (Lot 255, Ts-308); on the Southeast by
044 (Lot 255, Ts-308); on the Southwest by 043 (Lot 226-A & 18th street)
and on the Northwest by 045 (Lot 227, Ts-308) and declared for taxation
purposes in the name of [petitioner] under T.D. No. 002-4595-R and 002-
4596. ISDCaT
having acquired the same on December 5, 1996 from Barbara Galino by

virtue of a Deed of Absolute Sale; the sale was acknowledged by said Barbara
Galino through a 'Katunayan'; payment of the capital gains tax for the transfer of
the property was evidenced by a Certi cation Authorizing Registration issued by
the Bureau of Internal Revenue; petitioner came to know that Barbara Galino sold
the same property on April 24, 1998 to Cruz, who immediately occupied the
property and which occupation was merely tolerated by petitioner; on October 16,
1998, a complaint for ejectment was led with the Barangay East Bajac-Bajac,
Olongapo City but for failure to arrive at an amicable settlement, a Certi cate to
File Action was issued; on April 12, 1999 a demand letter was sent to [respondent]
to vacate and pay reasonable amount for the use and occupation of the same,
but was ignored by the latter; and due to the refusal of [respondent] to vacate the
premises, petitioner was constrained to secure the services of a counsel for an
agreed fee of P5,000.00 as attorney's fee and P500.00 as appearance fee and
incurred an expense of P5,000.00 for litigation.
"In respondent's Answer with Counterclaim, it was alleged that: petitioner is
not quali ed to own the residential lot in dispute, being a public land; according to
Barbara Galino, she did not sell her house and lot to petitioner but merely
obtained a loan from Veronica Lorenzana; the payment of the capital gains tax
does not necessarily show that the Deed of Absolute Sale was at that time
already in existence; the court has no jurisdiction over the subject matter because
the complaint was led beyond the one (1) year period after the alleged unlawful
deprivation of possession; there is no allegation that petitioner had been in prior
possession of the premises and the same was lost thru force, stealth or violence;
evidence will show that it was Barbara Galino who was in possession at the time
of the sale and vacated the property in favor of respondent; never was there an
occasion when petitioner occupied a portion of the premises, before respondent
occupied the lot in April 1998, she caused the cancellation of the tax declaration
in the name of Barbara Galino and a new one issued in respondent's name;
petitioner obtained its tax declaration over the same property on November 3,
1998, seven (7) months [after] the respondent [obtained hers]; at the time the
house and lot [were] bought by respondent, the house was not habitable, the
power and water connections were disconnected; being a public land, respondent
led a miscellaneous sales application with the Community Environment and
Natural Resources O ce in Olongapo City; and the action for ejectment cannot
succeed where it appears that respondent had been in possession of the property
prior to the petitioner." 5
In a Decision 6 dated October 30, 2000, the Municipal Trial Court in Cities (MTCC)
ordered respondent to vacate the property and surrender to petitioner possession thereof.
It also directed her to pay, as damages for its continued unlawful use, P500 a month from
April 24, 1999 until the property was vacated, P5,000 as attorney's fees, and the costs of
the suit.
On appeal, the Regional Trial Court 7 (RTC) of Olongapo City (Branch 72) reversed
the MTCC. The RTC ruled as follows: 1) respondents entry into the property was not by
mere tolerance of petitioner, but by virtue of a Waiver and Transfer of Possessory Rights
and Deed of Sale in her favor; 2) the execution of the Deed of Sale without actual transfer
of the physical possession did not have the effect of making petitioner the owner of the
property, because there was no delivery of the object of the sale as provided for in Article
1428 of the Civil Code; and 3) being a corporation, petitioner was disquali ed from
acquiring the property, which was public land.
Ruling of the Court of Appeals
Sustaining the RTC, the CA held that petitioner had failed to make a case for unlawful
detainer, because no contract — express or implied — had been entered into by the parties
with regard to possession of the property. It ruled that the action should have been for
forcible entry, in which prior physical possession was indispensable — a circumstance
petitioner had not shown either.
The appellate court also held that petitioner had challenged the RTC's ruling on the
question of ownership for the purpose of compensating for the latter's failure to counter
such ruling. The RTC had held that, as a corporation, petitioner had no right to acquire the
property which was alienable public land.
Hence, this Petition. 8
Issues
Petitioner submits the following issues for our consideration:
"1. The Honorable Court of Appeals had clearly erred in not holding that
[r]espondent's occupation or possession of the property in question was
merely through the tolerance or permission of the herein [p]etitioner;
"[2.] The Honorable Court of Appeals had likewise erred in holding that the
ejectment case should have been a forcible entry case where prior physical
possession is indispensable; and
"[3.] The Honorable Court of Appeals had also erred when it ruled that the
herein [r]espondent's possession or occupation of the said property is in
the nature of an exercise of ownership which should put the herein
[p]etitioner on guard." 9
The Court's Ruling

The Petition has no merit.

First Issue:
Alleged Occupation by Tolerance
Petitioner faults the CA for not holding that the former merely tolerated
respondent's occupation of the subject property. By raising this issue, petitioner is in
effect asking this Court to reassess factual ndings. As a general rule, this kind of
reassessment cannot be done through a petition for review on certiorari under Rule 45 of
the Rules of Court, because this Court is not a trier of facts; it reviews only questions of
law. 1 0 Petitioner has not given us ample reasons to depart from the general rule.
On the basis of the facts found by the CA and the RTC, we nd that petitioner failed
to substantiate its case for unlawful detainer. Admittedly, no express contract existed
between the parties. Not shown either was the corporation's alleged tolerance of
respondent's possession.
While possession by tolerance may initially be lawful, it ceases to be so upon the
owner's demand that the possessor by tolerance vacate the property. 11 To justify an
action for unlawful detainer, the permission or tolerance must have been present at the
beginning of the possession. 12 Otherwise, if the possession was unlawful from the start,
an action for unlawful detainer would be an improper remedy. Sarona v. Villegas 13
elucidates thus:
"A close assessment of the law and the concept of the word 'tolerance'
con rms our view heretofore expressed that such tolerance must be present right
from the start of possession sought to be recovered, to categorize a cause of as
one of unlawful detainer not of forcible entry. Indeed, to hold otherwise would
espouse a dangerous doctrine. And for two reasons. First. Forcible entry into the
land is an open challenge to the right of the possessor. Violation of that right
authorizes the speedy redress — in the inferior court — provided for in the rules. If
one year from the forcible entry is allowed to lapse before suit is led, then the
remedy ceases to be speedy; and the possessor is deemed to have waived his
right to seek relief in the inferior court. Second, if a forcible entry action in the
inferior court is allowed after the lapse of a number of years, then the result may
well be that no action for forcible entry can really prescribe. No matter how long
such defendant is in physical possession, plaintiff will merely make a demand,
bring suit in the inferior court — upon a plea of tolerance to prevent prescription to
set in — and summarily throw him out of the land. Such a conclusion is
unreasonable. Especially if we bear in mind the postulates that proceedings of
forcible entry and unlawful detainer are summary in nature, and that the one year
time bar to suit is but in pursuance of the summary nature of the action." 14
In this case, the Complaint and the other pleadings do not recite any, averment of
fact that would substantiate the claim of petitioner that it permitted or tolerated the
occupation of the property by Respondent Cruz. The Complaint contains only bare
allegations that 1) respondent immediately occupied the subject property after its sale to
her, an action merely tolerated by petitioner; 15 and 2) her allegedly illegal occupation of
the premises was by mere tolerance. 16
These allegations contradict, rather than support, petitioner's theory that its cause
of action is for unlawful detainer. First, these arguments advance the view that
respondent's occupation of the property was unlawful at its inception. Second, they
counter the essential requirement in unlawful detainer cases that petitioner's supposed act
of sufferance or tolerance must be present right from the start of a possession that is
later sought to be recovered. 17
As the bare allegation of petitioner's tolerance of respondent's occupation of the
premises has not been proven, the possession should be deemed illegal from the
beginning. Thus, the CA correctly ruled that the ejectment case should have been for
forcible entry — an action that had already prescribed, however, when the Complaint was
led on May 12, 1999. The prescriptive period of one year for forcible entry cases is
reckoned from the date of respondent's actual entry into the land, which in this case was
on April 24, 1998.
Second Issue:
Nature of the Case
Much of the di culty in the present controversy stems from the legal
characterization of the ejectment Complaint led by petitioner. Speci cally, was it for
unlawful detainer or for forcible entry?
The answer is given in Section 1 of Rule 70 of the Rules of Court, which we
reproduce as follows:
"SECTION 1. Who may institute proceedings, and when. — Subject to
the provisions of the next succeeding section, a person deprived of the
possession of any land or building by force, intimidation, threat, strategy, or
stealth, or a vendor, vendee, or other person against whom the possession of any
land or building is unlawfully withheld after expiration or termination of the right
to hold possession, by virtue of any contract, express or implied, or the legal
representatives or assigns of any such lessor, vendor, vendee, or other person,
may, at any time within one (1) year after such unlawful deprivation or
withholding of possession, bring an action in the proper Municipal Trial Court
against the person or persons unlawfully withholding or depriving of possession,
or any person or persons claiming under them, for the restitution of such
possession, together with damages and costs.''
While both causes of action deal only with the sole issue of physical or de facto
possession, 1 8 the two cases are really separate and distinct, as explained below:
". . . . In forcible entry, one is deprived of physical possession of land or
building by means of force, intimidation, threat, strategy, or stealth. In unlawful
detainer, one unlawfully withholds possession thereof after the expiration or
termination of his right to hold possession under any contract, express or implied.
In forcible entry, the possession is illegal from the beginning and the basic inquiry
centers on who has the prior possession de facto. In unlawful detainer, the
possession was originally lawful but became unlawful by the expiration or
termination of the right to possess, hence the issue of rightful possession is
decisive for, in such action, the defendant is in actual possession and the
plaintiff's cause of action is the termination of the defendant's right to continue in
possession.
"What determines the cause of action is the nature of defendant's entry
into the land. If the entry is illegal, then the action which may be led against the
intruder within one year therefrom is forcible entry. If, on the other hand, the entry
is legal but the possession thereafter became illegal, the case is one of unlawful
detainer which must be led within one year from the date of the last demand." 19
It is axiomatic that what determines the nature of an action as well as which court
has jurisdiction over it are the allegations in the complaint 20 and the character of the relief
sought. 21
In its Complaint, petitioner alleged that, having acquired the subject property from
Barbara Galino on December 5 1996, 22 it was the true and absolute owner 23 thereof; that
Galino had sold the property to Respondent Cruz on April 24, 1998; 24 that after the sale,
the latter immediately occupied the property, an action that was merely tolerated by
petitioner; 25 and that, in a letter given to respondent on April 12, 1999, 26 petitioner had
demanded that the former vacate the property, but that she refused to do so. 27 Petitioner
thereupon prayed for judgment ordering her to vacate the property and to pay reasonable
rentals for the use of the premises, attorney's fees and the costs of the suit. 28
The above allegations appeared to show the elements of unlawful detainer. They
also conferred initiatory jurisdiction on the MTCC, because the case was led a month
after the last demand to vacate — hence, within the one-year prescriptive period.
However, what was actually proven by petitioner was that possession by
respondent had been illegal from the beginning. While the Complaint was crafted to be an
unlawful detainer suit, petitioner's real cause of action was for forcible entry, which had
already prescribed. Consequently, the MTCC had no more jurisdiction over the action.
The appellate court, therefore, did not err when it ruled that petitioner's Complaint
for unlawful detainer was a mere subterfuge or a disguised substitute action for forcible
entry, which had already prescribed. To repeat, to maintain a viable action for forcible entry,
plaintiff must have been in prior physical possession of the property; this is an essential
element of the suit. 29
Third Issue:
Alleged Acts of Ownership
Petitioner next questions the CA's pronouncement that respondent's occupation of
the property was an exercise of a right owing from a claim of ownership. It submits that
the appellate court should not have passed upon the issue of ownership, because the only
question for resolution in an ejectment suit is that of possession de facto.
Clearly, each of the parties claimed the right to possess the disputed property
because of alleged ownership of it. Hence, no error could have been imputed to the
appellate court when it passed upon the issue of ownership only for the purpose of
resolving the issue of possession de facto. 30 The CA's holding is moreover in accord with
jurisprudence and the law.
Execution of a Deed of Sale Not Sufficient as Delivery
In a contract of sale, the buyer acquires the thing sold only upon its delivery "in any
of the ways speci ed in Articles 1497 to 1501, or any other manner signifying an
agreement that the possession is transferred from the vendor to the vendee." 31 With
respect to incorporeal property, Article 1498 lays down the general rule: the execution of a
public instrument shall be equivalent to the delivery of the thing that is the object of the
contract if, from the deed, the contrary does not appear or cannot be clearly inferred. ASETHC
However, ownership is transferred not by contract but by tradition or delivery. 3 2

Nowhere in the Civil Code is it provided that the execution of a Deed of Sale is a conclusive
presumption of delivery of possession of a piece of real estate. 33

This Court has held that the execution of a public instrument gives rises only to a
prima facie presumption of delivery. Such presumption is destroyed when the delivery is
not effected because of a legal impediment. 34 Pasagui v. Villablanca 35 had earlier ruled
that such constructive or symbolic delivery, being merely presumptive, was deemed
negated by the failure of the vendee to take actual possession of the land sold.
It is undisputed that petitioner did not occupy the property from the time it was
allegedly sold to it on December 5, 1996 or at any time thereafter. Nonetheless, it
maintains that Galino's continued stay in the premises from the time of the sale up to the
time respondent's occupation of the same on April 24, 1998, was possessions held on its
behalf and had the effect of delivery under the law. 36
Both the RTC and the CA disagreed. According to the RTC, petitioner did not gain
control and possession of the property, because Galino had continued to exercise
ownership rights over the realty. That is, she had remained in possession, continued to
declare it as her property for tax purposes and sold it to respondent in 1998.
For its part, the CA found it highly unbelievable that petitioner — which claims to be
the owner of the disputed property — would tolerate possession of the property by
respondent from April 24, 1998 up to October 16, 1998. How could it have been so
tolerant despite its knowledge that the property had been sold to her, and that it was by
virtue of that sale that she had undertaken major repairs and improvements on it?
Petitioner should have likewise been put on guard by respondent's declaration of the
property for tax purposes on April 23, 1998, 3 7 as annotated in the tax certi cate led
seven months later. 38 Verily, the tax declaration represented an adverse claim over the
unregistered property and was inimical to the right of petitioner.
Indeed, the above circumstances derogated its claim of control and possession of
the property.
Order of Preference in Double Sale of Immovable Property
The ownership of immovable property sold to two different buyers at different
times is governed by Article 1544 of the Civil Code, which reads as follows:
"Article 1544. ...
"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 rst in possession; and, in the absence thereof, to the
person who presents the oldest title, provided there is good faith."
Galino allegedly sold the property in question to petitioner on December 5, 1996

and, subsequently, to respondent on April 24, 1998. Petitioner thus argues that being the
rst buyer, it has a better right to own the realty. However, it has not been able to establish
that its Deed of Sale was recorded in the Registry of Deeds of Olongapo City. 39 Its claim
of an unattested and unveri ed notation on its Deed of Absolute Sale 40 is not equivalent
to registration. It admits that, indeed, the sale has not been recorded in the Registry of
Deeds. 41
In the absence of the required inscription, the law gives preferential right to the
buyer who in good faith is rst in possession. In determining the question of who is first in
possession, certain basic parameters have been established by jurisprudence.
First, the possession mentioned in Article 1544 includes not only material but also
symbolic possession. 42 Second, possessors in good faith are those who are not aware of
any aw in their title or mode of acquisition. 43 Third, buyers of real property that is in the
possession of persons other than the seller must be wary — they must investigate the
rights of the possessors. 4 4 Fourth, good faith is always presumed; upon those who allege
bad faith on the part of the possessors rests the burden of proof. 45
Earlier, we ruled that the subject property had not been delivered to petitioner;
hence, it did not acquire possession either materially or symbolically. As between the two
buyers, therefore, respondent was first in actual possession of the property.
Petitioner has not proven that respondent was aware that her mode of acquiring the
property was defective at the time she acquired it from Galino. At the time, the property —
which was public land — had not been registered in the name of Galino; thus, respondent
relied on the tax declarations thereon. As shown, the former's name appeared on the tax
declarations for the property until its sale to the latter in 1998. Galino was in fact
occupying the realty when respondent took over possession. Thus, there was no
circumstance that could have placed the latter upon inquiry or required her to further
investigate petitioner's right of ownership.
Disqualification from Ownership of Alienable Public Land
Private corporations are disquali ed from acquiring lands of the public domain, as
provided under Section 3 of Article XII of the Constitution, which we quote:
"Sec. 3. Lands of the public domain are classi ed into agricultural,
forest or timber, mineral lands, and national parks. Agricultural lands of the public
domain may be further classi ed by law according to the uses to which they may
be devoted. Alienable lands of the public domain shall be limited to agricultural
lands. Private corporations or associations may not hold such alienable lands of
the public domain except by lease, for a period not exceeding twenty- ve years,
and not to exceed one thousand hectares in area. Citizens of the Philippines may
not lease not more than ve hundred hectares, or acquire not more than twelve
hectares thereof by purchase, homestead, or grant. . . ." (Italics supplied)
While corporations cannot acquire land of the public domain, they can however
acquire private land. 46 Hence, the next issue that needs to be resolved is the
determination of whether the disputed property is private land or of the public domain.
According to the certi cation by the City Planning and Development O ce of
Olongapo City, the contested property in this case is alienable and disposable public land.
47 It was for this reason that respondent led a miscellaneous sales application to acquire
it. 4 8
On the other hand, petitioner has not presented proof that, at the time it purchased
the property from Galino, the property had ceased to be of the public domain and was
already private land. The established rule is that alienable and disposable land of the public
domain held and occupied by a possessor — personally or through predecessors-in-
interest, openly, continuously, and exclusively for 30 years — is ipso jure converted to
private property by the mere lapse of time. 49
In view of the foregoing, we a rm the appellate court's ruling that respondent is
entitled to possession de facto. This determination, however, is only provisional in nature.
50Well-settled is the rule that an award of possession de facto over a piece of property
does not constitute res judicata as to the issue of its ownership. 5 1
WHEREFORE, this Petition is DENIED and the assailed Decision AFFIRMED. Costs
against petitioner.
SO ORDERED.
Sandoval-Gutierrez, Corona and Carpio Morales, JJ., concur.
Puno, J., is on official leave.
Footnotes
1. Rollo, pp. 8-19.
2. Penned by Justice Remedios A. Salazar-Fernando and concurred in by Justices Romeo
A. Brawner (Division chairman) and Rebecca de Guia-Salvador (member); id., pp. 139-
147.
3. Rollo, p. 162.
4. CA Decision, p. 8; rollo, p. 146.
5. Id., pp. 1-3 & 139-141.
6. Penned by Judge Eduardo D. Alfonso Jr.
7. The RTC Decision dated May 4, 2001 was penned by Judge Eliodoro G. Ubiadas.
8. The case was deemed submitted for decision on August 9, 2002, upon the Court's'
receipt of respondent's Memorandum signed by Atty. Carmelino M. Roque. Petitioner's
Memorandum, filed on July 23, 2002, was signed by Atty. Oscar L. Karaan.
9. Petitioner's Memorandum, p. 8; rollo, p. 199.

10. Alfaro v. Court of Appeals, 416 Phil. 310, August 28, 2001; Villalon v. Court of Appeals,
377 Phil. 556, December 2, 1999; Cebu Shipyard and Engineering Works v. William Lines,
366 Phil. 439, May 5, 1999.
11. Arcal v. CA, 348 Phil. 813, January 26, 1998; Hilario v. CA, 329 Phil. 202, August 7, 1996,
citing Odsigue v. CA, 233 SCRA 626, July 4, 1994.
12. Go. Jr. v. CA, supra.
13. 131 Phil. 365, March 27, 1968.
14. Id., p. 373, per Sanchez, J.
15. Complaint, par. 7, p. 3; rollo, p. 22.
16. Position Paper of petitioner, p. 2; rollo, p. 50.
17. Go Jr. v. CA, supra.
18. Amagan v. Marayag, 383 Phil. 486, February 28, 2000.

19. Go v. CA, supra, p. 184, per Gonzaga-Reyes, J., citing Sarmiento v. CA, 320 Phil. 146,
153-154, November 16, 1995, per Regalado J.
20. Ibid.; Isidro v. Court of Appeals, 228 SCRA 503, December 15, 1993; §33(2) of Batas
Pambansa (BP) Blg. 129, as amended by Republic Act (RA) No. 7691.
21. Chico v. CA, 348 Phil. 37, January 5, 1998, citing several cases; Cañiza v. CA, 335 Phil.
1107, February 24, 1997.
22. Id., par. 3, pp. 2 &. 21.
23. Complaint, par. 2, p. 1; rollo, p. 20.
24. Id., par. 6, p. 2; ibid.
25. Id., par. 7, p. 3; id, p. 22.
26. Id., par. 10, p. 3; ibid.
27. Id., par. 11, p. 3; ibid.
28. Id., p. 4; id, p. 23.
29. Gener v. De Leon, 367 SCRA 631, October 19, 2001; Tirona v. Alejo, 367 SCRA 17,
October 10, 2001. The other essential element of forcible entry is deprivation of
possession by force, intimidation, threats, strategy, or stealth.
30. §16 of Rule 70 of the Rules of Court.

31. Article 1496 of the Civil Code.
32. Equatorial Realty Development Inc. v. Mayfair Theater, Inc., 370 SCRA 56, November 21,
2001; Ocejo, Perez & Co. v. International Bank, 37 Phil. 631, February 14, 1918; Roman v.
Grimlt; 6 Phil. 96, April 11, 1906.
33. Santos v. Santos, 366 SCRA 395, October 2, 2001.
34. Equatorial Realty Development Inc. v. Mayfair Theater, Inc., supra.
35. Supra.
36. Article 1497 of the Civil Code provides that the "thing sold shall be understood as
delivered, when it is placed in the control and possession of the vendee."
37. Annex "I", Declaration of Real Property; rollo, p. 41.

38. Annexes "A" and "B" of Complaint; rollo, pp. 25-26.
39. Under Section 113 of Presidential Decree (PD) No. 1529, to constitute constructive
notice to the whole world, instruments of conveyance over unregistered lands must be
registered in the office of the Register of Deeds for the province or city where the land
lies.
40. Annex "C" of Complaint; rollo, p. 27.
41. Petitioner's Memorandum, p. 10; rollo, p. 201.

42. Navera v. CA, 184 SCRA 585, April 26, 1990.
43. Article 526 of the Civil Code.

44. Cardente v. Intermediate Appellate Court, 155 SCRA 685, November 27, 1987;
Conspecto v. Fruto, 31 Phil. 144, July 23, 1915, cited in Bautista v. CA, 230 SCRA 446,
February 28, 1994.
45. Development Bank of the Philippines v. CA, 375 Phil. 114, October 13, 1999; Ballatan v.
CA, 363 Phil. 408, March 2, 1999.
46. See Section 7 of Article XII of the Constitution; Bernas, The 1987 Constitution of the
Republic of the Philippines: a Commentary, 1996 ed., p. 1020.
47. Rollo, p. 48.
48. Under the Public Land Act (Commonwealth Act No. 141, as amended), alienable public
land may be acquired by the filing of an application for a sales, a homestead, a free or a
special patent.
49. Republic v. CA, 374 Phil. 209, September 30, 1999; Natividad v. CA, 202 SCRA 493,
October 4, 1991; Republic v. Intermediate Appellate Court; 168 SCRA 165, November 29,
1988; Director of Lands v. Intermediate Appellate Court, 146 SCRA 509, December 29,
1986.
50. Amagan v. Marayag, supra.

51. Javelosa v. CA, 333 Phil. 331, December 10, 1996.

FIRST DIVISION
[G.R. No. 107992. October 8, 1997.]
ODYSSEY PARK, INC. , petitioner, vs . HONORABLE COURT OF

APPEALS and UNION BANK OF THE PHILIPPINES , respondents.
Aladdin F. Trinidad for petitioner.

Macalino and Associates for private respondents.
SYNOPSIS
Bancom Development Corporation and Odyssey Park, Inc. entered into a Contract to
Sell whereby the former agreed to sell to the latter a parcel of land in Baguio City and the
structure constructed thereon identi ed as the Europa Clubhouse. Subsequently, in a
"Separate Deed of Conveyance," Bancom con rmed that it has conveyed in favor of Union
Bank all the rights it has over the property. Under the Contract to Sell, the purchase price
was agreed to be paid in installment, and that "in the event Odyssey Park fails to pay any
portion of the purchase price of the Property or the interest and service charge thereon as
it falls due, Bancom may at its absolute discretion cancel and rescind this Contract and
declare the same as null, void and no further force and effect by serving on Odyssey a
written notice of cancellation and rescission thirty (30) days in advance. The President of
Europa Condominium Villas, Inc. questions the propriety of the Contract to Sell. It then
wrote Union Bank stating that the Europa Center was reported to prospective buyers and
the government authorities as part of common areas and amenities under the
condominium concept of selling to the public. Odyssey Park wrote Bancom stating that in
the meantime that there is a question on propriety of the sale, it is stopping payments of
the amortization. Bancom explained that the Europa Center and the parcel of land on which
it is built are not part of the Europa Condominium Villas, Inc. Union Bank demanded from
Odyssey Park payment of the overdue account, otherwise the Contract to Sell would be
cancelled and rescinded. Odyssey Park proposed a manner of settlement and they drafted
a Memorandum of Agreement. However, the agreement was not signed by the parties.
Union Bank then wrote Odyssey Park that it is formally rescinding the Contract to Sell and
demanding that they vacate and surrender possession of the premises. For failure to
vacate, Union Bank led against Odyssey Park a complaint for illegal detainer and
damages. Odyssey Park led this case for "Declaration of the Nullity of the Rescission of
the Contract to Sell With Damages" on the ground that there was failure to comply with the
requirements of the law on Rescission. The lower court declared the Contract to Sell to
have been properly rescinded, thus, it dismissed the complaint for being frivolous and
unfounded. This was affirmed by the appellate Court.
In a rming the appealed decision, the Supreme Court held that the parties are
bound by the stipulations they have agreed to. The agreement entered into by the parties
must be respected and held to be the law between them.
SYLLABUS
1. REMEDIAL LAW; EVIDENCE; FACTUAL FINDINGS OF THE COURT OF

APPEALS, RESPECTED. — The issues raised by petitioner which generally are factual in
nature and previously taken up by the appellate court cannot in this instance be freely
examined all over again. It is not the function of the Supreme Court to analyze and to weigh
anew the evidence already passed upon by the Court of Appeals. The authority of this
court is con ned to correcting errors of law, if any, that might have been committed below.
Absent the recognized exceptions, which are not here extant, factual ndings of the Court
of Appeals are conclusive. AIcECS
2. CIVIL LAW; CONTRACT TO SELL; RESCISSION; REQUIREMENT OF NOTARIAL

ACT UNDER R.A. 6552; NOT APPLICABLE TO COMMERCIAL BUILDINGS UNDER R.A. 3844.
— Republic Act ("R.A.") No. 6552, "An Act to Protect Buyers of Real Estate on Installment
Payments," requires a cancellation or rescission of the contract to sell by means of a
notarial act. The invocation of this Republic Act No. 6552 is misplaced. This law, which
normally applies to the sale or nancing of real estate on installment payments, excludes
"industrial lots, commercial buildings, and sales to tenants under R.A. No. 3844." The
property subject of the contract to sell is not a residential condominium apartment. The
building is merely 'part of common areas and amenities under the Condominium concept
of selling to the public.' The property subject of the contract to sell is more of a
commercial building than not.
3. ID.; ID.; FAILURE TO PAY PURCHASE PRICE PREVENTS OBLIGATION OF THE
VENDOR TO CONVEY TITLE FROM ACQUIRING AN OBLIGATORY FORCE. — Art. 1191 of
the Civil Code is not applicable. In a contract to sell, the payment of the purchase price is a
positive suspensive condition, the failure of which is not a breach, casual or serious, but a
situation that prevents the obligation of the vendor to convey title from acquiring an
obligatory force. The breach contemplated in Article 1191 of the Code is the obligor's
failure comply with an obligation already extant, not a failure of a condition to render
binding that obligation. In any event, the failure of petitioner to even complete the
downpayment stipulated in the contract to sell puts petitioner corporation far from good
stead in urging that there has been substantial compliance with the contract to sell within
the meaning of Article 1191 of the Code. Article 1592 of the Civil Code is also inapplicable.
Both Articles 1191 and 1592 of the Civil Code contemplate neither a conditional sale nor a
contract to sell but an absolute sale.
4. ID.; ID.; PARTIES THEREIN BOUND BY THEIR AGREEMENT. — What must be
held to rule in the case at bar is the agreement of the parties themselves. The familiar
doctrine in the law on contracts is that the parties are bound by the stipulations, clauses,
terms and conditions they have agreed to, the only limitation being that these stipulations,
clauses, terms and conditions are not contrary to law, morals, public order or public policy.
Not being repugnant to any legal proscription, the agreement entered into by the parties
herein involved must be respected and held to be the law between them. ScaCEH
DECISION
VITUG , J : p
Assailed in the instant petition for review on certiorari is the decision, dated 07
September 1992, of the Court of Appeals a rming that of the Regional Trial Court, Branch
152 of Pasig, Metro Manila, which has adjudged the contract to sell entered into between
petitioner and private respondent as having been validly rescinded.
The Court adopts the factual findings, hereunder narrated, of the appellate court:
"1. On November 4, 1981, Bancom Development Corporation and
plaintiff-appellant Odyssey Park, Inc., entered into a Contract to Sell (Exhibit B-1),
whereby the former agreed to sell to the latter the parcel of land with an area of
8,499 square meters situated in Baguio City and the structure constructed thereon
identified as the Europa Clubhouse.
"2. Subsequently on February 11, 1982, in a document entitled

'Separate Deed of Conveyance' (Annex F of the A davit of Carmelito A. Montano,
pages 152-154 of the Record), Bancom con rmed and acknowledged that it has
ceded, transferred and conveyed in favor of defendant-appellee Union Bank all the
rights, title and interest it has over the property.
"3. The purchase price of P3,500,000.00 was, per Section 2 of the
Contract to Sell, agreed to be paid as follows:
"'a) SEVEN HUNDRED THOUSAND PESOS (P700,000.00) as

down payment, to be paid by Odyssey as follows:
(i) ONE HUNDRED THOUSAND (P100,000.00) PESOS

upon signing of this Contract;
(ii) TWO HUNDRED THOUSAND PESOS (P200,000.00),

sixty (60) days from and after the date of this Contract. The said
amount shall be covered by a check postdated sixty (60) days after
the date of this Contract issued and delivered by Odyssey to
Bancom upon the signing of this Contract; and
(iii) FOUR HUNDRED THOUSAND PESOS (P400,000.00),

ninety (90) days from and after the date of this Contract. The said
amount shall be covered by a check postdated ninety (90) days
after the date of this Contract issued and delivered by Odyssey to
Bancom upon signing of this Contract.
'b) The balance of TWO MILLION EIGHT HUNDRED THOUSAND
PESOS (P2,800,000.00) shall be paid by Odyssey to Bancom within a
period of three (3) years by twelve (12) equal quarterly amortizations of
P298,346.08 each, inclusive of the interest and service charge set forth in
Section 3 hereof, the rst amortization to become due and payable four (4)
months and fteen (15) days after the date of this Contract, and the
succeeding amortizations at the end of each quarter thereafter until the
balance of the purchase price of the Property is paid in full.'
"4. It was also agreed in Section 5 of the Contract to Sell that:

"'Section 5: In the event Odyssey fails to pay any portion of the
purchase price of the Property or the interest and service charge thereon as
and when it falls due, or otherwise fails to comply with or violate any of the
provisions of this Contract, Bancom may at its absolute discretion cancel
and rescind this Contract and declare the same as null, void and no further
force and effect by serving on Odyssey a written notice of cancellation and
rescission thirty (30) days in advance. cdtai
'In the event this Contract is cancelled and rescinded as provided in

this Section, all the amounts which the Odyssey may have paid to Bancom
pursuant to and in accordance with this Contract shall be forfeited in favor
of Bancom as rentals for the use and occupancy of the Property and as
penalty for the breach and violation of this Contract. Furthermore, all the
improvements which Odyssey may have introduced on the Property shall
form part thereof and belong to Bancom without right of reimbursements
to Odyssey; Provided, that Bancom may at its absolute discretion instead
require Odyssey to remove such improvements from the Property at
expense of Odyssey.'
"5. On November 26, 1981, twenty-two (22) days after the execution of
the contract plaintiff-appellant paid the amount of P100,000.00. Other payments,
also beyond the stipulated period, (see Odyssey Park, Inc., Statement of
Application of Payment, Annex A of the Supportive A davit of Nicefero S.
Agaton, p. 309 of the record) in the total sum of P110,000.00 were made as
follows:
September 22, 1982 P20,000.00

April 13, 1983 10,000.00
April 30, 1983 10,000.00
July 20, 1983 50,000.00
September 19, 1983 20,000.00
"6. On December 23, 1981, Mr. Vicente A. Araneta, President of Europa

Condominium Villas, Inc., wrote defendant-appellee Union Bank, a letter, Exhibit E,
stating that the Europa Center was reported to prospective buyers as well as
government authorities as part of common areas and amenities under the
condominium concept of selling to the public and for that reason wants to make
it of record that Europa Condominium Villas, Inc., questions the propriety of the
contract to sell.
"7. On January 4, 1982, plaintiff-appellant Odyssey Park, Inc., through
its Chairman of the Board, Mr. Carmelito A. Montano, wrote Bancom Development
Corp. a letter, Exhibit F, stating that it acknowledges receipt of a copy of the letter-
protest from the Europa Condominium Villas, Inc., and that in the meantime that
there is a question on the propriety of the sale, it is stopping/withholding
payments of the amortization.
"8. On the same date, January 4, 1982, Bancom, through its Senior
Vice-President, wrote Europa Condominium Villas, Inc. a letter, Exhibit H,
explaining that the Europa Center and the parcel of land on which it is built are
not part of the Europa Condominium Villas, Inc.
"9. On March 29, 1983, defendant-appellee Union Bank wrote plaintiff-

appellant Odyssey Park, Inc., a letter (Annexes F, F-1 of the Supportive A davit of
Nicefero S. Agaton, pp. 317-318 of the record) demanding payment of the
overdue account of P2,193,720.91, inclusive of interest and service charges,
otherwise the contract to sell would be cancelled and rescinded;
"10. On April 12, 1983, plaintiff-appellant Odyssey wrote defendant-

appellee Union Bank a letter (Annex F-2 of the Supportive A davit of Nicefero S.
Agaton, pp. 319-320 of the record) proposing a manner of settlement which
defendant-appellee Union Bank answered (Annex F-3, p. 321 of the record) asking
for more details of the proposal. The series of communications led to the drafting
of a Memorandum of Agreement (Exhibit N) which was not, however, signed by
the parties.
"11. On January 6, 1984, defendant-appellee Union Bank, through
counsel, wrote plaintiff-appellant Odyssey Park, Inc., a letter (Exhibit O) formally
rescinding and/or cancelling the contract to sell and demanding that plaintiff-
appellant vacate and peaceably surrender possession of the premises.
"12. On or about August 20, 1984, for failure of plaintiff-appellant to

vacate, defendant-appellee led a case for illegal detainer and damages (Exhibit
P).
"13. On July 5, 1988, plaintiff-appellant led this case for 'Declaration
of the Nullity of the Rescission of the Contract to Sell With Damages'." 1
(Emphasis ours.)
After the trial, the lower court rendered judgment in favor of private respondent,
declaring the Contract to Sell of 04 November 1981 to have been properly rescinded;
dismissing the complaint for being frivolous and unfounded; and ordering the plaintiff to
pay the defendant P300,000.00 by way of attorney's fees and litigation expenses. The
judgment, as so heretofore stated, was affirmed by respondent appellate court.
Its motion for reconsideration having been denied on 22 November 1992, petitioner
corporation seasonably led the present petition questioning the decision of the appellate
court.
The Court rules for affirmance of the appealed decision.
The issues raised by petitioner which generally are factual in nature and previously
taken up by the appellate court cannot in this instance be freely examined all over again. It
is not the function of the Supreme Court to analyze and to weigh anew the evidence
already passed upon by the Court of Appeals. The authority of this Court is con ned to
correcting errors of law, if any, that might have been committed below. 2 Absent the
recognized exceptions, which are not here extant, factual ndings of the Court of Appeals
are conclusive.
Hardly, in this case, can it be said that there was no basis at all for debunking the
contention of petitioner to the effect that because Europa Condominium Villas, Inc., had
questioned the right of Bancom to sell the property, petitioner thereby was enfranchised to
suspend or withhold payment to Bancom. Respondent appellate court, seconding the
findings of the trial court, quoted the latter; thus:
"First, the title of Union Bank over the property (TCT No. T-33725) is clear
without any encumbrance or adverse claim. Second, Europa Condominium Villas,
Inc. has not earnestly questioned Bancom's right to sell. If Europa is in earnest, it
should have led the necessary action in Court to protect its right to a valuable
property. Third, Europa would not have offered to buy the property from Bancom
for P6 Million if it was claiming ownership over it. Fourth, the letters which
plaintiff claim to be proof of Europa's persistence in questioning Bancom's right
to sell the property do not really question Bancom's right to do so but are actually
money claims of Europa Condominium Villas, Inc. against Odyssey for unpaid
water bills and other services rendered by Europa." 3
The only real legal issue, it appears to the Court, is whether or not the rescission of
the contract to sell by private respondent accords with the requirements of Republic Act
("R.A.") No. 6552, also known as "An Act to Protect Buyers of Real Estate on Installment
Payments" which, petitioner insists, requires a cancellation or rescission of the contract by
means of a notarial act. A mere letter (dated 06 January 1984), or short of such a notarial
act, according to petitioner, would be utterly deficient.
Unfortunately for petitioner, the invocation of Republic Act No. 6552 is misplaced.
This law, which normally applies to the sale or nancing of real estate on installment
payments, excludes "industrial lots, commercial buildings, and sales to tenants under R.A.
No. 3844." The appellate court has thus aptly said:
"While the law applies to all transactions or contracts involving the sale or
nancing of real estate on installment payments, including residential
condominium apartments, excluded are industrial lots, commercial buildings and
sales to tenants under R.A. 3844 as amended. The property subject of the
contract to sell is not a residential condominium apartment. Even on the basis of
the letter of Mr. Vicente A. Araneta, Exhibit E, the building is merely 'part of
common areas and amenities under the Condominium concept of selling to the
public'. The property subject of the contract to sell is more of a commercial
building." 4 cda
Neither would Article 1191 of the Civil Code govern. Article 1191, in full, provides:
"Art. 1191. The power to rescind obligations is implied in reciprocal
ones, in case one of the obligors should not comply with what is incumbent upon
him.
"The injured party may choose between the ful llment and the rescission
of the obligation, with the payment of damages in either case. He may also seek
rescission, even after he has chosen ful llment, if the latter should become
impossible.
"The Court shall decree the rescission claimed, unless there be just cause
authorizing the fixing of a period.
"This is understood to be without prejudice to the rights of third persons
who have acquired the thing, in accordance with articles 1385 and 1388 and the
Mortgage Law."
In a contract to sell, the payment of the purchase price is a positive suspensive

condition, the failure of which is not a breach, casual or serious, but a situation that
prevents the obligation of the vendor to convey title from acquiring an obligatory force. 5
The breach contemplated in Article 1191 of the Code is the obligor's failure to comply with
an obligation already extant, not a failure of a condition to render binding that obligation. In
any event, the failure of petitioner to even complete the downpayment stipulated in the
contract to sell puts petitioner corporation far from good stead in urging that there has
been substantial compliance with the contract to sell within the meaning of Article 1191 of
the Code.
So, too, must Article 1592 of the Civil Code be held inapplicable. This law states:
"Art. 1592. In the sale of immovable property, even though it may have
been stipulated that upon failure to pay the price at the time agreed upon the
rescission of the contract shall of right take place, the vendee may pay; even after
the expiration of the period, as long as no demand for rescission of the contract
has been made upon him either judicially or by a notarial act. After the demand,
the court may not grant him a new term."
It is clear that the above provisions contemplate neither a conditional sale nor a
contract to sell but an absolute sale. 6
What must instead be held to rule in the case at bar is the agreement of the parties
themselves. Section 5 of their contract to sell reads:
"Section 5: In the event Odyssey fails to pay any portion of the
purchase price of the Property or the interest and service charge thereon as and
when it falls due, or otherwise fails to comply with or violate any of the provisions
of this Contract, Bancom may at its absolute discretion cancel and rescind this
Contract and declare the same as null, void and no further force and effect by
serving on Odyssey a written notice of cancellation and rescission thirty (30) days
in advance.
"In the event this Contract is cancelled and rescinded as provided in this
Section, all the amounts which the Odyssey may have paid to Bancom pursuant
to and in accordance with this Contract shall be forfeited in favor of Bancom as
rentals for the use and occupancy of the Property and as penalty for the breach
and violation of this Contract. Furthermore, all the improvements which Odyssey
may have introduced on the Property shall form part thereof and belong to
Bancom without right of reimbursements to Odyssey; Provided, that Bancom may
at its absolute discretion instead require Odyssey to remove such improvements
from the Property at expense of Odyssey." 7
It is a familiar doctrine in the law on contracts that the parties are bound by the
stipulations, clauses, terms and conditions they have agreed to, 8 the only limitation being
that these stipulations, clauses, terms and conditions are not contrary to law, morals,
public order or public policy. 9 Not being repugnant to any legal proscription, the
agreement entered into by the parties herein involved must be respected and held to be
the law between them.
WHEREFORE, the decision appealed from is AFFIRMED in toto. Costs against
petitioner.
SO ORDERED.
Davide, Jr., Bellosillo, Kapunan and Hermosisima, Jr., JJ ., concur.
Footnotes
1. Rollo, pp. 24-27.
2. PNB vs. Court of Appeals, 159 SCRA 433; Conde vs. Intermediate Appellate Court, 144
SCRA 144; Gaw vs. Intermediate Appellate Court, 220 SCRA 405.
3. Rollo, p. 29.
4. Rollo, p. 32.
5. See Manuel vs. Rodriguez, 109 Phil. 1, cited in Roque vs. Lapuz, 96 SCRA 741; Agustin
vs. Court of Appeals, 186 SCRA 375.
6. See Alfonso vs. Court of Appeals, 186 SCRA 400; Joseph and Sons Enterprises, Inc. vs.
Court of Appeals, 143 SCRA 663.
7. Rollo, p. 26.
8. Article 1308, Civil Code.
9. Article 1306.

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EN BANC

[G.R. No. L-30817. September 29, 1972.]

DOMINADOR DIZON, doing business under the firm name

Andres T . Velarde for petitioner.

1. CIVIL LAW; PROPERTY; OWNERSHIP AND POSSESSION; RIGHT OF

xxx xxx xxx

"Antonio Matute, the owner of another pawnshop, being convinced that he

1. Article 559 reads as follows: "The possession of movable property acquired in

3. Ibid, pp. II-III.

13. Ibid, p. 392.

2. Tolentino's Civil Code, Vol. II, p. 265, emphasis copied.

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[G.R. No. 80298. April 26, 1990.]

EDCA PUBLISHING & DISTRIBUTING CORP. , petitioner, vs. THE SPOUSES

Emiliano S. Samson, R. Balderrama-Samson, Mary Anne B. Samson for petitioner.

xxx xxx xxx

However, as long as no action is taken by the party entitled, either that of

1. Presided by Judge Jose B. Herrera.

3. Buena, J., with Castro-Bartolome and Cacdac, Jr., JJ., concurring.

12. Substantially reproduced in what is now Article 559.

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[G.R. No. 75364. November 23, 1988.]

ANTONIO LAYUG , petitioner, vs. INTERMEDIATE APPELLATE COURT

Francisco Ma. Garcia for petitioner.

1. REMEDIAL LAW; CIVIL PROCEDURE; APPEAL. — Findings of fact of the Court of

CD Technologies Asia, Inc. © 2016 cdasiaonline.com

12. 27 Am. Jr. 2d., p. 522.

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[G.R. No. 119745. June 20, 1997.]

POWER COMMERCIAL AND INDUSTRIAL CORPORATION , petitioner,

Solis, Medina & Magno Law Offices for petitioner.

1. CIVIL LAW; CONTRACT; SALE; TYPES OF DELIVERY, CONSTRUED. — The Civil

2. ID.; ID.; ID.; BREACH OF WARRANTY AGAINST EVICTION; WHEN PRESENT. —

That the above described property is mortgaged to the Philippine National

That the said Power Commercial and Industrial Development Corporation

On February 19, 1982, PNB sent petitioner a letter as follows: 7

(2) Ordering defendants Spouses Quiambao to return to

"The counterclaim of both defendants spouses Quiambao and PNB are

"No pronouncement as to costs.

On appeal by respondent — spouses and PNB, Respondent Court of Appeals

Hence, the recourse to this Court.

"B. Respondent Court of Appeals gravely erred in failing to consider in its

The Court's Ruling

By his own admission, Anthony Powers, General Manager of petitioner-corporation,

8. Notice of Extra-Judicial Sale, Records, p. 372.

15. TSN, April 1, 1987, pp. 19-21; and rollo, p. 147.

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[G.R. No. 12342. August 3, 1918.]

A. A. ADDISON , plaintiff-appellant, vs . MARCIANA FELIX and BALBINO

Thos. D. Aitken, for appellant

1. VENDOR AND PURCHASER; DELIVERY; EXECUTION OF PUBLIC

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[G.R. No. 151212. September 10, 2003.]

TEN FORTY REALTY AND DEVELOPMENT CORP., Represented by its

Oscar L. Karaan for petitioner.

1. REMEDIAL LAW; SPECIAL CIVIL ACTIONS; UNLAWFUL DETAINER; OWNER'S

2. CIVIL LAW; SPECIAL CONTRACTUAL; SALES, BUYER ACQUIRES THE THING

3. ID.; ID.; ID.; DOUBLE SALE OF IMMOVABLE PROPERTY; ORDER OF

'A parcel of residential house and lot situated in the above-

having acquired the same on December 5, 1996 from Barbara Galino by

The Court's Ruling

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However, ownership is transferred not by contract but by tradition or delivery. 3 2

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