Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 123547       May 21, 2001

REV. FR. DANTE MARTINEZ, petitioner, vs.HONORABLE COURT OF APPEALS, HONORABLE JUDGE JOHNSON BALLUTAY, PRESIDING JUDGE, BRANCH 25, REGIONAL TRIAL COURT OF CABANA TUAN CITY, HONORABLE JUDGE ADRIANO TUAZON, JR., PRESIDING JUDGE, BRANCH 28, REGIONAL TRIAL COURT OF CABANATUAN CITY, SPOUSES REYNALDO VENERACION and SUSAN VENERACION, SPOUSES MAXIMO HIPOLITO and MANUELA DE LA PAZ and GODOFREDO DE LA PAZ, respondents.

MENDOZA, J.:

This is a petition for review on certiorari of the decision, dated 7, 1995, and resolution, dated January 31, 1996, of the Court of Appeals, which affirmed the decisions of the Regional Trial Court, Branches 251 and 28,2Cabanatuan City, finding private respondents spouses Reynaldo and Susan Veneracion owners of the land in dispute, subject to petitioner's rights as a builder in good faith.

The facts are as follows:

Sometime in February 1981, private respondents Godofredo De la Paz and his sister Manuela De la Paz, married to Maximo Hipolito, entered into an oral contract with petitioner Rev. Fr. Dante Martinez, then Assistant parish priest of Cabanatuan City, for the sale of Lot No. 1337-A-3 at the Villa Fe Subdivision in Cabanatuan City for the sum of P15,000.00. The lot is located along Maharlika Road near the Municipal Hall of Cabanatuan City. At the time of the sale, the lot was still registered in the name of Claudia De la Paz, mother of private respondents, although the latter had already sold it to private respondent Manuela de la Paz by virtue of a Deed of Absolute Sale dated May 26, 1976 (Exh. N/Exh. 2-Veneracion).3 Private respondent Manuela subsequently registered the sale in her name on October 22, 1981 and was issued TCT No. T-40496 (Exh. 9).4 When the land was offered for sale to petitioner, private respondents De la Paz were accompanied by their mother, since petitioner dealt ' with the De la Fazes as a family and not individually. He was assured by them that the lot belonged to Manuela De la Paz. It was agreed that petitioner would give a downpayment of P3,000.00 to private respondents De la Paz and that the balance would be payable by installment. After giving the P3,000.00 downpayment, petitioner started the construction of a house on the lot after securing a building permit from the City Engineer's Office on April 23, 1981, with the written consent of the then registered owner, Claudia de la Paz (Exh. B/Exh, 1).5 Petitioner likewise began paying the real estate taxes on said property (Exh. D, D-l, D-2).6 Construction on the house was completed on October 6, 1981 (Exh. V).7 Since then, petitioner and his family have maintained their residence there.8

On January 31, 1983, petitioner completed payment of the lot for which private respondents De la Paz executed two documents. The first document (Exh. A) read:

1-31-83

Ang halaga ng Lupa sa Villa Fe Subdivision na ipinagbili kay Fr. Dante Martinez ay P15,000.00 na pinangangako namin na ibibigay ang Deed of Sale sa ika-25 ng Febrero 1983.

[SGD.] METRING HIPOLITO

[SGD.] JOSE GODOFREDO DE LA PAZ9

The second writing (Exh. O) read:

Cabanatuan City

March 19, 1986

TO WHOM IT MAY CONCERN:

This is to certify that Freddie dela Paz has agreed to sign tomorrow (March 20) the affidavit of sale of lot located at Villa Fe Subdivision sold to Fr. Dante Martinez.

[Sgd.] Freddie dela Paz

FREDDIE DELA PAZ10

However, private respondents De la Paz never delivered the Deed of Sale they promised to petitioner.

In the meantime, in a Deed of. Absolute Sale with Right to Repurchase dated October 28, 1981 (Exh. 10),11private respondents De la Paz sold three lots with right to repurchase the same within one year to private respondents spouses Reynaldo and Susan Veneracion for the sum of P150,000.00. One of the lots sold was the lot previously sold to petitioner.12

Reynaldo Veneracion had been a resident of Cabanatuan City since birth. He used to pass along Maharlika Highway in going to the Municipal Hall or in going to and from Manila. Two of the lots subject of the sale were located along Maharlika Highway, one of which was the lot sold earlier by the De la Pazes to petitioner. The third lot (hereinafter referred to as the Melencio lot) was occupied by private respondents De la Paz. Private respondents Veneracion never took actual possession of any of these lots during the period of redemption, but all titles to the lots were given to him.13

Before the expiration of the one year period, private respondent Godofredo De la Paz informed private respondent Reynaldo Veneracion that he was selling the three lots to another person for P200,000.00. Indeed, private respondent Veneracion received a call from a Mr. Tecson verifying if he had the titles to the properties, as private respondents De la Paz were offering to sell the two lots along Maharlika Highway to him (Mr. Tecson) for P180,000.00 The offer included the lot purchased by petitioner in February, 1981. Private respondent Veneracion offered to purchase the same two lots from the De la razes for the same amount, The offer was accepted by private respondents De la Paz. Accordingly, on June 2, 1983, a Deed of Absolute Sale was executed over the two lots (Exh. I/Exh. 5-Veneracion).14 Sometime in January, 1984, private respondent Reynaldo Veneracion asked a certain Renato Reyes, petitioner's neighbor, who the owner of the building erected on the subject lot was. Reyes told him that it was Feliza Martinez, petitioner's mother, who was in possession of the property. Reynaldo Veneracion told private respondent Godofredo about the matter and was assured that Godofredo would talk to Feliza. Based on that assurance, private respondents

Veneracion registered the lots with the Register of Deeds of Cabanatuan on March 5, 1984. The lot in dispute was registered under TCT No. T-44612 (Exh. L/Exh. 4-Veneracion).15

Petitioner discovered that the lot he was occupying with his family had been sold to the spouses Veneracion after receiving a letter, (Exh. P/Exh. 6-Veneracion) from private respondent Reynaldo Veneracion on March 19, 1986, claiming ownership of the land and demanding that they vacate the property and remove their improvements thereon.16 Petitioner, in turn, demanded through counsel the execution of the deed of sale from private respondents De la Paz and informed Reynaldo Veneracion that he was the owner of the property as he had previously purchased the same from private respondents De la Paz.17

The matter was then referred to the Katarungang Pambarangay of San Juan, Cabanatuan City for conciliation, but the parties failed to reach an agreement (Exh. M/Exh. 13).18 As a consequence, on May 12, 1986, private respondent Reynaldo Veneracion brought an action for ejectment in the Municipal Trial Court, Branch III, Cabanatuan City against petitioner and his mother (Exh. 14).19

On the other hand, on June 10, 1986, petitioner caused a notice of lis pendens  to be recorded on TCT No. T-44612 with the Register of Deeds of Cabanatuan City (Exh. U).20

During the pre-trial conference, the parties agreed to have the case decided under the Rules on Summary Procedure and defined the issues as follows:

1. Whether of not defendant (now petitioner) may be judicially ejected.

2. Whether or not the main issue in this case is ownership.

3. Whether or not damages may be awarded.21

On January 29, 1987, the trial court rendered its decision, pertinent portions of which are quoted as follows:

With the foregoing findings of the Court, defendants [petitioner Rev. Fr. Dante Martinez and his mother] are the rightful possessors and in good faith and in concept of owner, thus cannot be ejected from the land in question. Since the main issue is ownership, the better remedy of the plaintiff [herein private respondents Veneracion] is Accion Publiciana in the Regional Trial Court, having jurisdiction to adjudicate on ownership.

Defendants' counterclaim will not be acted upon it being more than P20,000.00 is beyond this Court's power to adjudge.

WHEREFORE, judgment is hereby rendered, dismissing plaintiff's complaint and ordering plaintiff to pay Attorney's fee of P5,000.00 and cost of suit.

SO ORDERED.22

On March 3, 1987, private respondents Veneracion filed a notice of appeal with the Regional Trial Court, but failed to pay the docket fee. On June 6, 1989, or over two years after the filing of the notice of appeal, petitioner filed a Motion for Execution of the Judgment, alleging finality of judgment for failure of private respondents Veneracion to perfect their appeal and failure to prosecute the appeal for an unreasonable length of time.

Upon objection of private respondents Veneracion, the trial court denied on June 28, 1989 the motion for execution and ordered the records of the case to be forwarded to the appropriate Regional Trial Court. On July 11, 1989, petitioner appealed from this order. The appeal of private respondents Veneracion from the decision of the MTC and the appeal of petitioner from the order denying petitioner's motion for execution were forwarded to the Regional Trial Court, Branch 28, Cabanatuan City. The cases were thereafter consolidated under Civil Case No. 670-AF.

On February 20, 1991, the Regional Trial Court rendered its decision finding private respondents Veneracion as the true owners of the lot in dispute by virtue of their prior registration with the Register of Deeds, subject to petitioner's rights as builder in good faith, and ordering petitioner and his privies to Vacate the lot after receipt of the cost of the construction of the house, as well as to pay the sum of P5,000.00 as attorney's fees and the costs of the suit. It, however, failed to rule on petitioner's appeal of the Municipal Trial Court's order denying their Motion for Execution of Judgment.

Meanwhile, on May 30, 1986, while the ejectment case was pending before the Municipal Trial Court, petitioner Martinez filed a complaint for annulment of sale with damages against the Veneracions and De la Pazes with the Regional Trial Court, Branch 25, Cabanatuan City. On March 5, 1990, the trial court rendered its decision finding private respondents Veneracion owners of the land in dispute, subject to the rights of petitioner as a builder in good faith, and ordering private respondents De la Paz to pay petitioner the sum of P50,000.00 as moral damages and P10,000.00 as attorney's fees, and for private respondents to pay the costs of the suit.

On March 20, 1991, petitioner then filed a petition for review with the Court of Appeals of the RTC's decision in Civil Case No. 670-AF (for ejectment). Likewise, on April 2, 1991, petitioner appealed the trial court's decision in Civil Case No. 44-[AF]-8642-R (for annulment of sale and damages) to the Court of Appeals. The cases were designated as CA G.R. SP. No. 24477 and CA G.R. CY No. 27791, respectively, and were subsequently consolidated. The Court of Appeals affirmed the trial courts' decisions, without ruling on petitioner's appeal from the Municipal Trial Court's order denying his Motion for Execution of Judgment. It declared the Veneracions to be owners of the lot in dispute as they were the first registrants in good faith, in accordance with Art. 1544 of the Civil Code. Petitioner Martinez failed to overcome the presumption of good faith for the following reasons:

1. when private respondent Veneracion discovered the construction on the lot, he immediately informed private respondent Godofredo about it and relied on the latter's assurance that he will take care of the matter.

2. the sale between petitioner Martinez and private respondents De la Paz was not notarized, as required by Arts. 1357 and 1358 of the Civil Code, thus it cannot be said that the private respondents Veneracion had knowledge of the first sale.23

Petitioner's motion for reconsideration was likewise denied in a resolution dated January 31, 1996.24 Hence this petition for review. Petitioner raises the following assignment of errors:

I THE PUBLIC RESPONDENTS HONORABLE COURT OF APPEALS AND REGIONAL TRIAL COURT JUDGES JOHNSON BALLUTAY AND ADRIANO TUAZON ERRED IN HOLDING THAT PRIVATE RESPONDENTS REYNALDO VENERACION AND WIFE ARE BUYERS AND REGISTRANTS IN GOOD FAITH IN RESOLVING THE ISSUE OF OWNERSHIP AND POSSESSION OF THE LAND IN DISPUTE.

II THAT PUBLIC RESPONDENTS ERRED IN NOT RESOLVING AND DECIDING THE APPLICABILITY OF THE DECISION OF THIS HONORABLE COURT IN THE CASES OF

SALVORO VS. TANEGA, ET AL., G. R. NO. L 32988 AND IN ARCENAS VS. DEL ROSARIO, 67 PHIL 238, BY TOTALLY IGNORING THE SAID DECISIONS OF THIS HONORABLE COURT IN THE ASSAILED DECISIONS OF THE PUBLIC RESPONDENTS.

III THAT THE HONORABLE COURT OF APPEALS ERRED IN NOT GIVING DUE COURSE TO THE PETITION FOR REVIEW IN CA G. R. SP. NO. 24477.

IV THAT THE HONORABLE COURT OF APPEALS IN DENYING PETITIONER'S PETITION FOR REVIEW AFORECITED INEVITABLY SANCTIONED AND/OR WOULD ALLOW A VIOLATION OF LAW AND DEPARTURE FROM THE USUAL COURSE OF JUDICIAL PROCEEDINGS BY PUBLIC RESPONDENT HONORABLE JUDGE ADRIANO TUAZON WHEN THE LATTER RENDERED A DECISION IN CIVIL CASE NO. 670-AF [ANNEX "D"] REVERSING THE DECISION OF THE MUNICIPAL TRIAL COURT JUDGE SENDON DELIZO IN CIVIL CASE NO. 9523 [ANNEX "C"] AND IN NOT RESOLVING IN THE SAME CASE THE APPEAL INTERPOSED BY DEFENDANTS ON THE ORDER OF THE SAME COURT DENYING THE MOTION FOR EXECUTION.

V THAT THE RESOLUTION [ANNEX "B"] (OF THE COURT OF APPEALS) DENYING PETITIONER'S MOTION FOR RECONSIDERATION [ANNEX "1"] WITHOUT STATING CLEARLY THE FACTS AND THE LAW ON WHICH SAID RESOLUTION WAS BASED, (IS ERRONEOUS).

These assignment of errors raise the following issues:

1. Whether or not private respondents Veneracion are buyers in good faith of the lot in dispute as to make them the absolute owners thereof in accordance with Art. 1544 of the Civil Code on double sale of immovable property.

2. Whether or not payment of the appellate docket fee within the period to appeal is not necessary for the perfection of the appeal after a notice of appeal has been filed within such period.

3. Whether or not the resolution of the Court of Appeals denying petitioner's motion for reconsideration is contrary to the constitutional requirement that a denial of a motion for reconsideration must state the legal reasons on which it is based.

First. It is apparent from the first and second assignment of errors that petitioner is assailing the findings of fact and the appreciation of the evidence made by the trial courts and later affirmed by the respondent court. While, as a general rule, only questions of law may be raised in a petition for review under Rule 45 of the Rules of Court, review may nevertheless be granted under certain exceptions, namely: (a) when the conclusion is a finding grounded entirely on speculation, surmises, or conjectures; (b) when the inference made is manifestly mistaken, absurd, or impossible; (c) where there is a grave abuse of discretion; (d) when the judgment is based on a misapprehension of facts; (e) when the findings of fact are conflicting; (f) when the Court of Appeals, in making its findings, went beyond the issue of the case and the same is contrary to the admissions of both appellant and appellee; (g) when the findings of the Court of Appeals are contrary to those of the trial court; (h) when the findings of fact are conclusions without citation of specific evidence on which they are based; (I) when the facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed by the respondents; (j) when the finding of fact of the Court of Appeals is premised on the supposed absence of evidence but is contradicted by the evidence on record; and (k) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties and which, if properly considered, would justify a different conclusion.25

In this case, the Court of Appeals based its ruling that private respondents Veneracion are the owners of the disputed lot on their reliance on private respondent Godofredo De la Paz's assurance that he would take care of the matter concerning petitioner's occupancy of the disputed lot as constituting good faith. This case, however, involves double sale and, on this matter, Art. 1544 of the Civil Code provides that where immovable property is the subject of a double sale, ownership shall be transferred (1) to the person acquiring it who in good faith first recorded it to the Registry of Property; (2) in default thereof, to the person who in good faith was first in possession; and (3) in default thereof, to the person who presents the oldest title.26 The requirement of the law, where title to the property is recorded in the Register of Deeds, is two-fold: acquisition in good faith and recording in good faith. To be entitled to priority, the second purchaser must not only prove prior recording of his title but that he acted in good faith, i.e., without knowledge or notice of a prior sale to another. The presence of good faith should be ascertained from the circumstances surrounding the purchase of the land.27

1. With regard to the first sale to private respondents Veneracion, private respondent Reynaldo Veneracion testified that on October 10, 1981, 18 days before the execution of the first Deed of Sale with Right to Repurchase, he inspected the premises and found it vacant.28 However, this is belied by the testimony of Engr. Felix D. Minor, then building inspector of the Department of Public Works and Highways, that he conducted on October 6, 1981 an ocular inspection of the lot in dispute in the performance of his duties as a building inspector to monitor the progress of the construction of the building subject of the building permit issued in favor of petitioner on April 23, 1981, and that he found it 100 % completed (Exh. V).29 In the absence of contrary evidence, he is to be presumed to have regularly performed his official duty.30 Thus, as early as October, 1981, private respondents Veneracion already knew that there was construction being made on the property they purchased.

2. The Court of Appeals failed to determine the nature of the first contract of sale between the private respondents by considering their contemporaneous and subsequent acts.31 More specifically, it overlooked the fact that the first contract of sale between the private respondents shows that it is in fact an equitable mortgage.

The requisites for considering a contract of sale with a right of repurchase as an equitable mortgage are (1) that the parties entered into a contract denominated as a contract of sale and (2) that their intention was to secure an existing debt by way of mortgage.32 A contract of sale with right to repurchase gives rise to the presumption that it is an equitable mortgage in any of the following cases: (1) when the price of a sale with a right to repurchase is unusually inadequate; (2) when the vendor remains in possession as lessee or otherwise; (3) when, upon or after the expiration of the right to repurchase, another instrument extending the period of redemption or granting a new period is executed; (4) when the purchaser retains for himself a part of the purchase price; (5) when the vendor binds himself to pay the taxes on the thing sold; (6) in any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation.33 In case of doubt, a contract purporting to be a sale with right to repurchase shall be construed as an equitable mortgage.34

In this case, the following circumstances indicate that the private respondents intended the transaction to be an equitable mortgage and not a contract of sale: (1) Private respondents Veneracion never took actual possession of the three lots; (2) Private respondents De la Paz remained in possession of the Melencio lot which was co-owned by them and where they resided; (3) During the period between the first sale and the second sale to private respondents Veneracion, they never made any effort to take possession of the properties; and (4) when the period of redemption had expired and private respondents Veneracion were informed by the De la Pazes that they are offering the lots for sale to another person for P200,000.00, they never objected. To the contrary, they offered to purchase the two lots for P180,000.00 when they found that a certain Mr.

Tecson was prepared to purchase it for the same amount. Thus, it is clear from these circumstances that both private respondents never intended the first sale to be a contract of sale, but merely that of mortgage to secure a debt of P150,000.00.

With regard to the second sale, which is the true contract of sale between the parties, it should be noted that this Court in several cases,35 has ruled that a purchaser who is aware of facts which should put a reasonable man upon his guard cannot turn a blind eye and later claim that he acted in good faith. Private respondent Reynaldo himself admitted during the pre-trial conference in the MTC in Civil Case No. 9523 (for ejectment) that petitioner was already in possession of the property in dispute at the time the second Deed of Sale was executed on June 1, 1983 and registered on March 4, 1984. He, therefore, knew that there were already occupants on the property as early as 1981. The fact that there are persons, other than the vendors, in actual possession of the disputed lot should have put private respondents on inquiry as to the nature of petitioner's right over the property. But he never talked to petitioner to verify the nature of his right. He merely relied on the assurance of private respondent Godofredo De la Paz, who was not even the owner of the lot in question, that he would take care of the matter. This does not meet the standard of good faith.

3. The appellate court's reliance on Arts. 1357 and 1358 of the Civil Code to determine private respondents Veneracion's lack of knowledge of petitioner's ownership of the disputed lot is erroneous.

Art. 135736 and Art. 1358,37 in relation to Art. 1403(2)38 of the Civil Code, requires that the sale of real property must be in writing for it to be enforceable. It need not be notarized. If the sale has not been put in writing, either of the contracting parties can compel the other to observe such requirement.39 This is what petitioner did when he repeatedly demanded that a Deed of Absolute Sale be executed in his favor by private respondents De la Paz. There is nothing in the above provisions which require that a contract of sale of realty must be executed in a public document. In any event, it has been shown that private respondents Veneracion had knowledge of facts which would put them on inquiry as to the nature of petitioner's occupancy of the disputed lot.

Second. Petitioner contends that the MTC in Civil Case No. 9523 (for ejectment) erred in denying petitioner's Motion for Execution of the Judgment, which the latter filed on June 6, 1989, two years after private respondents Veneracion filed a notice of appeal with the MTC on March 3, 1987 without paying the appellate docket fee. He avers that the trial court's denial of his motion is contrary to this Court's ruling in the cases of Republic v. Director of Lands,40 and Aranas v. Endona41  in which it was held that where the appellate docket fee is not paid in full within the reglementary period, the decision of the MTC becomes final and unappealable as the payment of docket fee is not only a mandatory but also a jurisdictional requirement.

Petitioner's contention has no merit. The case of Republic v. Director of Lands deals with the requirement for appeals from the Courts of First Instance, the Social Security Commission, and the Court of Agrarian Relations to the Court of Appeals. The case of Aranas v. Endona, on the other hand, was decided under the 1964 Rules of Court and prior to the enactment of the Judiciary Reorganization Act of 1981 (B. P. Blg. 129) and the issuance of its Interim Rules and Guidelines by this Court on January 11, 1983. Hence, these cases are not applicable to the matter at issue. 1âwphi1.nêt

On the other hand, in Santos v. Court of Appeals,42  it was held that although an appeal fee is required to be paid in case of an appeal taken from the municipal trial court to the regional trial court, it is not a prerequisite for the perfection of an appeal under §2043 and §2344 of the Interim Rules and Guidelines issued by this Court on January 11, 1983 implementing the Judiciary Reorganization Act of 1981 (B.P. Blg. 129). Under these sections, there are only two requirements for the perfection of an appeal, to wit: (a) the filing of a notice of appeal within the reglementary period; and (b) the

expiration of the last day to appeal by any party. Even in the procedure for appeal to the regional trial courts,45 nothing is mentioned about the payment of appellate docket fees.

Indeed, this Court has ruled that, in appealed cases, the failure to pay the appellate docket fee does not automatically result in the dismissal of the appeal, the dismissal being discretionary on the part of the appellate court.46 Thus, private respondents Veneracions' failure to pay the appellate docket fee is not fatal to their appeal.

Third. Petitioner contends that the resolution of the Court of Appeals denying his motion for reconsideration was rendered in violation of the Constitution because it does not state the legal basis thereof.

This contention is likewise without merit.

Art. VIII, Sec. 14 of the Constitution provides that "No petition for review or motion for reconsideration of a decision of the court shall be refused due course or denied without stating the basis therefor." This requirement was fully complied with when the Court of Appeals, in denying. reconsideration of its decision, stated in its resolution that it found no reason to change its ruling because petitioner had not raised anything new.47 Thus, its resolution denying petitioner's motion for reconsideration states:

For resolution is the Motion for Reconsideration of Our Decision filed by the petitioners.

Evidently, the motion poses nothing new. The points and arguments raised by the movants have been considered and passed upon in the Decision sought to be reconsidered. Thus, We find no reason to disturb the same.

WHEREFORE, the motion is hereby DENIED.

SO ORDERED.48

Attorney's. fees should be awarded as petitioner was compelled to litigate to protect his interest due to private respondents' act or omission.49

WHEREFORE, the decision of the Court of Appeals is REVERSED and a new one is RENDERED:

(1) declaring as null and void the deed of sale executed by private respondents Godofredo and Manuela De la Paz in favor of private respondents spouses Reynaldo and Susan Veneracion;

(2) ordering private respondents Godofredo and Manuela De la Paz to execute a deed of absolute sale in favor of petitioner Rev. Fr. Dante Martinez;

(3) ordering private respondents Godofredo and Manuela De la Paz to reimburse private respondents spouses Veneracion the amount the latter may have paid to the former;

(4) ordering the Register of Deeds of Cabanatuan City to cancel TCT No. T-44612 and issue a new one in the name of petitioner Rev. Fr. Dante Martinez; and

(5) ordering private respondents to pay petitioner jointly and severally the sum of P20,000.00 as attorney's fees and to pay the costs of the suit.

SO ORDERED.1âwphi1.nêt

Bellosillo, Quisumbing, Buena, and De Leon, Jr., JJ., concur.

Footnotes:

1 Per Judge Johnson L. Ballutay.

2 Per Judge Adriano I. Tuason.

3 Records (Civil Case No. 44-AF-8642-R), pp. 146-147.

4 Id.,  p. 190.

5 Id.,  pp. 132, 180.

6  Id.,  pp. 134-136.

7  Id.,  p. 217; TSN (Engr. Felix D. Minor), p. 10-11, Feb. 23, 1989.

8 TSN (Fr. Dame Martinez), pp. 4, 6-9, 12-16, 45, Dec. 11, 1987.

9 Records (Civil Case No. 44-AF-8642-R), p. 131; TSN (Fr. Dame Martinez), p. 9, Dec. 11, 1987.

10 Records (Civil Case No. 44-AF-8642-R), p. 148.

11  Id.,  pp. 193-194.

12 TSN (Reynaldo Veneracion), pp. 3-8, Sept. 28, 1988.

13  Id.,  pp. 18-19, Nov. 3, 1988.

14 Records (Civil Case No. 44-AF-8642-R), p. 183.

15 TSN (Reynaldo Veneracion), pp. 10-17, 16-17, Sept. 28, 1988; Records (Civil Case No. 44-AF-8642-R), p. 144.

16 TSN (Fr. Dante Martinez), pp. 25-28, Dec. 11, 1987; Records (Civil Case No. 44-AF- 8642-R), 149, 184.

17 Records (Civil Case No. 44-AF-8642-R), pp. 151-152.

18 Id.,  p. 145, 197.

19 p.198.

20 Id., p. 155.

21 Id., p. 140; Order, p. 1.

22 CA Rollo (CA-G. R. SP. No.24477), p. 42; MTC Judgment, p. 5.

23 Rollo, pp. 56-61; CA Decision, pp. 6-11.

24  Id.,  p. 63; Resolution, p. 1.

25 Lacanilao v. Court of Appeals, 262 SCRA 486 (1996); Philippine Home Assurance Corp. v. Court of Appeals, 257 SCRA 468 (1996); Floro v. Llenado, 244

SCRA 715 (1995).

26 Balatbat v. Court of Appeals, 261 SCRA 128 (1996).

27 Bautista v. Court of Appeals, 230 SCRA 446 (1994).

28 TSN (Reynaldo Veneracion), p. 16, Sept. 28, 1988.

29 TSN (Engr. Felix D. Minor), pp. 10-11, Feb. 23, 1989; Records (Civil Case No. 44-AF-8642-R), p. 217.

30 Celeste v. Court of Appeals, 209 SCRA 79 (1992).

31 Matanguihan v. Court of Appeals, 275 SCRA 380 (1997).

32 Id.

33 Civil Code, Art. 1602.

34 Id., Art. 1603.

35 De la Cruz v. Intermediate Appellate Court, 157 SCRA 660 (1988); Bautista v. Court of Appeals, 230 SCRA 446 (1994); Balatbat v. Court of Appeals, 261

SCRA 128 (1996).

36 Art. 1357. If the law requires a document or other special form, as in the acts and contracts enumerated in the following article, the contracting parties may

compel each other to observe that form, once the contract has been perfected. This right may be exercised simultaneously with the action upon the contract.

37 Art. 1358. The following must appear in a public document:

(1) Acts and contracts which have for their object the creation, transmission, modification or extinguishment of real rights over immovable property;

sales of real property or of an interest therein are governed by Articles 1403, No. 2 and 1405;

38 Art. 1403. The following contracts are unenforceable, unless they are ratified:

. . . .

(e)  An agreement for the leasing for a longer period than one year, or for the sale of real property or of an interest therein;

39 Heirs of Amparo del Rosario v. Santos, 108 SCRA 43 (1981).

40 71 SCRA 450 (1976).

41 117 SCRA 753 (1982).

42 253 SCRA 632 (1996).

43 Sec. 20. Procedure for taking appeal.  - An appeal from the metropolitan trial Courts, municipal trial courts or municipal circuit trial courts to the regional trial

courts, and from the regional trial courts to the Intermediate Appellate Court in actions or proceedings originally filed in the former shall be taken by filing a notice

of appeal with the court that rendered the judgment or order appealed from.

44 Sec. 23. Perfection of appeal.  - In cases where appeal is taken, the perfection of the appeal shall be upon the expiration of the last day to appeal by any

party.

45 Interim Rules and Guidelines, §21.

46 Fontanar v. Bonsubre, 145 SCRA 663 (1986); Del Rosario and Sons Logging Enterprises, Inc. v. NLRC, 136 SCRA 669 (1985).

47 Borromeo v. Court of Appeals, 186 SCRA 1 (1990).

48 Rollo, p. 63; Resolution, p. 1.

49 Civil Code, Art. 2208 (2).

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 156973             June 4, 2004

SPOUSES TOMAS OCCEÑA and SILVINA OCCEÑA, petitioners, vs.LYDIA MORALES OBSIANA ESPONILLA, ELSA MORALES OBSIANA SALAZAR and DARFROSA OBSIANA SALAZAR ESPONILLA, respondents.

D E C I S I O N

PUNO, J.:

The case at bar involves a portion of the 1,198-square meter residential lot (lot no. 265) situated in Sibalom, Antique, originally owned by spouses Nicolas and Irene Tordesillas under OCT No. 1130. The Tordesillas spouses had three (3) children, namely: Harod, Angela and Rosario, the latter having been survived by her two (2) children, Arnold and Lilia de la Flor.

After the death of the Tordesillas spouses, the lot was inherited by their children Harod and Angela, and grandchildren Arnold and Lilia. In 1951, the heirs executed a Deed of Pacto de Retro Sale1 in favor of Alberta Morales covering the southwestern portion of the lot with an area of 748 square meters.

Three (3) years later, in 1954, Arnold and Lilia executed a Deed of Definite Sale of Shares, Rights, Interests and Participations2 over the same 748 sq. m. lot in favor of Alberta Morales. The notarized deed also attested that the lot sold by vendors Arnold and Lilia to Alberta were their share in the estate of their deceased parents.

Alberta possessed the lot as owner, constructed a house on it and appointed a caretaker to oversee her property. Thereafter, in July 1956, vendor Arnold de la Flor borrowed the OCT from Alberta covering the lot. He executed an Affidavit3 acknowledging receipt of the OCT in trust and undertook to return said title free from changes, modifications or cancellations.

In 1966, Arnold and Angela, nephew and daughter respectively of the Tordesillas spouses, without the knowledge of Alberta, executed a Deed of Extrajudicial Settlement4 declaring the two of them as the only co-owners of the undivided 1,198 sq. m. lot no. 265, without acknowledging their previous sale of 748 sq. m. thereof to Alberta. A number of times, thereafter, Alberta and her nieces asked Arnold for the OCT of the land but Arnold just kept on promising to return it.

In 1983, Arnold executed an Affidavit of Settlement of the Estate5 of Angela who died in 1978 without issue, declaring himself as the sole heir of Angela and thus consolidating the title of the entire lot in his name.

In 1985, vendee Alberta Morales died. Her nieces-heirs, Lydia, Elsa and Dafrosa, succeeded in the ownership of the lot. Months later, as the heirs were about to leave for the United States, they asked Arnold to deliver to them the title to the land so they can register it in their name. Arnold repeatedly promised to do so but failed to deliver the title to them.

On December 4, 1986, after Alberta’s heirs left for the States, Arnold used the OCT he borrowed from the deceased vendee Alberta Morales, subdivided the entire lot no. 265 into three sublots, and registered them all under his name, viz: lot no. 265-A (with TCT No. 16895), lot no. 265-B (with TCT No. 16896) and lot no. 265-C (with TCT No. 16897). He then paid the real estate taxes on the property.

On August 13, 1990, Arnold sold lot nos. 265-B & C to spouses Tomas and Sylvina Occeña, which included the 748 sq. m. portion previously sold to Alberta Morales. A Deed of Absolute Sale6 over said lots was executed to the Occeña spouses and titles were transferred to their names.

In 1993, after the death of Arnold, the three (3) nieces-heirs of Alberta Morales learned about the second sale of their lot to the Occeña spouses when they were notified by caretaker Abas that they were being ejected from the land. In 1994, the heirs filed a case7 for annulment of sale and cancellation of titles, with damages, against the second vendees Occeña spouses. In their complaint, they alleged that the Occeñas purchased the land in bad faith as they were aware that the lots sold to them had already been sold to Alberta Morales in 1954. They averred that before the sale, when Tomas Occeña conducted an ocular inspection of the lots, Morito Abas, the caretaker appointed by Alberta Morales to oversee her property, warned them not to push through with the sale as the land was no longer owned by vendor Arnold as the latter had previously sold the lot to Alberta Morales who had a house constructed thereon.

For their part, the Occeña spouses claimed that the OCT in the name of the original owners of the lots, the Tordesillas spouses, was cancelled after it was subdivided between Angela and Arnold in 1969; that new TCTs had been issued in the latter’s names; that they were unaware that the subject lots were already previously sold to Morales as they denied that Tomas had a talk with caretaker Abas on the matter; that as of December 4, 1987, the TCTs covering the lots were in the name of Arnold and his wife, without any adverse claim annotated thereon; that vendor Arnold represented to them that the occupants they saw on the land were squatters and that he merely tolerated their presence; that they did not personally investigate the alleged squatters on the land and merely relied on the representation of vendor Arnold; that sometime in 1966-1967, Arnold and his co-heir Angela caused the survey of the original lot and subdivided it into 3 lots, without opposition from Morales or her heirs. Thus, three (3) TCTs were issued in 1969 to Arnold and Angela and, two of the lots were then sold to the Occeña spouses, again without objection from Alberta Morales.

The Occeña spouses alleged that they were buyers in good faith as the titles to the subject lots were free from liens or encumbrances when they purchased them. They claimed that in 1989, Arnold offered to sell the subject lots to them. On August 13, 1990, after they verified with the Antique Registry of Deeds that Arnold’s TCTs were clean and unencumbered, Arnold signed the instrument of sale over the subject lots in favor of the Occeñas forP100,000.00 and new titles were issued in their names.

The Occeñas likewise set up the defenses of laches and prescription. They argue that Alberta and plaintiffs-heirs were barred from prosecuting their action as they failed to assert their right for forty (40) years. Firstly, they point out that vendor Arnold and Angela subdivided the entire lot in 1966 and declared themselves as the only co-owners thereof in the deed of extrajudicial settlement. Alberta Morales failed to oppose the inclusion of her 748 sq. m. lot in the deed. Thus, the title to the entire lot no. 256 was transferred to the names of Arnold and Angela. Secondly, preparatory to the division of the lots, vendor Arnold had the land surveyed but Alberta again failed to oppose the same. Finally, Alberta and her heirs who are claiming adverse rights over the land based on the 1951 Deed of Pacto de Retro Sale and the 1954 Deed of Definite Sale of Shares failed for 40 years to annotate their adverse claims on the new titles issued to Arnold and Angela, enabling the latter to possess a clean title and transfer them to the Occeña spouses.

After trial, the lower court rendered a decision declaring the Occeña spouses as buyers in good faith and ruled that the action of the heirs was time-barred.

On appeal by Alberta’s heirs, the Court of Appeals reversed the decision of the trial court. It found that the Occeñas purchased the land in bad faith and that the action filed by Alberta’s heirs was not barred by prescription or laches. The dispositive portion reads:

WHEREFORE, the instant appeal is hereby GRANTED. Accordingly, the assailed decision is herebyREVERSED and SET ASIDE and a new one is rendered declaring the Deed of Absolute Sale dated August 13, 1990 executed between Arnold de la Flor in favor of defendants-appellees null and void and ordering the cancellation of Transfer Certificate of Title Nos. 16896, 16897, T-18241 and T-18242.

SO ORDERED.8

Hence this appeal where petitioner-spouses Occeña raise the following issues:

I

WHETHER OR NOT A VERBAL INFORMATION COULD BE MADE TO PREVAIL OVER A CLEAN CERTIFICATE OF TITLE OF A REGISTERED LAND WHICH IS FREE OF ANY LIEN OR ENCUMBRANCE ANNOTATED ON ITS CERTIFICATE OF TITLE OR ANY ADVERSE CLAIM RECORDED WITH THE REGISTER OF DEEDS.

II

WHETHER OR NOT A BUYER OF A REGISTERED LAND IS OBLIGATED TO MAKE INQUIRIES OF ANY POSSIBLE DEFECT OR ADVERSE CLAIM AFFECTING ITS OWNERSHIP WHICH DOES NOT APPEAR ON THE CERTIFICATE OF TITLE.

III

WHETHER OR NOT THE PERIOD OF MORE THAN FORTY (40) YEARS WITHOUT POSITIVE ACTION TAKEN BY RESPONDENTS, AS WELL AS BY ALBERTA MORALES, TO PROTECT THEIR INTEREST CAN BE CONSIDERED LACHES AND THUS THEIR PRESENT ACTION HAS PRESCRIBED.

On the first two issues, petitioner-spouses claim that they were purchasers of the land in good faith as the law does not obligate them to go beyond a clean certificate of title to determine the condition of the property. They argue that a person dealing with registered land is only charged with notice of the burden on the property annotated on the title. When there is nothing on the title to indicate any cloud or vice in the ownership of the property or any encumbrance thereon, the purchaser is not required to explore further than the title in quest of any hidden defect or inchoate right that may subsequently defeat his right thereto. They claim they had every right to purchase the land despite the verbal warning made by caretaker Abas as the information was mere hearsay and cannot prevail over the title of the land which was free from any encumbrance.

Their arguments do not persuade.

The petition at bar presents a case of double sale of an immovable property. Article 1544 of the New Civil Code provides that in case an immovable property is sold to different vendees, the ownership

shall belong: (1) to the person acquiring it who in good faith first recorded it in the Registry of Property; (2) should there be no inscription, the ownership shall pertain to the person who in good faith was first in possession; and, (3) in the absence thereof, to the person who presents the oldest title, provided there is good faith.

In all cases, good faith is essential. It is the basic premise of the preferential rights granted to the one claiming ownership over an immovable.9 What is material is whether the second buyer first registers the second sale in good faith, i.e., without knowledge of any defect in the title of the property sold.10 The defense of indefeasibility of a Torrens title does not extend to a transferee who takes the certificate of title in bad faith, with notice of a flaw.11

The governing principle of prius tempore, potior jure (first in time, stronger in right) enunciated under Art. 1544 has been clarified, thus:

x x x Knowledge by the first buyer of the second sale cannot defeat the first buyer’s rights except when the second buyer first registers in good faith the second sale (Olivares vs. Gonzales, 159 SCRA 33).Conversely, knowledge gained by the second buyer of the first sale defeats his rights even if he is first to register, since such knowledge taints his registration with bad faith (see also Astorga vs. Court of Appeals, G.R. No. 58530, 26 December 1984). In Cruz vs. Cabaña (G.R. No. 56232, 22 June 1984, 129 SCRA 656), it was held that it is essential, to merit the protection of Art. 1544, second paragraph, that the second realty buyer must act in good faith in registering his deed of sale (citingCarbonell vs. Court of Appeals, 69 SCRA 99 and Crisostomo vs. CA, G.R. No. 95843, 02 September 1992).12

In the case at bar, we find that petitioner-spouses failed to prove good faith in their purchase and registration of the land. A purchaser in good faith and for value is one who buys property without notice that some other person has a right to or interest in such property and pays its fair price before he has notice of the adverse claims and interest of another person in the same property. So it is that the "honesty of intention" which constitutes good faith implies a freedom from knowledge of circumstances which ought to put a person on inquiry. At the trial, Tomas Occeña admitted that he found houses built on the land during its ocular inspection prior to his purchase. He relied on the representation of vendor Arnold that these houses were owned by squatters and that he was merely tolerating their presence on the land. Tomas should have verified from the occupants of the land the nature and authority of their possession instead of merely relying on the representation of the vendor that they were squatters, having seen for himself that the land was occupied by persons other than the vendor who was not in possession of the land at that time. The settled rule is that a buyer of real property in the possession of persons other than the seller must be wary and should investigate the rights of those in possession. Without such inquiry, the buyer can hardly be regarded as a buyer in good faith and cannot have any right over the property.13 A purchaser cannot simply close his eyes to facts which should put a reasonable man on his guard and then claim that he acted in good faith under the belief that there was no defect in the title of his vendor.14 His mere refusal to believe that such defect exists or his willful closing of his eyes to the possibility of the existence of a defect in his vendor’s title will not make him an innocent purchaser for value if it later develops that the title was in fact defective, and it appears that he would have notice of the defect had he acted with that measure of precaution which may reasonably be required of a prudent man in a similar situation.

Indeed, the general rule is that one who deals with property registered under the Torrens system need not go beyond the same, but only has to rely on the title. He is charged with notice only of such burdens and claims as are annotated on the title. However, this principle does not apply when the party has actual knowledge of facts and circumstances that would impel a reasonably cautious man

to make such inquiry or when the purchaser has knowledge of a defect or the lack of title in his vendor or of sufficient facts to induce a reasonably prudent man to inquire into the status of the title of the property in litigation. One who falls within the exception can neither be denominated an innocent purchaser for value nor a purchaser in good faith.15

The evidence of the private respondents show that when Tomas Occeña conducted an ocular inspection of the land prior to the second sale, Abas, the caretaker of the house which Alberta Morales built on the land, personally informed Tomas that the lot had been previously sold by the same vendor Arnold to Alberta Morales. With this information, the Occeñas were obliged to look beyond the title of their vendor and make further inquiries from the occupants of the land as to their authority and right to possess it. However, despite this information about a prior sale, the Occeñas proceeded with the purchase in haste. They did not inquire from Abas how they could get in touch with the heirs or representatives of Alberta to verify the ownership of the land. Neither do the records reveal that they exerted effort to examine the documents pertaining to the first sale. Having discovered that the land they intended to buy was occupied by a person other than the vendor not in actual possession thereof, it was incumbent upon the petitioners to verify the extent of the occupant’s possessory rights.16 The Occeñas did nothing and chose to ignore and disbelieve Abas’ statement.

On the third issue, we hold that the action to annul title filed by respondents-heirs is not barred by laches and prescription. Firstly, laches is a creation of equity and its application is controlled by equitable considerations. Laches cannot be used to defeat justice or perpetuate fraud and injustice. Neither should its application be used to prevent the rightful owners of a property from recovering what has been fraudulently registered in the name of another.17 Secondly, prescription does not apply when the person seeking annulment of title or reconveyance is in possession of the lot because the action partakes of a suit to quiet title which is imprescriptible.18 In this case, Morales had actual possession of the land when she had a house built thereon and had appointed a caretaker to oversee her property. Her undisturbed possession of the land for a period of fifty (50) long years gave her and her heirs a continuing right to seek the aid of a court of equity to determine the nature of the claim of ownership of petitioner-spouses.19 As held by this Court in Faja vs. Court of Appeals:20

x x x There is settled jurisprudence that one who is in actual possession of a piece of land claiming to be owner thereof may wait until his possession is disturbed or his title attacked before taking steps to vindicate his right, the reason for the rule being, that his undisturbed possession gives him a continuing right to seek the aid of a court of equity to ascertain and determine the nature of the adverse claim and its effect on his own title, which right can be claimed only by one who is in possession. x x x The right to quiet title to the property, seek its reconveyance and annul any certificate of title covering it accrued only from the time the one in possession was made aware of a claim adverse to his own, and it is only then that the statutory period of prescription commences to run against such possessor.

In the case at bar, Morales’ caretaker became aware of the second sale to petitioner-spouses only in 1991 when he received from the latter a notice to vacate the land. Respondents-heirs did not sleep on their rights for in 1994, they filed their action to annul petitioners’ title over the land. It likewise bears to stress that when vendor Arnold reacquired title to the subject property by means of fraud and concealment after he has sold it to Alberta Morales, a constructive trust was created in favor of Morales and her heirs. As the defrauded parties who were in actual possession of the property, an action of the respondents-heirs to enforce the trust and recover the property cannot prescribe. They may vindicate their right over the property regardless of the lapse of time.21 Hence, the rule that

registration of the property has the effect of constructive notice to the whole world cannot be availed of by petitioners and the defense of prescription cannot be successfully raised against respondents.

In sum, the general rule is that registration under the Torrens system is the operative act which gives validity to the transfer of title on the land. However, it does not create or vest title especially where a party has actual knowledge of the claimant’s actual, open and notorious possession of the property at the time of his registration.22 A buyer in bad faith has no right over the land. As petitioner-spouses failed to register the subject land in good faith, ownership of the land pertains to respondent-heirs who first possessed it in good faith.

IN VIEW WHEREOF, the petition is DISMISSED. No costs.

SO ORDERED.

Quisumbing, Austria-Martinez, Callejo, Sr., and Tinga, JJ., concur.

Footnotes

1 Original Records, pp. 19-20.

2 Id., pp. 21-24.

3 Id., p. 26.

4 Id., pp. 27-28.

5 Id., pp. 29-30.

6 Id., pp. 33-34.

7 Docketed as Civil Case No. 2715.

8 Decision dated January 17, 2003, Court of Appeals Special Second Division, Penned by Associate Justice Mariano del Castillo and concurred in by Associate Justices Teodoro P. Regino and Rebecca Guia-Salvador; Rollo at 41-54.

9 Gabriel vs. Spouses Mabanta and Colobong, G.R. No. 142403, March 26, 2003.

10 Coronel vs. Court of Appeals, 263 SCRA 15 (1996).

11 Baricuatro, Jr. vs. Court of Appeals, 325 SCRA 137 (2000).

12 Compendium of Civil Law and Jurisprudence, Justice Jose C. Vitug, pp. 604-605.

13 Spouses Castro vs. Miat, G.R. No. 143297, February 11, 2003.

14 Heirs of Ramon Durano, Sr. vs. Uy, 344 SCRA 238 (2000).

15 Spouses Domingo vs. Roces, G.R. No. 147468, April 9, 2003; Dela Merced vs. Government Service Insurance System, 365 SCRA 1 (2001).

16 Gonzales vs. Toledo, G.R. No. 149465, December 8, 2003; Mathay vs. Court of Appeals, 295 SCRA 556 (1998).

17 Alcantara-Daus vs. Spouses de Leon, G.R. No. 149750, June 16, 2003.

18 Heirs of Santiago vs. Heirs of Santiago, G.R. No. 151440, June 17, 2003.

19 Millena vs. Court of Appeals, 324 SCRA 126 (2000).

20 75 SCRA 441 (1977).

21 Heirs of Ermac vs. Heirs of Ermac, G.R. No. 149679, May 30, 2003; Juan vs. Zuñiga, 4 SCRA 1221 (1962).

22 Lavides vs. Pre, 367 SCRA 382 (2001).

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 141634      February 5, 2001

Heirs of Spouses REMEDIOS R. SANDEJAS and ELIODORO P. SANDEJAS SR. -- ROBERTO R. SANDEJAS, ANTONIO R. SANDEJAS, CRISTINA SANDEJAS MORELAND, BENJAMIN R. SANDEJAS, REMEDIOS R. SANDEJAS, and heirs of SIXTO S. SANDEJAS II, RAMON R. SANDEJAS, TERESITA R. SANDEJAS, and ELIODORO R. SANDEJAS JR., all represented by ROBERTO R. SANDEJAS, petitioners, vs.ALEX A. LINA, respondent.

PANGANIBAN, J.:

A contract of sale is not invalidated by the fact that it is subject to probate court approval. The transaction remains binding on the seller-heir, but not on the other heirs who have not given their consent to it. In settling the estate of the deceased, a probate court has jurisdiction over matters incidental and collateral to the exercise of its recognized powers. Such matters include selling, mortgaging or otherwise encumbering realty belonging to the estate. Rule 89, Section 8 of the Rules of Court, deals with the conveyance of real property contracted by the decedent while still alive. In contrast with Sections 2 and 4 of the same Rule, the said provision does not limit to the executor or administrator the right to file the application for authority to sell, mortgage or otherwise encumber realty under administration. The standing to pursue such course of action before the probate court inures to any person who stands to be benefited or injured by the judgment or to be entitled to the avails of the suit.1âwphi1.nêt

The Case

Before us is a Petition for Review under Rule 45 of the Rules of Court, seeking to reverse and set aside the Decision1 dated April 16, 1999 and the Resolution2 dated January 12, 2000, both promulgated by the Court of Appeals in CA-GR CV No. 49491. The dispositive portion of the assailed Decision reads as follows:3

"WHEREFORE, for all the foregoing, [w]e hereby MODIFY the [O]rder of the lower court dated January 13, 1995, approving the Receipt of Earnest Money With Promise to Buy and Sell dated June 7, 1982, only to the three-fifth (3/5) portion of the disputed lots covering the share of [A]dministrator Eliodoro Sandejas, Sr. [in] the property. The intervenor is hereby directed to pay appellant the balance of the purchase price of the three-fifth (3/5) portion of the property within thirty (30) days from receipt of this [O]rder and x x x the administrator [is directed] to execute the necessary and proper deeds of conveyance in favor of appellee within thirty (30) days thereafter."

The assailed Resolution denied reconsideration of the foregoing disposition.

The Facts

The facts of the case, as narrated by the Court of Appeals (CA), are as follows:4

"On February 17, 1981, Eliodoro Sandejas, Sr. filed a petition (Record, SP. Proc. No. R-83-15601, pp. 8-10) in the lower court praying that letters of administration be issued in his favor for the settlement of the estate of his wife, REMEDIOS R. SANDEJAS, who died on April 17, 1955. On July 1, 1981, Letters of Administration [were issued by the lower court appointing Eliodoro Sandejas, Sr. as administrator of the estate of the late Remedios Sandejas (Record, SP. Proc. No. R-83-15601, p. 16). Likewise on the same date, Eliodoro Sandejas, Sr. took his oath as administrator (Record, SP. Proc. No. R-83-15601, p. 17). x x x.

"On November 19, 1981, the 4th floor of Manila City Hall was burned and among the records burned were the records of Branch XI of the Court of First Instance of Manila. As a result, [A]dministrator Eliodoro Sandejas, Sr. filed a [M]otion for [R]econstitution of the records of the case on February 9, 1983 (Record, SP. Proc. No. R-83-15601, pp. 1-5). On February 16, 1983, the lower court in its [O]rder granted the said motion (Record, SP. Proc. No. R-83-15601, pp. 28-29).

"On April 19, 1983, an Omnibus Pleading for motion to intervene and petition-in-intervention was filed by [M]ovant Alex A. Lina alleging among others that on June 7, 1982, movant and [A]dministrator Eliodoro P. Sandejas, in his capacity as seller, bound and obligated himself, his heirs, administrators, and assigns, to sell forever and absolutely and in their entirety the following parcels of land which formed part of the estate of the late Remedios R. Sandejas, to wit:

1. 'A parcel of land (Lot No.22 Block No. 45 of the subdivision plan Psd-21121, being a portion of Block 45 described on plan Psd-19508, G.L.R.O. Rec. No. 2029), situated in the "Municipality of Makati, province of Rizal, containing an area of TWO HUNDRED SEVENTY (270) SQUARE METERS, more or less, with TCT No. 13465;

2. 'A parcel of land (Lot No. 21 Block No. 45 of the subdivision plan Psd-21141, being a portion of Block 45 described on plan Psd-19508 G.L.R.O. Rec. No. 2029), situated in the Municipality of Makati, Province of Rizal, containing an area of TWO HUNDRED SEVENTY (270) SQUARE METERS, more or less, with TCT No. 13464;'

3. 'A parcel of land (Lot No. 5 Block No. 45 of the subdivision plan Psd-21141, being a portion of Block 45 described on plan Psd-19508 G.L.R.O. Rec. No. 2029), situated in the Municipality of Makati, Province of Rizal, containing an area of TWO HUNDRED EIGHT (208) SQUARE METERS, more or less, with TCT No. 13468;'

4. 'A parcel of land (Lot No. 6, Block No. 45 of the subdivision plan Psd-21141, being a portion of Block 45 described on plan Psd-19508 G.L.R.O. Rec. No. 2029), situated in the Municipality of Makati, Province of Rizal, containing an area of TWO HUNDRED EIGHT (208) SQUARE METERS, more or less, with TCT No. 13468;'

"The [R]eceipt of the [E]arnest [M]oney with [P]romise to [S]ell and to [B]uy is hereunder quoted, to wit:

'Received today from MR. ALEX A. LINA the sum of ONE HUNDRED THOUSAND (P100,000.00) PESOS, Philippine Currency, per Metropolitan Bank & Trust Company

Chec[k] No. 319913 dated today for P100,000.00, x x x as additional earnest money for the following:

xxx      xxx      xxx

all registered with the Registry of Deeds of the [P]rovince of Rizal (Makati Branch Office) in the name of SELLER 'EL!ODORO SANDEJAS, Filipino Citizen, of legal age, married to Remedios Reyes de Sandejas;' and which undersigned, as SELLER, binds and obligates himself, his heirs, administrators and assigns, to sell forever and absolutely in their entirety (all of the four (4) parcels of land above described, which are contiguous to each other as to form one big lot) to said Mr. Alex A. Lina, who has agreed to buy all of them, also binding on his heirs, administrators and assigns, for the consideration of ONE MILLION (P1,000,000.00) PESOS, Philippine Currency, upon such reasonable terms of payment as may be agreed upon by them. The parties have, however, agreed on the following terms and conditions:

'1. The P100,000.00 herein received is in addition to the P70,000.00 earnest money already received by SELLER from BUYER, all of which shall form part of, and shall be deducted from, the purchase price of P1,000,000.00, once the deed of absolute [sale] shall be executed;

'2. As a consideration separate and distinct from the price, undersigned SELLER also acknowledges receipt from Mr. Alex A. Lina of the sum of ONE THOUSAND (P1,000.00) PESOS, Philippine Currency, per Metropolitan Bank & Trust Company Check No. 319912 dated today and payable to SELLER for P1,000.00;

'3. Considering that Mrs. Remedios Reyes de Sandejas is already deceased and as there is a pending intestate proceedings for the settlement of her estate (Spec. Proc. No.138393, Manila CFI, Branch XI), wherein SELLER was appointed as administrator of said Estate, and as SELLER, in his capacity as administrator of said Estate, has informed BUYER that he (SELLER) already filed a [M]otion with the Court for authority to sell the above parcels of land to herein BUYER, but which has been delayed due to the burning of the records of said Spec. Pro. No. 138398, which records are presently under reconstitution, the parties shall have at least ninety (90) days from receipt of the Order authorizing SELLER, in his capacity as administrator, to sell all THE ABOVE DESCRIBED PARCELS OF LAND TO HEREIN BUYER (but extendible for another period of ninety (90) days upon the request of either of the parties upon the other), within which to execute the deed of absolute sale covering all above parcels of land;

'4. In the event the deed of absolute sale shall not proceed or not be executed for causes either due to SELLER'S fault, or for causes of which the BUYER is innocent, SELLER binds himself to personally return to Mr. Alex A. Lina the entire ONE HUNDRED SEVENTY THOUSAND ([P]170,000.00) PESOS In earnest money received from said Mr. Lina by SELLER, plus fourteen (14%) percentum interest per annum, all of which shall be considered as liens of said parcels of land, or at least on the share therein of herein SELLER;

'5. Whether indicated or not, all of above terms and conditions shall be binding on the heirs, administrators, and assigns of both the SELLER (undersigned MR. ELIODORO P. SANDEJAS, SR.) and BUYER (MR. ALEX A. LINA).' (Record, SP. Proc. No. R-83-15601, pp. 52-54)

"On July 17, 1984, the lower court issued an [O]rder granting the intervention of Alex A. Lina (Record, SP. Proc. No. R-83-15601, p. 167).

"On January 7, 1985, the counsel for [A]dministrator Eliodoro P. Sandejas filed a [M]anifestation alleging among others that the administrator, Mr. Eliodoro P. Sandejas, died sometime in November 1984 in Canada and said counsel is still waiting for official word on the fact of the death of the administrator. He also alleged, among others that the matter of the claim of Intervenor Alex A. Lina becomes a money claim to be filed in the estate of the late Mr. Eliodoro P. Sandejas (Record, SP. Proc. No. R-83-15601, p. 220). On February 15, 1985, the, lower court issued an [O]rder directing, among others, that the counsel for the four (4) heirs and other heirs of Teresita R. Sandejas to move for the appointment of [a] new administrator within fifteen (15) days from receipt of this [O]rder (Record, SP. Proc. No. R-83-15601, p. 227). In the same manner, on November 4, 1985, the lower court again issued an order, the content of which reads:

'On October 2, 1985, all the heirs, Sixto, Roberto, Antonio, Benjamin all surnamed Sandejas were ordered to move for the appointment of [a] new administrator. On October 16, 1985, the same heirs were given a period of fifteen (15) days from said date within which to move for the appointment of the new administrator. Compliance was set for October 30, 1985, no appearance for the aforenamed heirs. The aforenamed heirs are hereby ordered to show cause within fifteen (15) days from receipt of this Order why this Petition for Settlement of Estate should not be dismissed for lack of interest and failure to comply with a lawful order of this Court.

'SO ORDERED.' (Record, SP. Proc. No. R-83-15601, p. 273).

"On November 22, 1985, Alex A. Lina as petitioner filed with the Regional Trial Court of Manila an Omnibus Pleading for (1) petition for letters of administration [and] (2) to consolidate instant case with SP. Proc. No. R-83-15601 RTC-Branch XI-Manila, docketed therein as SP. Proc. No. 85- 33707 entitled 'IN RE: INTESTATE ESTATE OF ELIODORO P. SANDEJAS, SR., ALEX A. LINA PETITIONER", [for letters of administration] (Record, SP. Proc. No.85-33707, pp. 1-7). On November 29, 1985, Branch XXXVI of the Regional Trial Court of Manila issued an [O]rder consolidating SP. Proc. No. 85-33707, with SP. Proc. No. R-83-15601 (Record, SP. Proc. No. 85-33707, p. 13). Likewise, on December 13, 1985, the Regional Trial Court of Manila, Branch XI, issued an [O]rder stating that 'this Court has no objection to the consolidation of Special proceedings No. 85-331707, now pending before Branch XXXVI of this Court, with the present proceedings now pending before this Branch' (Record, SP. Proc. No. R-83- 15601, p. 279).

"On January 15, 1986, Intervenor Alex A. Lina filed [a] Motion for his appointment as a new administrator of the Intestate Estate of Remedios R. Sandejas on the following reasons:

'5.01. FIRST, as of this date, [i]ntervenor has not received any motion on the part of the heirs Sixto, Antonio, Roberto and Benjamin, all surnamed Sandejas, for the appointment of anew [a]dministrator in place of their father, Mr. Eliodoro P. Sandejas, Sr.;

'5.02. SECOND, since Sp. Proc. 85-33707, wherein the [p]etitioner is herein Intervenor Alex A. Lina and the instant Sp. PROC. R-83-15601, in effect are already consolidated, then the appointment of Mr. Alex Lina as [a]dministrator of the Intestate Estate of Remedios R. Sandejas in instant Sp. Proc. R-83-15601, would be beneficial to the heirs and also to the Intervenor;

'5.03. THIRD, of course, Mr. Alex A. Lina would be willing to give way at anytime to any [a]dministrator who may be proposed by the heirs of the deceased Remedios R. Sandejas, so long as such [a]dministrator is qualified.' (Record, SP. Proc. No. R-83-15601, pp. 281-283)

"On May 15, 1986, the lower court issued an order granting the [M]otion of Alex A. Lina as the new [a]dministrator of the Intestate Estate of Remedios R. Sandejas in this proceedings. (Record, SP. Proc. No. R-83-15601, pp. 288- 290)

"On August 281 1986, heirs Sixto, Roberto, Antonio and Benjamin, all surnamed Sandejas, and heirs [sic] filed a [M]otion for [R]econsideration and the appointment of another administrator Mr. Sixto Sandejasl in lieu of [I]ntervenor Alex A. Lina stating among others that it [was] only lately that Mr. Sixto Sandejas, a son and heir, expressed his willingness to act as a new administrator of the intestate estate of his mother, Remedios R. Sandejas (Record, SP. Proc. No. 85-33707, pp. 29-31). On October 2, 1986, Intervenor Alex A. Lina filed his [M]anifestation and [C]ounter [M]otion alleging that he ha[d] no objection to the appointment of Sixto Sandejas as [a]dministrator of the [i]ntestate [e]state of his mother Remedios R. Sandejas (Sp. Proc. No.85-15601), provided that Sixto Sandejas be also appointed as administrator of the [i]ntestate [e]state of his father, Eliodoro P . Sandejas, Sr. (Spec. Proc. No. 85-33707), which two (2) cases have been consolidated (Record, SP. Proc. No. 85-33707, pp. 34-36). On March 30, 1987, the lower court granted the said [M]otion and substituted Alex Lina with Sixto Sandejas as petitioner in the said [P]etitions (Record, SP. Proc. No. 85-33707, p. 52). After the payment of the administrator's bond (Record, SP. Proc. No. 83-15601, pp. 348-349) and approval thereof by the court (Record, SP. Proc. No. 83-15601, p. 361), Administrator Sixto Sandejas on January 16, 1989 took his oath as administrator of the estate of the deceased Remedios R. Sandejas and Eliodoro P. Sandejas (Record, SP. Proc. No. 83-15601, p. 367) and was likewise issued Letters of Administration on the same day (Record, SP. Proc. No. 83-15601, p. 366).

"On November 29, 1993, Intervenor filed [an] Omnibus Motion (a) to approve the deed of conditional sale executed between Plaintiff-in-lntervention Alex A. Lina and Elidioro [sic] Sandejas, Sr. on June 7, 1982; (b) to compel the heirs of Remedios Sandejas and Eliodoro Sandejas, Sr. thru their administrator, to execute a deed of absolute sale in favor of [I]ntervenor Alex A. Lina pursuant to said conditional deed of sale (Record, SP. Proc. No. 83-15601, pp. 554-561) to which the administrator filed a [M]otion to [D]ismiss and/or [O]pposition to said omnibus motion on December 13, 1993 (Record, SP. Proc. No.83-15601, pp. 591-603).

"On January 13, 1995, the lower court rendered the questioned order granting intervenor's [M]otion for the [A]pproval of the Receipt of Earnest Money with promise to buy between Plaintiff-in-lntervention Alex A. Lina and Eliodoro Sandejas, Sr. dated June 7, 1982 (Record, SP. Proc. No. 83-15601, pp. 652-654 ). x x x."

The Order of the intestate courts disposed as follows:

"WHEREFORE, [i]ntervenor's motion for the approval of the Receipt Of Earnest Money With Promise To Sell And To Buy dated June 7, 1982, is granted. The [i]ntervenor is directed to pay the balance of the purchase price amounting to P729,000.00 within thirty (30) days from receipt of this Order and the Administrator is directed to execute within thirty (30) days thereafter the necessary and proper deeds of conveyancing."6

Ruling of the Court of Appeals

Overturning the RTC ruling, the CA held that the contract between Eliodoro Sandejas Sr. and respondent was merely a contract to sell, not a perfected contract of sale. It ruled that the ownership of the four lots was to remain in the intestate estate of Remedios Sandejas until the approval of the sale was obtained from the settlement court. That approval was a positive suspensive condition, the nonfulfillment of which was not tantamount to a breach. It was simply an event that prevented the obligation from maturing or becoming effective. If the condition did not happen, the obligation would not arise or come into existence.

The CA held that Section 1, Rule 897 of the Rules of Court was inapplicable, because the lack of written notice to the other heirs showed the lack of consent of those heirs other than Eliodoro Sandejas Sr. For this reason, bad faith was imputed to him, for no one is allowed to enjoyed a claim arising from one’s own wrongdoing. Thus, Eliodoro Sr. was bound, as a matter of justice and good faith, to comply with his contractual commitments as an owner and heir. When he entered into the agreement with respondent, he bound his conjugal and successional shares in the property.

Hence, this Petition.8

Issues

In their Memorandum, petitioners submit the following issues for our resolution:

"a) Whether or not Eliodoro P. Sandejas Sr. is legally obligated to convey title to the property referred to in the subject document which was found to be in the nature of a contract to sell - where the suspensive condition set forth therein [i.e.] court approval, was not complied with;

"b) Whether or not Eliodoro P. Sandejas Sr. was guilty of bad faith despite the conclusion of the Court of Appeals that the respondent [bore] the burden of proving that a motion for authority to sell ha[d] been filed in court;

"c) Whether or not the undivided shares of Eliodoro P. Sandejas Sr. in the subject property is three-fifth (3/5) and the administrator of the latter should execute deeds of conveyance therefor within thirty days from receipt of the balance of the purchase price from the respondent; and

"d) Whether or not the respondent's petition-in-intervention was converted to a money claim and whether the [trial court] acting as a probate court could approve the sale and compel the petitioners to execute [a] deed of conveyance even for the share alone of Eliodoro P. Sandejas Sr."9

In brief, the Petition poses the main issue of whether the CA erred in modifying the trial court's Decision and in obligating petitioners to sell 3/5 of the disputed properties to respondent, even if the suspensive condition had not been fulfilled. It also raises the following collateral issues: (1) the settlement court's jurisdiction; (2) respondent-intervenor's standing to file an application for the approval of the sale of realty in the settlement case, (3) the decedent's bad faith, and (4) the computation of the decedent's share in the realty under administration.

This Court’s Ruling

The Petition is partially meritorious.

Main Issue:

Obligation With a Suspensive Condition

Petitioners argue that the CA erred in ordering the conveyance of the disputed 3/5 of the parcels of land, despite the nonfulfillment of the suspensive condition -- court approval of the sale -- as contained in the "Receipt of Earnest Money with Promise to Sell and to Buy" (also referred to as the "Receipt"). Instead, they assert that because this condition had not been satisfied, their obligation to deliver the disputed parcels of land was converted into a money claim.

We disagree. Petitioners admit that the agreement between the deceased Eliodoro Sandejas Sr. and respondent was a contract to sell. Not exactly. In a contract to sell, the payment of the purchase price is a positive suspensive condition. The vendor's obligation to convey the title does not become effective in case of failure to pay.10

On the other hand, the agreement between Eliodoro Sr. and respondent is subject to a suspensive condition -- the procurement of a court approval, not full payment. There was no reservation of ownership in the agreement. In accordance with paragraph 1 of the Receipt, petitioners were supposed to deed the disputed lots over to respondent. This they could do upon the court's approval, even before full payment. Hence, their contract was a conditional sale, rather than a contract to sell as determined by the CA.

When a contract is subject to a suspensive condition, its birth or effectivity can take place only if and when the condition happens or is fulfilled.11 Thus, the intestate court's grant of the Motion for Approval of the sale filed by respondent resulted in petitioners' obligation to execute the Deed of Sale of the disputed lots in his favor. The condition having been satisfied, the contract was perfected. Henceforth, the parties were bound to fulfil what they had expressly agreed upon.

Court approval is required in any disposition of the decedent's estate per Rule 89 of the Rules of Court. Reference to judicial approval, however, cannot adversely affect the substantive rights of heirs to dispose of their own pro indiviso shares in the co-heirship or co-ownership.12 In other words, they can sell their rights, interests or participation in the property under administration. A stipulation requiring court approval does not affect the validity and the effectivity of the sale as regards the selling heirs. It merely implies that the property may be taken out ofcustodia legis, but only with the court's permission.13 It would seem that the suspensive condition in the present conditional sale was imposed only for this reason.

Thus, we are not persuaded by petitioners' argument that the obligation was converted into a mere monetary claim. Paragraph 4 of the Receipt, which petitioners rely on, refers to a situation wherein the sale has not materialized. In such a case," the seller is bound to return to the buyer the earnest money paid plus interest at fourteen percent per annum. But the sale was approved by the intestate court; hence, the proviso does not apply.

Because petitioners did not consent to the sale of their ideal shares in the disputed lots, the CA correctly limited the scope of the Receipt to the pro-indiviso share of Eliodoro Sr. Thus, it correctly modified the intestate court's ruling by excluding their shares from the ambit of the transaction.

First Collateral Issue:

Jurisdiction of Settlement Court

Petitioners also fault the CA Decision by arguing, inter alia, (a) jurisdiction over ordinary civil action seeking not merely to enforce a sale but to compel performance of a contract falls upon a civil court,

not upon an intestate court; and (b) that Section 8 of Rule 89 allows the executor or administrator, and no one else, to file an application for approval of a sale of the property under administration.

Citing Gil v. Cancio14 and Acebedo v. Abesamis,15 petitioners contend that the CA erred in clothing the settlement court with the jurisdiction to approve the sale and to compel petitioners to execute the Deed of Sale. They allege factual differences between these cases and the instant case, as follows: in Gil,  the sale of the realty in administration was a clear and an unequivocal agreement for the support of the widow and the adopted child of the decedent; and in Acebedo, a clear sale had been made, and all the heirs consented to the disposition of their shares in the realty in administration.

We are not persuaded. We hold that Section 8 of Rule 89 allows this action to proceed. The factual differences alleged by petitioners have no bearing on the intestate court's jurisdiction over the approval of the subject conditional sale. Probate jurisdiction covers all matters relating to the settlement of estates (Rules 74 & 86-91) and the probate of wills (Rules 75-77) of deceased persons, including the appointment and the removal of administrators and executors (Rules 78-85). It also extends to matters incidental and collateral to the exercise of a probate court's recognized powers such as selling, mortgaging or otherwise encumbering realty belonging to the estate. Indeed, the rules on this point are intended to settle the estate in a speedy manner, so that the benefits that may flow from such settlement may be immediately enjoyed by the heirs and the beneficiaries.16

In the present case, the Motion for Approval was meant to settle the decedent's obligation to respondent; hence, that obligation clearly falls under the jurisdiction of the settlement court. To require respondent to file a separate action -- on whether petitioners should convey the title to Eliodoro Sr.'s share of the disputed realty -- will unnecessarily prolong the settlement of the intestate estates of the deceased spouses.

The suspensive condition did not reduce the conditional sale between Eliodoro Sr. and respondent to one that was "not a definite, clear and absolute document of sale," as contended by petitioners. Upon the occurrence of the condition, the conditional sale became a reciprocally demandable obligation that is binding upon the parties.17That Acebedo also involved a conditional sale of real property18 proves that the existence of the suspensive condition did not remove that property from the jurisdiction of the intestate court.

Second Collateral Issue:

Intervenor's Standing

Petitioners contend that under said Rule 89, only the executor or administrator is authorized to apply for the approval of a sale of realty under administration. Hence, the settlement court allegedly erred in entertaining and granting respondent's Motion for Approval. 1âwphi1.nêt

We read no such limitation. Section 8, Rule 89 of the Rules of Court, provides:

"SEC. 8. When court may authorize conveyance of realty which deceased contracted to convey. Notice. Effect of deed. -- Where the deceased was in his lifetime under contract, binding in law, to deed real property, or an interest therein, the court having jurisdiction of the estate may, on application for that purpose, authorize the executor or administrator to convey such property according to such contract, or with such modifications as are agreed upon by the parties and approved by the court; and if the contract is to convey real property to the executor or administrator, the clerk of the court shall execute the deed. x x x."

This provision should be differentiated from Sections 2 and 4 of the same Rule, specifically requiring only the executor or administrator to file the application for authority to sell, mortgage or otherwise encumber real estate for the purpose of paying debts, expenses and legacies (Section 2);19 or for authority to sell real or personal estate beneficial to the heirs, devisees or legatees and other interested persons, although such authority is not necessary to pay debts, legacies or expenses of administration (Section 4).20 Section 8 mentions only an application to authorize the conveyance of realty under a contract that the deceased entered into while still alive. While this Rule does not specify who should file the application, it stands to reason that the proper party must be one .who is to be benefited or injured by the judgment, or one who is to be entitled to the avails of the suit.21

Third Collateral Issue:

Bad Faith

Petitioners assert that Eliodoro Sr. was not in bad faith, because (a) he informed respondent of the need to secure court approval prior to the sale of the lots, and (2) he did not promise that he could obtain the approval.

We agree. Eliodoro Sr. did not misrepresent these lots to respondent as his own properties to which he alone had a title in fee simple. The fact that he failed to obtain the approval of the conditional sale did not automatically imply bad faith on his part. The CA held him in bad faith only for the purpose of binding him to the conditional sale. This was unnecessary because his being bound to it is, as already shown, beyond cavil.

Fourth Collateral Issue:

Computation of Eliodoro's Share

Petitioners aver that the CA's computation of Eliodoro Sr.'s share in the disputed parcels of land was erroneous because, as the conjugal partner of Remedios, he owned one half of these lots plus a further one tenth of the remaining half, in his capacity as a one of her legal heirs. Hence, Eliodoro's share should be 11/20 of the entire property. Respondent poses no objection to this computation.22

On the other hand, the CA held that, at the very least, the conditional sale should cover the one half (1/2) pro indiviso conjugal share of Eliodoro plus his one tenth (1/10) hereditary share as one of the ten legal heirs of the decedent, or a total of three fifths (3/5) of the lots in administration.23

Petitioners' correct. The CA computed Eliodoro's share as an heir based on one tenth of the entire disputed property. It should be based only on the remaining half, after deducting the conjugal share.24

The proper determination of the seller-heir's shares requires further explanation. Succession laws and jurisprudence require that when a marriage is dissolved by the death of the husband or the wife, the decedent's entire estate - under the concept of conjugal properties of gains -- must be divided equally, with one half going to the surviving spouse and the other half to the heirs of the deceased.25 After the settlement of the debts and obligations, the remaining half of the estate is then distributed to the legal heirs, legatees and devices. We assume, however, that this preliminary determination of the decedent's estate has already been taken into account by the parties, since the only issue raised in this case is whether Eliodoro's share is 11/20 or 3/5 of the disputed lots.

WHEREFORE, The Petition is hereby PARTIALLY GRANTED. The appealed Decision and Resolution areAFFIRMED with the MODIFICATION  that respondent is entitled to only a pro-indiviso share equivalent to 11/20 of the disputed lots.

SO ORDERED.

Melo, Vitug, Gonzaga-Reyes, and Sandoval-Gutierrez, JJ., concur.

Footnote

1 Penned by Justice Mariano M. Umali of the Special Seventh Division of the Court of Appeals with the concurrence of Justices Romeo J. Callejo Sr., acting Division Chairman; and Bernardo P. Abesamis, member. Rollo, pp. 39-56.

2 Rollo, p. 58.

3 CA Decision, p. 18; rollo, p. 56.

4 CA Decision, pp. 2-8; rollo, pp. 40-46.

5 Penned by Judge Roberto A. Barrios of the Regional Trial Court of Manila, Branch 11.

6 RTC Order, p. 3; rollo, p. 73.

7 "SECTION 1. Order of sale of personalty. – Upon the application of the executor or administrator, and on written notice to the heirs and other persons interested, the court may order the whole or a part of the personal estate to be sold, if it appears necessary for the purpose of paying debts, expenses of administration, or legacies, or the preservation of the property."

8 This case was submitted for resolution upon the receipt by this Court of the Memorandum for the Petitioners on October 12, 2000, signed by Atty. Pascual T. Lacas of Lacas, Lao & Associates. Respondent’s Memorandum, signed by Atty. Rudegelio D. Tacorda, was submitted on October 5, 2000.

9 Rollo, p. 139.

10 Justice Jose C. Vitug, Compendium of Civil Law and Jurisprudence, rev. ed., p. 580; Cheng v. Genato,300 SCRA 722, 734, December 29, 1998; Odyssey Park, Inc. v. Court of Appeals, 280 SCRA 253, 260, October 8, 1997.

11 Cheng v. Genato, supra, pp. 735-736; Coronel v. Court of Appeals, 263 SCRA 15, 33, October 7, 1996;Compendium, pp. 487-488, 580 & 603.

12 Acebedo v. Abesamis, 217 SCRA 186, 193, January 18, 1993.

13 Vda. de Cruz v. Ilagan, 81 SCRA 554, 561, September 30, 1948.

14 SCRA 796, 796-801, July 30, 1965.

15 Supra.

16 Sikat v. Vda. de Villanueva, 57 Phil. 486, 494, November 10, 1932; Magbanua v. Akol, 72 Phil. 567, 572, June 27, 1941; Del Castillo v. Enriquez, 109 Phil. 491, 494-495, September 30, 1960.

17 Art. 1458, Civil Code.

18 Supra, p.188.

19 "SEC. 2. When court may authorize sale, mortgage, or other encumbrance of realty to pay debts and legacies through personalty not exhausted. - When the personal estate of the deceased is not sufficient to pay the debts, expenses of administration, and legacies, or where the sale of such personal estate may injure the business or other interests of those interested in the estate, and where a testator has not otherwise made sufficient provision for the payment of such debts, expenses, and legacies, the court, on the application of the executor or administrator and on written notice to the heirs, devisees, and legatees residing in the Philippines, may authorize the executor or administrator to sell, mortgage, or otherwise encumber so much as may be necessary of the real estate, in lieu of personal estate, for the purpose of paying such debts, expenses, and legacies, if it clearly appears that such sale, mortgage, or encumbrance would be beneficial to the persons interested; and if a part cannot be sold, mortgaged, or otherwise encumbered without injury to those interested in the remainder, the authority may be for the sale, mortgage, or other encumbrance of the whole of such .real estate, or so much thereof as is necessary or beneficial under the circumstances."

20 "Sec. 4. When court may authorize sale of estate as beneficial to interested persons. Disposal of proceeds. - When it appears that the sale of the whole or a part of the real or personal estate, will be beneficial to the heirs, devisees, It legatees, and other interested persons, the court may, upon application of the executor or administrator and on written notice to the heirs, devisees, and legatees who are interested in the estate to be sold, authorize the executor or administrator to sell the whole or apart of said estate, although not necessary to pay debts, legacies, or expenses of administration; but such authority shall not be granted if inconsistent with the provisions of a will. In case of such sale, the proceeds shall be assigned to the persons entitled to the estate in the proper proportions."

21 Section 2, Rule 3, Rules of Court.

22 Respondent's Memorandum; rollo, p. 124.

23 1/2 + 1/10 = 6/10 or 3/5 reduced to the lowest term.

24 1/2 + [1/10 x 1/2] = 1/2+[1/20] = 10/20+ 1/20 = 11/20

25 Art. 129(7), Family Code; Armas v. Calisterio, GR No. 136467, April 6, 2000, p. 8, per Vitug, J.; and Del Mundo v. Court of Appeals, 97 SCRA 373, 382, April 30, 1980.

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-31346 December 28, 1929

PO SUN TUN, plaintiff-appellant, vs.W. S. PRICE and THE PROVINCIAL GOVERNMENT OF LEYTE, defendants-appellees.

Vicente Sotto for appellant. Kapunan and Kapunan for appellee Price. Attorney-General Jaranilla for the Provincial Government of Leyte.

 

MALCOLM, J.:

The undisputed facts in this case are the following:

On November 29, 1921, Gabino Barreto P. Po Ejap was the owner of a certain parcel of land situated in the municipality of Tacloban, Province of Leyte. On the date mentioned, he sold the land to Po Tecsi for the sum of P8,000. On June 21, 1923, Po mortgaged the land to W. S. Price in the amount of P17,000. The mortgage was duly noted in the office of the register of deeds of Leyte on August 18th of the same year. On December 17, 1924, Po executed a deed of sale of the land to Price in consideration of P17,000. This sale was recorded with the register of deeds on January 22, 1925. Price in turn, with the consent of his wife, sold the land on February 16, 1927, to the Province of Leyte for P20,570.

In connection with the above facts, it should further be stated that when the Tacloban Cadastral Case was before the courts in 1918, this land was claimed by Gabino Barreto P. Po Ejap acting through his agent, Po Tecsi, but subsequently on motion the names of Mr. and Mrs. Price were substituted as claimants. On March 17, 1927, the original certificate of title was issued in the name of the spouses Price. Later, the proper transfer certificate of title was provided for the Province of Leyte.

Returning again to the original date of November 29, 1921, on that date Po Tecsi gave a general power of attorney including the right to sell to Gabino Barreto P. Po Ejap. Acting under this power, Gabino sold the land on November 22, 1923, for P8,000 to Jose H. Katigbak. On this document there appears on the upper right-hand margin the following: "Register of Deeds, Received, Dec. 15, 1923, Province of Leyte." In turn Jose H. Katigbak transferred the property to Po Sun Tun on October 12, 1927, for P8,000.

Further explaining the relationship of the parties, it should be taken into consideration that Gabino Barreto P. Po Ejap and Po Tecsi, between whom was the original transaction and between whom was the provision made for the power of attorney, are brothers. Gabino Barreto P. Po Ejap and Po Sun Tun, the first the original vendor, and the latter the person to whom the property eventually returned pursuant to the power of attorney, are father and son. As to the possession of the property,

it has been under the control of Price and the Provincial Government of Leyte and has not been under the material control of Po Sun Tun.

Predicated on these facts, Po Sun Tun began an action in the Court of First Instance of Leyte to gain the possession of the property and to secure damages in the amount of P3,600. Judge Causing sitting in first instance decided the case on the pleadings and the evidence, absolving the defendants W. S. Prince and the Province of Leyte from the complaint, with costs against the plaintiff. The principal error assigned on appeal by the plaintiff in connection with this judgment is that the trial judge erred in finding that the deed, Exhibit D, in favor of Jose H. Katigbak had not been registered in the corresponding registry of property.

The provision of law relied upon by the trial judge as authority for his decision was the second paragraph of article 1473 of the Civil Code, which provides that if the same thing should have been sold to different vendees, "Si fuere inmueble, la propiedad pertenecera al adquirente que antes la haya inscrito en el Registro," or, as translated by Fisher, "Should it be real property, it shall belong to the purchaser who first recorded it in the Registry of Deeds." Recalling that the deed of Po Tecsi to Price was duly registered on January 22, 1925, and that thereafter a Torrens title was obtained in the name of Price, and that the deed of Gabino Barreto P. Po Ejap to Jose H. Katigbak has noted on it "Register of Deeds, Received, Dec. 15, 1923, Province of Leyte," can it be said that within the meaning of the law this latter deed was ever recorded?

We are clearly of the opinion that it was not. The law and the authorities are overwhelmingly demonstrative of this statement. The mere presentation to the office of the register of deeds of a document on which acknowledgment of receipt is written is not equivalent to recording or registering the real property. Escriche says that registration, in its juridical aspect, must be understood as the entry made in a book or public registry of deeds. (See Altavas, Land Registration in the Philippine Islands, 2d ed., p. 151.) Soler and Castello in their Diccionario de Legislacion Hipotecaria y Notarial, vol. II, p. 185, state:

Registration in general, as the law uses the word, means any entry made in the books of the Registry, including both registration in its ordinary and strict sense, and cancellation, annotation, and even the marginal notes. In its strick acceptation, it is the entry made in the Registry which records solemnly and permanently the right of ownership and other real rights.

The American authorities conform in this respect to the Spanish authorities for the term "To register" it has been said that it means to "enter in a register; to record formally and distinctly; to enroll; to enter in a list" (Reck vs.Phoenix Ins. Co. [1889], 7 N. Y. Suppl., 492; 54 Hun., 637; Harriman vs. Woburn Electric Light Co. [1895], 163 Mass., 85). If any doubt remained on the subject, it would be dispelled by turning to Act No. 2837 amendatory of section 194 of the Administrative Code, and recalling that it is therein provided that "No instrument or deed establishing, transmitting, acknowledging, modifying or extinguishing rights with respect to real estate not registered under the provisions of Act Numbered Four hundred and ninety-six, entitled "The Land Registration," and its amendments, shall be valid, except as between the parties thereto, until such instrument or deed has been registered, in the manner hereinafter prescribed, in the office of the register of deeds for the province or city where the real estate lies." (There follows in the law the requirements regarding the books which it is the duty of the register of deeds to keep and use.)

It results as a matter of course since the deed made by Gabino Barreto P. Po Ejap in favor of Jose H. Katigbak was not only not first recorded in the registry of deeds but never legally so recorded, and since the purchaser who did record his deed was Price, who secured a Torrens title and transferred the same to the Province of Leyte, that Po Sun Tun, the holder of a defeasible title, has no legal

rights as against Price and the Province of Leyte, the holders of indefeasible titles. Also, if necessary, it could be ruled that within the meaning of section 38 of the Land Registration Law, Price and the Province of Leyte are innocent purchasers for value of the disputed property.

Finding the judgment appealed from to be correct from all points of view, it will be affirmed, with the costs of this instance against the appellant.

Avanceña, C.J., Johnson, Street, Ostrand, Johns, Romualdez and Villa-Real, JJ., concur.