SECOND DIVISION

HEIRS OF EDUARDO MANLAPAT, G.R. No. 125585

represented by GLORIA MANLAPAT-
BANAAG and LEON M. BANAAG, JR.,
Petitioners, Pre
sent:

PUNO, J.,
*


Chairman,
- versus - AUSTRIA-MARTINEZ,
Acting Chairman,
CALLEJO, SR.,
TINGA, and

CHICO-NAZARIO, JJ.
HON. COURT OF APPEALS,
RURAL BANK OF SAN PASCUAL,
INC., and JOSE B. SALAZAR,
CONSUELO CRUZ and Promulgated:
ROSALINA CRUZ-BAUTISTA,
and the REGISTER OF DEEDS of
Meycauayan, Bulacan, June 8, 2005
Respondents.

x-------------------------------------------------------------------x

D E C I S I O N

TINGA, J.:


Before this Court is a Rule 45 petition assailing
the Decision
[1]
dated 29 September 1994 of the Court of
Appeals that reversed theDecision
[2]
dated 30 April 1991 of
the Regional Trial Court (RTC) of Bulacan, Branch 6,
Malolos. The trial court declared Transfer Certificates of
Title (TCTs) No. T-9326-P(M) and No. T-9327-P(M) as
void ab initio and ordered the restoration of Original
Certificate of Title (OCT) No. P-153(M) in the name of
Eduardo Manlapat (Eduardo), petitioners predecessor-in-
interest.

The controversy involves Lot No. 2204, a parcel
of land with an area of 1,058 square meters, located at
Panghulo, Obando, Bulacan. The property had been
originally in the possession of Jose Alvarez, Eduardos
grandfather, until his demise in 1916. It remained
unregistered until 8 October 1976 when OCT No. P-153(M)
was issued in the name of Eduardo pursuant to a free
patent issued in Eduardos name
[3]
that was entered in the
Registry of Deeds of Meycauayan, Bulacan.
[4]
The subject
lot is adjacent to a fishpond owned by one

Ricardo Cruz (Ricardo), predecessor-in-interest of
respondents Consuelo Cruz and Rosalina Cruz-Bautista
(Cruzes).
[5]


On 19 December 1954, before the subject lot
was titled, Eduardo sold a portion thereof with an area of
553 square meters to Ricardo. The sale is evidenced by a
deed of sale entitled Kasulatan ng Bilihang Tuluyan ng
Lupang Walang Titulo (Kasulatan)
[6]
which was signed by
Eduardo himself as vendor and his wife Engracia Aniceto
with a certain Santiago Enriquez signing as witness. The
deed was notarized by Notary Public Manolo Cruz.
[7]
On 4
April 1963, the Kasulatan was registered with the Register
of Deeds of Bulacan.
[8]


On 18 March 1981, another Deed of
Sale
[9]
conveying another portion of the subject lot
consisting of 50 square meters as right of way was
executed by Eduardo in favor of Ricardo in order to reach
the portion covered by the first sale executed in 1954 and
to have access to his fishpond from the provincial
road.
[10]
The deed was signed by Eduardo himself and his
wife Engracia Aniceto, together with Eduardo Manlapat, Jr.
and Patricio Manlapat. The same was also duly notarized
on 18 July 1981 by Notary Public Arsenio Guevarra.
[11]


In December 1981, Leon Banaag, Jr. (Banaag), as
attorney-in-fact of his father-in-law Eduardo, executed a
mortgage with the Rural Bank of San Pascual, Obando
Branch (RBSP), for P100,000.00 with the subject lot as
collateral. Banaag deposited the owners duplicate
certificate of OCT No. P-153(M) with the bank.

On 31 August 1986, Ricardo died without
learning of the prior issuance of OCT No. P-153(M) in the
name of Eduardo.
[12]
His heirs, the Cruzes, were not
immediately aware of the consummated sale between
Eduardo and Ricardo.

Eduardo himself died on 4 April 1987. He was
survived by his heirs, Engracia Aniceto, his spouse; and
children, Patricio, Bonifacio, Eduardo, Corazon, Anselmo,
Teresita and Gloria, all surnamed Manlapat.
[13]
Neither did
the heirs of Eduardo (petitioners) inform the Cruzes of the
prior sale in favor of their predecessor-in-interest, Ricardo.
Yet subsequently, the Cruzes came to learn about the sale
and the issuance of the OCT in the name of Eduardo.

Upon learning of their right to the subject lot,
the Cruzes immediately tried to confront petitioners on
the mortgage and obtain the surrender of the OCT. The
Cruzes, however, were thwarted in their bid to see the
heirs. On the advice of the Bureau of Lands, NCR Office,
they brought the matter to the barangay captain
of Barangay Panghulo, Obando, Bulacan. During the
hearing, petitioners were informed that the Cruzes had a
legal right to the property covered by OCT and needed the
OCT for the purpose of securing a separate title to cover
the interest of Ricardo. Petitioners, however, were
unwilling to surrender the OCT.
[14]


Having failed to physically obtain the title from
petitioners, in July 1989, the Cruzes instead went to RBSP
which had custody of the owners duplicate certificate of
the OCT, earlier surrendered as a consequence of the
mortgage. Transacting with RBSPs manager, Jose Salazar
(Salazar), the Cruzes sought to borrow the owners
duplicate certificate for the purpose of photocopying the
same and thereafter showing a copy thereof to the
Register of Deeds. Salazar allowed the Cruzes to bring the
owners duplicate certificate outside the bank premises
when the latter showed the Kasulatan.
[15]
The Cruzes
returned the owners duplicate certificate on the same day
after having copied the same. They then brought the copy
of the OCT to Register of Deeds Jose Flores (Flores) of
Meycauayan and showed the same to him to secure his
legal opinion as to how the Cruzes could legally protect
their interest in the property and register the
same.
[16]
Flores suggested the preparation of a subdivision
plan to be able to segregate the area purchased by Ricardo
from Eduardo and have the same covered by a separate
title.
[17]


Thereafter, the Cruzes solicited the opinion of
Ricardo Arandilla (Arandilla), Land Registration Officer,
Director III, Legal Affairs Department, Land Registration
Authority at Quezon City, who agreed with the advice
given by Flores.
[18]
Relying on the suggestions of Flores and
Arandilla, the Cruzes hired two geodetic engineers to
prepare the corresponding subdivision plan. The
subdivision plan was presented to the Land Management
Bureau, Region III, and there it was approved by a certain
Mr. Pambid of said office on 21 July 1989.

After securing the approval of the subdivision
plan, the Cruzes went back to RBSP and again asked for
the owners duplicate certificate from Salazar. The Cruzes
informed him that the presentation of the owners
duplicate certificate was necessary, per advise of the
Register of Deeds, for the cancellation of the OCT and the
issuance in lieu thereof of two separate titles in the names
of Ricardo and Eduardo in accordance with the approved
subdivision plan.
[19]
Before giving the owners duplicate
certificate, Salazar required the Cruzes to see Atty. Renato
Santiago (Atty. Santiago), legal counsel of RBSP, to secure
from the latter a clearance to borrow the title. Atty.
Santiago would give the clearance on the condition that
only Cruzes put up a substitute collateral, which they
did.
[20]
As a result, the Cruzes got hold again of the owners
duplicate certificate.

After the Cruzes presented the owners duplicate
certificate, along with the deeds of sale and the
subdivision plan, the Register of Deeds cancelled the OCT
and issued in lieu thereof TCT No. T-9326-P(M) covering
603 square meters of Lot No. 2204 in the name of Ricardo
and TCT No. T-9327-P(M) covering the remaining 455
square meters in the name of Eduardo.
[21]


On 9 August 1989, the Cruzes went back to the
bank and surrendered to Salazar TCT No. 9327-P(M) in the
name of Eduardo and retrieved the title they had earlier
given as substitute collateral. After securing the new
separate titles, the Cruzes furnished petitioners with a
copy of TCT No. 9327-P(M) through the barangay captain
and paid the real property tax for 1989.
[22]


The Cruzes also sent a formal letter to Guillermo
Reyes, Jr., Director, Supervision Sector, Department III of
the Central Bank of the Philippines, inquiring whether
they committed any violation of existing bank laws under
the circumstances. A certain Zosimo Topacio, Jr. of the
Supervision Sector sent a reply letter advising the Cruzes,
since the matter is between them and the bank, to get in
touch with the bank for the final settlement of the case.
[23]


In October of 1989, Banaag went to RBSP,
intending to tender full payment of the mortgage
obligation. It was only then that he learned of the dealings
of the Cruzes with the bank which eventually led to the
subdivision of the subject lot and the issuance of two
separate titles thereon. In exchange for the full payment
of the loan, RBSP tried to persuade petitioners to accept
TCT No. T-9327-P(M) in the name of Eduardo.
[24]


As a result, three (3) cases were lodged, later
consolidated, with the trial court, all involving the issuance
of the TCTs, to wit:

(1) Civil Case No. 650-M-89,
for reconveyance with damages filed
by the heirs of Eduardo Manlapat
against Consuelo Cruz, Rosalina Cruz-
Bautista, Rural Bank of San Pascual,
Jose Salazar and Jose Flores, in his
capacity as Deputy Registrar,
Meycauayan Branch of the Registry of
Deeds of Bulacan;

(2) Civil Case No. 141-M-90
for damages filed by Jose Salazar
against Consuelo Cruz, et. [sic] al.; and

(3) Civil Case No. 644-M-89,
for declaration of nullity of title with
damages filed by Rural Bank of San
Pascual, Inc. against the spouses
Ricardo Cruz and Consuelo Cruz, et
al.
[25]


After trial of the consolidated cases, the RTC of
Malolos rendered a decision in favor of the heirs of
Eduardo, the dispositive portion of which reads:

WHEREFORE, premised from
the foregoing, judgment is hereby
rendered:

1.Declaring
Transfer Certificates of
Title Nos. T-9326-P(M) and
T-9327-P(M) as void ab
initio and ordering the
Register of Deeds,
Meycauayan Branch to
cancel said titles and to
restore Original Certificate
of Title No. P-153(M) in the
name of plaintiffs
predecessor-in-interest
Eduardo Manlapat;

2.-Ordering the
defendants Rural Bank of
San Pascual, Jose Salazar,
Consuelo Cruz and Rosalina
Cruz-Bautista, to pay the
plaintiffs Heirs of Eduardo
Manlapat, jointly and
severally, the following:

a)P200,000.00 as
moral damages;
b)P50,000.00 as
exemplary
damages;
c)P20,000.00 as
attorneys fees;
and
d)the costs of the
suit.

3.Dismissing the
counterclaims.

SO ORDERED.
[26]



The trial court found that petitioners were entitled to
the reliefs of reconveyance and damages. On this matter,
it ruled that petitioners were bona fide mortgagors of an
unclouded title bearing no annotation of any lien and/or
encumbrance. This fact, according to the trial court, was
confirmed by the bank when it accepted the mortgage
unconditionally on 25 November 1981. It found that
petitioners were complacent and unperturbed, believing
that the title to their property, while serving as security for
a loan, was safely vaulted in the impermeable confines of
RBSP. To their surprise and prejudice, said title was
subdivided into two portions, leaving them a portion of
455 square meters from the original total area of 1,058
square meters, all because of the fraudulent and negligent
acts of respondents and RBSP. The trial court ratiocinated
that even assuming that a portion of the subject lot was
sold by Eduardo to Ricardo, petitioners were still not privy
to the transaction between the bank and the Cruzes which
eventually led to the subdivision of the OCT into TCTs No.
T-9326-P(M) and No. T-9327-P(M), clearly to the damage
and prejudice of petitioners.
[27]


Concerning the claims for damages, the trial
court found the same to be bereft of merit. It ruled that
although the act of the Cruzes could be deemed
fraudulent, still it would not constitute intrinsic fraud.
Salazar, nonetheless, was clearly guilty of negligence in
letting the Cruzes borrow the owners duplicate certificate
of the OCT. Neither the bank nor its manager had business
entrusting to strangers titles mortgaged to it by other
persons for whatever reason. It was a clear violation of the
mortgage and banking laws, the trial court concluded.

The trial court also ruled that although Salazar
was personally responsible for allowing the title to be
borrowed, the bank could not escape liability for it was
guilty of contributory negligence. The evidence showed
that RBSPs legal counsel was sought for advice regarding
respondents request. This could only mean that RBSP
through its lawyer if not through its manager had known in
advance of the Cruzes intention and still it did nothing to
prevent the eventuality. Salazar was not even summarily
dismissed by the bank if he was indeed the sole person to
blame. Hence, the banks claim for damages must
necessarily fail.
[28]


The trial court granted the prayer for the annulment
of the TCTs as a necessary consequence of its declaration
that reconveyance was in order. As to Flores, his work
being ministerial as Deputy Register of the Bulacan
Registry of Deeds, the trial court absolved him of any
liability with a stern warning that he should deal with his
future transactions more carefully and in the strictest
sense as a responsible government official.
[29]


Aggrieved by the decision of the trial court,
RBSP, Salazar and the Cruzes appealed to the Court of
Appeals. The appellate court, however, reversed the
decision of the RTC. The decretal text of the decision
reads:

THE FOREGOING
CONSIDERED, the appealed decision is
hereby reversed and set aside, with
costs against the appellees.

SO ORDERED.
[30]



The appellate court ruled that petitioners were
not bona fide mortgagors since as early as 1954 or before
the 1981 mortgage, Eduardo already sold to Ricardo a
portion of the subject lot with an area of 553 square
meters. This fact, the Court of Appeals noted, is even
supported by a document of sale signed by Eduardo Jr. and
Engracia Aniceto, the surviving spouse of Eduardo, and
registered with the Register of Deeds of Bulacan. The
appellate court also found that on 18 March 1981, for the
second time, Eduardo sold to Ricardo a separate area
containing 50 square meters, as a road right-of-
way.
[31]
Clearly, the OCT was issued only after the first sale.
It also noted that the title was given to the Cruzes by RBSP
voluntarily, with knowledge even of the banks
counsel.
[32]
Hence, the imposition of damages cannot be
justified, the Cruzes themselves being the owners of the
property. Certainly, Eduardo misled the bank into
accepting the entire area as a collateral since the 603-
square meter portion did not anymore belong to him. The
appellate court, however, concluded that there was no
conspiracy between the bank and Salazar.
[33]


Hence, this petition for review on certiorari.

Petitioners ascribe errors to the appellate court
by asking the following questions, to wit: (a) can a
mortgagor be compelled to receive from the mortgagee a
smaller portion of the originally encumbered title
partitioned during the subsistence of the mortgage,
without the knowledge of, or authority derived from, the
registered owner; (b) can the mortgagee question the
veracity of the registered title of the mortgagor, as noted
in the owners duplicate certificate, and thus, deliver the
certificate to such third persons, invoking an adverse,
prior, and unregistered claim against the registered title of
the mortgagor; (c) can an adverse prior claim against a
registered title be noted, registered and entered without a
competent court order; and (d) can belief of ownership
justify the taking of property without due process of
law?
[34]


The kernel of the controversy boils down to the
issue of whether the cancellation of the OCT in the name
of the petitioners predecessor-in-interest and its splitting
into two separate titles, one for the petitioners and the
other for the Cruzes, may be accorded legal recognition
given the peculiar factual backdrop of the case. We rule in
the affirmative.



Private respondents (Cruzes) own
the portion titled in their names

Consonant with law and justice, the ultimate
denouement of the property dispute lies in the
determination of the respective bases of the warring
claims. Here, as in other legal disputes, what is written
generally deserves credence.

A careful perusal of the evidence on record
reveals that the Cruzes have sufficiently proven their claim
of ownership over the portion of Lot No. 2204 with an area
of 553 square meters. The duly notarized instrument of
conveyance was executed in 1954 to which no less than
Eduardo was a signatory. The execution of the deed of sale
was rendered beyond doubt by Eduardos admission in
his Sinumpaang Salaysaydated 24 April 1963.
[35]
These
documents make the affirmance of the right of the Cruzes
ineluctable. The apparent irregularity, however, in the
obtention of the owners duplicate certificate from the
bank, later to be presented to the Register of Deeds to
secure the issuance of two new TCTs in place of the OCT, is
another matter.

Petitioners argue that the 1954 deed of sale was
not annotated on the OCT which was issued in 1976 in
favor of Eduardo; thus, the Cruzes claim of ownership
based on the sale would not hold water. The Court is not
persuaded.

Registration is not a requirement for validity of
the contract as between the parties, for the effect of
registration serves chiefly to bind third persons.
[36]
The
principal purpose of registration is merely to notify other
persons not parties to a contract that a transaction
involving the property had been entered into. Where the
party has knowledge of a prior existing interest which is
unregistered at the time he acquired a right to the same
land, his knowledge of that prior unregistered interest has
the effect of registration as to him.
[37]


Further, the heirs of Eduardo cannot be
considered third persons for purposes of applying the rule.
The conveyance shall not be valid against any person
unless registered, except (1) the grantor, (2) his heirs and
devisees, and (3) third persons having actual notice or
knowledge thereof.
[38]
Not only are petitioners the heirs
of Eduardo, some of them were actually parties to
the Kasulatan executed in favor of Ricardo. Thus, the
annotation of the adverse claim of the Cruzes on the OCT
is no longer required to bind the heirs of Eduardo,
petitioners herein.

Petitioners had no right to constitute
mortgage over disputed portion

The requirements of a valid mortgage are clearly
laid down in Article 2085 of the New Civil Code, viz:

ART. 2085. The following
requisites are essential
to the contracts of
pledge and mortgage:

(1) That they be
constituted to
secure the
fulfillment of a
principal
obligation;
(2) That the pledgor
or mortgagor be
the absolute
owner of the thing
pledged or
mortgaged;
(3) That the persons
constituting the
pledge or
mortgage have
the free disposal
of their property,
and in the
absence thereof,
that they be
legally authorized
for the purpose.

Third persons who
are not parties to the
principal obligation may
secure the latter by
pledging or mortgaging
their own property.
(emphasis supplied)


For a person to validly constitute a valid mortgage on
real estate, he must be the absolute owner thereof as
required by Article 2085 of the New Civil Code.
[39]
The
mortgagor must be the owner, otherwise the mortgage is
void.
[40]
In a contract of mortgage, the mortgagor remains
to be the owner of the property although the property is
subjected to a lien.
[41]
A mortgage is regarded as nothing
more than a mere lien, encumbrance, or security for a
debt, and passes no title or estate to the mortgagee and
gives him no right or claim to the possession of the
property.
[42]
In this kind of contract, the property
mortgaged is merely delivered to the mortgagee to secure
the fulfillment of the principal obligation.
[43]
Such delivery
does not empower the mortgagee to convey any portion
thereof in favor of another person as the right to dispose is
an attribute of ownership.
[44]
The right to dispose includes
the right to donate, to sell, to pledge or mortgage. Thus,
the mortgagee, not being the owner of the property,
cannot dispose of the whole or part thereof nor cause the
impairment of the security in any manner without
violating the foregoing rule.
[45]
The mortgagee only owns
the mortgage credit, not the property itself.
[46]


Petitioners submit as an issue whether a
mortgagor may be compelled to receive from the
mortgagee a smaller portion of the lot covered by the
originally encumbered title, which lot was partitioned
during the subsistence of the mortgage without the
knowledge or authority of the mortgagor as registered
owner. This formulation is disingenuous, baselessly
assuming, as it does, as an admitted fact that the
mortgagor is the owner of the mortgaged property in its
entirety. Indeed, it has not become a salient issue in this
case since the mortgagor was not the owner of the entire
mortgaged property in the first place.

Issuance of OCT No. P-153(M), improper

It is a glaring fact that OCT No. P-153(M)
covering the property mortgaged was in the name of
Eduardo, without any annotation of any prior disposition
or encumbrance. However, the property was sufficiently
shown to be not entirely owned by Eduardo as evidenced
by theKasulatan. Readily apparent upon perusal of the
records is that the OCT was issued in 1976, long after
the Kasulatan was executed way back in 1954. Thus, a
portion of the property registered in Eduardos name
arising from the grant of free patent did not actually
belong to him. The utilization of the Torrens system to
perpetrate fraud cannot be accorded judicial sanction.

Time and again, this Court has ruled that the
principle of indefeasibility of a Torrens title does not apply
where fraud attended the issuance of the title, as was
conclusively established in this case. The Torrens title does
not furnish a shied for fraud.
[47]
Registration does not vest
title. It is not a mode of acquiring ownership but is merely
evidence of such title over a particular property. It does
not give the holder any better right than what he actually
has, especially if the registration was done in bad faith.
The effect is that it is as if no registration was made at
all.
[48]
In fact, this Court has ruled that a decree of
registration cut off or extinguished a right acquired by a
person when such right refers to a lien or encumbrance on
the landnot to the right of ownership thereofwhich was
not annotated on the certificate of title issued thereon.
[49]


Issuance of TCT Nos. T-9326-P(M)
and T-9327-P(M), Valid


The validity of the issuance of two TCTs, one for
the portion sold to the predecessor-in-interest of the
Cruzes and the other for the portion retained by
petitioners, is readily apparent from Section 53 of the
Presidential Decree (P.D.) No. 1529 or the Property
Registration Decree. It provides:

SEC 53. Presentation of
owners duplicate upon entry of new
certificate. No voluntary instrument
shall be registered by the Register of
Deeds, unless the owners duplicate
certificate is presented with such
instrument, except in cases expressly
provided for in this Decree or upon
order of the court, for cause shown.

The production of the
owners duplicate certificate,
whenever any voluntary instrument is
presented for registration, shall be
conclusive authority from the
registered owner to the Register of
Deeds to enter a new certificate or to
make a memorandum of registration
in accordance with such instrument,
and the new certificate or
memorandum shall be binding upon
the registered owner and upon all
persons claiming under him, in favor of
every purchaser for value and in good
faith.

In all cases of registration
procured by fraud, the owner may
pursue all his legal and equitable
remedies against the parties to such
fraud without prejudice, however, to
the rights of any innocent holder of the
decree of registration on the original
petition or application, any
subsequent registration procured by
the presentation of a forged duplicate
certificate of title, or a forged deed or
instrument, shall be null and void.
(emphasis supplied)


Petitioners argue that the issuance of the TCTs
violated the third paragraph of Section 53 of P.D. No.
1529. The argument is baseless. It must be noted that the
provision speaks of forged duplicate certificate of
title and forged deed or instrument. Neither instance
obtains in this case. What the Cruzes presented before the
Register of Deeds was the very genuine owners duplicate
certificate earlier deposited by Banaag, Eduardos
attorney-in-fact, with RBSP. Likewise, the instruments of
conveyance are authentic, not forged. Section 53 has
never been clearer on the point that as long as the
owners duplicate certificate is presented to the Register
of Deeds together with the instrument of conveyance,
such presentation serves as conclusive authority to the
Register of Deeds to issue a transfer certificate or make a
memorandum of registration in accordance with the
instrument.

The records of the case show that despite the
efforts made by the Cruzes in persuading the heirs of
Eduardo to allow them to secure a separate TCT on the
claimed portion, their ownership being amply evidenced
by the Kasulatan and Sinumpaang Salaysay where
Eduardo himself acknowledged the sales in favor of
Ricardo, the heirs adamantly rejected the notion of
separate titling. This prompted the Cruzes to approach the
bank manager of RBSP for the purpose of protecting their
property right. They succeeded in persuading the latter to
lend the owners duplicate certificate. Despite the
apparent irregularity in allowing the Cruzes to get hold of
the owners duplicate certificate, the bank officers
consented to the Cruzes plan to register the deeds of sale
and secure two new separate titles, without notifying the
heirs of Eduardo about it.

Further, the law on the matter, specifically P.D.
No. 1529, has no explicit requirement as to the manner of
acquiring the owners duplicate for purposes of issuing a
TCT. This led the Register of Deeds of Meycauayan as well
as the Central Bank officer, in rendering an opinion on the
legal feasibility of the process resorted to by the Cruzes.
Section 53 of P.D. No. 1529 simply requires the production
of the owners duplicate certificate, whenever any
voluntary instrument is presented for registration, and the
same shall be conclusive authority from the registered
owner to the Register of Deeds to enter a new certificate
or to make a memorandum of registration in accordance
with such instrument, and the new certificate or
memorandum shall be binding upon the registered owner
and upon all persons claiming under him, in favor of every
purchaser for value and in good faith.
Quite interesting, however, is the contention of
the heirs of Eduardo that the surreptitious lending of the
owners duplicate certificate constitutes fraud within the
ambit of the third paragraph of Section 53 which could
nullify the eventual issuance of the TCTs. Yet we cannot
subscribe to their position.

Impelled by the inaction of the heirs of Eduardo
as to their claim, the Cruzes went to the bank where the
property was mortgaged. Through its manager and legal
officer, they were assured of recovery of the claimed
parcel of land since they are the successors-in-interest of
the real owner thereof. Relying on the bank officers
opinion as to the legality of the means sought to be
employed by them and the suggestion of the Central Bank
officer that the matter could be best settled between
them and the bank, the Cruzes pursued the titling of the
claimed portion in the name of Ricardo. The Register of
Deeds eventually issued the disputed TCTs.

The Cruzes resorted to such means to protect
their interest in the property that rightfully belongs to
them only because of the bank officers acquiescence
thereto. The Cruzes could not have secured a separate TCT
in the name of Ricardo without the banks approval. Banks,
their business being impressed with public interest, are
expected to exercise more care and prudence than private
individuals in their dealings, even those involving
registered lands.
[50]
The highest degree of diligence is
expected, and high standards of integrity and performance
are even required of it.
[51]


Indeed, petitioners contend that the mortgagee
cannot question the veracity of the registered title of the
mortgagor as noted in the owners duplicate certificate,
and, thus, he cannot deliver the certificate to such third
persons invoking an adverse, prior, and unregistered claim
against the registered title of the mortgagor. The strength
of this argument is diluted by the peculiar factual milieu of
the case.

A mortgagee can rely on what appears on the
certificate of title presented by the mortgagor and an
innocent mortgagee is not expected to conduct an
exhaustive investigation on the history of the mortgagors
title. This rule is strictly applied to banking institutions. A
mortgagee-bank must exercise due diligence before
entering into said contract. Judicial notice is taken of the
standard practice for banks, before approving a loan, to
send representatives to the premises of the land offered
as collateral and to investigate who the real owners
thereof are.
[52]


Banks, indeed, should exercise more care and
prudence in dealing even with registered lands, than
private individuals, as their business is one affected with
public interest. Banks keep in trust money belonging to
their depositors, which they should guard against loss by
not committing any act of negligence that amounts to lack
of good faith. Absent good faith, banks would be denied
the protective mantle of the land registration statute, Act
496, which extends only to purchasers for value and good
faith, as well as to mortgagees of the same character and
description.
[53]
Thus, this Court clarified that the rule that
persons dealing with registered lands can rely solely on the
certificate of title does not apply to banks.
[54]


Bank Liable for Nominal Damages

Of deep concern to this Court, however, is the
fact that the bank lent the owners duplicate of the OCT to
the Cruzes when the latter presented the instruments of
conveyance as basis of their claim of ownership over a
portion of land covered by the title. Simple rationalization
would dictate that a mortgagee-bank has no right to
deliver to any stranger any property entrusted to it other
than to those contractually and legally entitled to its
possession. Although we cannot dismiss the banks
acknowledgment of the Cruzes claim as legitimized by
instruments of conveyance in their possession, we
nonetheless cannot sanction how the bank was inveigled
to do the bidding of virtual strangers. Undoubtedly, the
banks cooperative stance facilitated the issuance of the
TCTs. To make matters worse, the bank did not even
notify the heirs of Eduardo. The conduct of the bank is as
dangerous as it is unthinkably negligent. However, the
aspect does not impair the right of the Cruzes to be
recognized as legitimate owners of their portion of the
property.

Undoubtedly, in the absence of the banks
participation, the Register of Deeds could not have issued
the disputed TCTs. We cannot find fault on the part of the
Register of Deeds in issuing the TCTs as his authority to
issue the same is clearly sanctioned by law. It is thus
ministerial on the part of the Register of Deeds to issue
TCT if the deed of conveyance and the original owners
duplicate are presented to him as there appears on
theface of the instruments no badge of irregularity or
nullity.
[55]
If there is someone to blame for the shortcut
resorted to by the Cruzes, it would be the bank itself
whose manager and legal officer helped the Cruzes to
facilitate the issuance of the TCTs.

The bank should not have allowed complete
strangers to take possession of the owners duplicate
certificate even if the purpose is merely for photocopying
for a danger of losing the same is more than imminent.
They should be aware of the conclusive presumption in
Section 53. Such act constitutes manifest negligence on
the part of the bank which would necessarily hold it liable
for damages under Article 1170 and other relevant
provisions of the Civil Code.
[56]


In the absence of evidence, the damages that
may be awarded may be in the form of nominal damages.
Nominal damages are adjudicated in order that a right of
the plaintiff, which has been violated or invaded by the
defendant, may be vindicated or recognized, and not for
the purpose of indemnifying the plaintiff for any loss
suffered by him.
[57]
This award rests on the mortgagors
right to rely on the banks observance of the highest
diligence in the conduct of its business. The act of RBSP of
entrusting to respondents the owners duplicate certificate
entrusted to it by the mortgagor without even notifying
the mortgagor and absent any prior investigation on the
veracity of respondents claim and
character is a patent failure to foresee the risk created by
the act in view of the provisions of Section 53 of P.D. No.
1529. This act runs afoul of every banks mandate to
observe the highest degree of diligence in dealing with its
clients. Moreover, a mortgagor has also the right to be
afforded due process before deprivation or diminution of
his property is effected as the OCT was still in the name of
Eduardo. Notice and hearing are indispensable elements
of this right which the bank miserably ignored.

Under the circumstances, the Court believes the
award of P50,000.00 as nominal damages is appropriate.


Five-Year Prohibition against alienation
or encumbrance under the Public Land Act


One vital point. Apparently glossed over by the
courts below and the parties is an aspect which is
essential, spread as it is all over the record and intertwined
with the crux of the controversy, relating as it does to the
validity of the dispositions of the subject property and the
mortgage thereon. Eduardo was issued a title in 1976 on
the basis of his free patent application. Such application
implies the recognition of the public dominion character of
the land and, hence, the five (5)-year prohibition imposed
by the Public Land Act against alienation or encumbrance
of the land covered by a free patent or
homestead
[58]
should have been considered.

The deed of sale covering the fifty (50)-square
meter right of way executed by Eduardo on 18 March 1981
is obviously covered by the proscription, the free patent
having been issued on 8 October 1976. However,
petitioners may recover the portion sold since the
prohibition was imposed in favor of the free patent
holder. In Philippine National Bank v. De los Reyes,
[59]
this
Court ruled squarely on the point, thus:

While the law bars recovery in a
case where the object of the contract
is contrary to law and one or both
parties acted in bad faith, we cannot
here apply the doctrine of in pari
delicto which admits of an exception,
namely, that when the contract is
merely prohibited by law, not
illegal per se, and the prohibition is
designed for the protection of the
party seeking to recover, he is entitled
to the relief prayed for whenever
public policy is enhanced thereby.
Under the Public Land Act, the
prohibition to alienate is predicated on
the fundamental policy of the State to
preserve and keep in the family of the
homesteader that portion of public
land which the State has gratuitously
given to him, and recovery is allowed
even where the land acquired under
the Public Land Act was sold and not
merely encumbered, within the
prohibited period.
[60]



The sale of the 553 square meter portion is a
different story. It was executed in 1954, twenty-two (22)
years before the issuance of the patent in 1976.
Apparently, Eduardo disposed of the portion even before
he thought of applying for a free patent. Where the sale
or transfer took place before the filing of the free patent
application, whether by the vendor or the vendee, the
prohibition should not be applied. In such situation,
neither the prohibition nor the rationale therefor which is
to keep in the family of the patentee that portion of the
public land which the government has gratuitously given
him, by shielding him from the temptation to dispose of
his landholding, could be relevant. Precisely, he had
disposed of his rights to the lot even before the
government could give the title to him.

The mortgage executed in favor of RBSP is also
beyond the pale of the prohibition, as it was forged in
December 1981 a few months past the period of
prohibition.

WHEREFORE, the Decision of the Court of Appeals is
AFFIRMED, subject to the modifications herein.
Respondent Rural Bank of San Pascual is hereby ORDERED
to PAY petitioners Fifty Thousand Pesos (P50,000.00) by
way of nominal damages. Respondents Consuelo Cruz and
Rosalina Cruz-Bautista are hereby DIVESTED of title to, and
respondent Register of Deeds of Meycauayan, Bulacan is
accordingly ORDERED to segregate, the portion of fifty (50)
square meters of the subject Lot No. 2204, as depicted in
the approved plan covering the lot, marked as Exhibit A,
and to issue a new title covering the said portion in the
name of the petitioners at the expense of the petitioners.
No costs.

SO ORDERED.

SECOND DIVISION


WILFREDO T. VAGILIDAD G.R. No. 161136
and LOLITA A. VAGILIDAD,
Petitioners,
Present:


P
U
N
O
,

J
.
,

C
h
a
i
r
p
e
r
s
o
n
,
- versus - SANDOVAL -
GUTIERREZ,
C
O
R
O
N
A
,
A
Z
C
U
N
A
,

a
n
d
G
A
R
C
I
A
,

J
J
.

GABINO VAGILIDAD, JR. Promulgated:
and DOROTHY VAGILIDAD,
Respondents. Nove
mber 16, 2006
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - x

D E C I S I O N


PUNO, J.:
This is a Petition for Review on Certiorari of the
Decision
[1]
and Resolution
[2]
of the Court of Appeals in CA-
G.R. No. CV-68318 dated March 19, 2003 and November
13, 2003, respectively, reversing and setting aside the
decision of the Regional Trial Court of Antique, Sixth
Judicial Region, Branch II, in Civil Case No. 2825
dated January 26, 1999.
The facts are stated in the assailed Decision
[3]
of the
appellate court, viz.:
A parcel of land, Lot No.
1253, situated in Atabay, San Jose,
Antique, measuring 4,280 square
meters, was owned by Zoilo [Labiao]
(hereafter ZOILO) as per Original
Certificate of Title No. RO-2301 issued
on March 3, 1931. Sometime in 1931,
ZOILO died. Subsequently, on May 12,
1986, Loreto Labiao (hereafter
LORETO), son of ZOILO, sold
to Gabino Vagilidad Jr. (hereafter
GABINO JR.) a portion of Lot No. 1253
(hereafter Lot 1253-B), measuring
1,604 square meters as evidenced by
the Deed of Absolute Sale executed by
LORETO.

In view of the death of
ZOILO, his children,
LORETO, Efren Labiao (hereafter
EFREN) and
Priscilla Espanueva (hereafter
PRISCILLA) executed an Extrajudicial
x x x Settlement of Estate dated
January 20, 1987, adjudicating the
entire Lot No. 1253, covering 4,280
square meters, to LORETO. On January
29, 1987, Transfer Certificate of Title
(TCT) No. T-16693 was issued in favor
of LORETO, EFREN and PRISCILLA, but
on even date, TCT No. T-16693 was
cancelled and TCT No. T-16694,
covering the said property, was issued
in the name of LORETO alone.

On July 31, 1987, GABINO
JR., as petitioner, filed a Petition for
the Surrender of TCT No. T-16694,
covering Lot No. 1253, with
the Regional Trial Court of San
Jose City, Sixth Judicial Region, against
LORETO, docketed as Cadastral Case
No. 87-731-A. The plaintiff alleged
that, being the owner of x x x Lot No.
1253-B, under TCT No. T-16694, by
virtue of the sale that took place
on May 12, 1986, he is entitled to ask
for the surrender of the owners copy
of TCT No. T-16694 to the Register of
Deeds of Antique in order to effect the
transfer of title to the name of the
petitioner. However, as per motion of
both counsels[,] since the parties
seemed to have already reached an
amicable settlement without the
knowledge of their counsels, the trial
court issued an Order dated March 21,
1994sending the case to the archives.

On September 21, 1988,
[GABINO JR.] paid real estate taxes on
the land he bought from LORETO as
per Tax Declaration No. 1038 where
the property was specified as Lot No.
1253-B. GABINO JR. thereafter sold the
same lot to Wilfredo Vagilidad
(hereafter WILFREDO) as per Deed of
Absolute Sale dated December 7,
1989. On even date, Deed of Absolute
Sale of a Portion of Land involving the
opt-described property was also
executed by LORETO in favor of
WILFREDO. The aforementioned
deeds, which were both executed on
December 7, 1989 [and] notarized by
Atty. Warloo Cardenal[,] [appear] to
have been given the same entry
number in his notarial books as both
contained the designation Document
No. 236, Page No. 49, Book No. XI,
Series of 1989*.]

Corollarily, on February 14,
1990, the sale of Lot No. 1253-B to
WILFREDO was registered with the
Registry of Deeds of
the Province of Antique under Entry
No. 180425. Consequently, TCT No. T-
18023, cancelling TCT No. 16694, was
issued in favor of WILFREDO pursuant
to the Deed of Absolute Sale
dated December 7, 1989.

On October 24, 1991,
spouses WILFREDO and LOLITA
obtained a loan from the Philippine
National Bank (PNB for brevity) in the
amount of P150,000.00 and mortgaged
Lot No. 1253-B as collateral of the said
loan and the transaction was inscribed
at the back of TCT No. 18023 as Entry
No. 186876. Subsequently, the xxx real
estate mortgage was cancelled under
Entry No. 191053 as per inscription
dated November 17, 1992 in xxx TCT
No. 18023.

Subsequently, WILFREDO
obtained another loan from
Development Bank of
the Philippines (DBP for brevity) in the
amount of P200,000.00 and mortgaged
Lot No. 1253-B as collateral of the xxx
loan and the transaction was inscribed
at the back of TCT No. 18023 as Entry
No. 196268. The said loan was paid
and, consequently, the mortgage was
cancelled as Entry No. 202500.

On September 29, 1995,
spouses GABINO and Ma. Dorothy
Vagilidad (hereafter DOROTHY), as
plaintiffs, filed a Complaint for
Annulment of Document,
Reconveyance and Damages, with the
Regional Trial Court of Antique, Sixth
Judicial Region, Branch 11, against
spouses WILFREDO and Lolita Vagilidad
(hereafter LOLITA), docketed as Civil
Case No. 2825. The plaintiffs claimed
that they are the lawful owners of Lot
No. 1253-B which was sold to him by
LORETO in 1986. They alleged that
[GABINO JR.] is a nephew of defendant
WILFREDO. They likewise raised that
when GABINO SR. died, defendant
WILFREDO requested GABINO JR. to
transfer the ownership of Lot No.
1253-B in
defendant WILFREDOs name for
loaning purposes with the agreement
that the land will be returned when
the plaintiffs need the same. They
added that, pursuant to the mentioned
agreement, plaintiff GABINO JR.,
without the knowledge and consent of
his spouse, DOROTHY, executed the
Deed of Sale dated December 7,
1989 in favor of defendant WILFREDO
receiving nothing as payment therefor.
They pointed out that after defendant
WILFREDO was able to mortgage the
property, plaintiffs demanded the
return of the property but the
defendants refused to return the
same. The plaintiffs claimed that the
same document is null and void for
want of consideration and the same
does not bind the non-consenting
spouse. They likewise prayed that the
defendant be ordered to pay the
plaintiffs not less than P100,000.00 as
actual and moral damages, P10,000.00
as attorneys fees and P5,000.00 as
litigation expenses.

For their part, the
defendants, on January 15, 1996, filed
their Answer, denying the material
allegations of the plaintiffs. Defendants
claimed that they are the lawful
owners of Lot No. 1253-B. They alleged
that LORETO, with conformity of his
wife, sold to them Lot No. 1253 on
December 7, 1989 for P5,000.00 and
the transaction was registered with the
Register of Deeds of the Province of
Antique under Entry No. 180425. They
added that, subsequently, TCT No. T-
18023, covering Lot No. 1253-B, was
issued in favor of the defendants.
Hence, they claimed that the plaintiffs
be directed to pay the
defendants P200,000.00 as moral
damages, P50,000.00 as exemplary
damages, P20,000.00 as attorneys
fees and P30,000.00 for litigation
expenses.
[4]


The trial court ruled in favor of petitioners WILFREDO
and LOLITA and held that LORETO did not validly convey
Lot No. 1253-B to GABINO, JR. on May 12, 1986since at
that time, the heirs of ZOILO had not partitioned Lot No.
1253.
[5]
It ruled that LORETO could only sell at that time his
aliquot share in the inheritance. He could not have sold a
divided part thereof designated by metes and bounds.
Thus, it held that LORETO remained the owner of the
subject lot when he sold it to WILFREDO on December 7,
1989. It further found that there was no proof that
WILFREDO knew of the sale that took place between
LORETO and GABINO, JR. on May 12, 1986.
The dispositive portion of the decision states:
WHEREFORE, in view of the
foregoing pronouncements and a
preponderance of evidence, judgment
is hereby rendered:

1. FINDING the defendants
WILFREDO VAGILIDAD and LOLITA
VAGILIDAD to have duly acquired
ownership of Lot No. 1253-B
containing an area of 1,604 square
meters, more or less, situated in San
Jose, Antique;

2. SUSTAINING the validity
of Transfer Certificate of Title No. T-
18023 covering the subject Lot No.
1253-B and issued in the name of the
defendant WILFREDO VAGILIDAD,
married to the defendant LOLITA
VAGILIDAD;

3. DISMISSING the
complaint of the plaintiffs GABINO
VAGILIDAD, JR. and MA. DOROTHY
VAGILIDAD, as well as the
counterclaims of the defendants
WILFREDO VAGILIDAD and LOLITA
VAGILIDAD and of the defendants
LORETO LABIAO and FRANCISCA
LABIAO; and

4. PRONOUNCING no
cost.
[6]



GABINO, JR. and DOROTHY filed an appeal with the
Court of Appeals. The appellate court reversed and set
aside the decision of the court a quo, viz.:
WHEREFORE, premises
considered, the Decision dated January
26, 1999 of the Regional Trial Court of
Antique, Sixth Judicial Region, Branch
11, in Civil Case No. 2825, is hereby
REVERSED and SET ASIDE and a new
one is entered: (1) declaring the Deed
of Absolute Sale [of Portion of Land]
dated December 7, 1989 executed by
appellee LORETO in favor of appellee
WILFREDO null and void; (2) ordering
the defendants-appellees WILFREDO
and LOLITA to reconvey Lot No. 1253-B
to plaintiffs-appellants GABINO, JR.
and DOROTHY; and (3)
ordering the defendants-appellees to
pay the plaintiffs-
appellants P100,000.00 as moral
damages, P10,000.00 as attorneys
fees and P5,000.00 as litigation
expenses.
[7]


The appellate court ruled that the sale made by
LORETO in favor of GABINO, JR. on May 12, 1986 is valid.
The rights of LORETO to succession are transmitted from
the moment of ZOILOs death in 1931. Thus, when LORETO
sold the 1,604-square meter portion of Lot No. 1253 to
GABINO JR., he already had the right as co-owner to his
share to Lot No. 1253, even if at that time the property
had not yet been partitioned. Consequently, the sale made
by LORETO in favor of WILFREDO on December 7, 1989 is
void because LORETO and FRANCISCA were no longer the
owners of Lot No. 1253-B as of that time. The appellate
court also held WILFREDO and LOLITA liable for moral
damages for falsifying the fictitious deeds of sale
on December 7, 1989.

WILFREDO and LOLITA moved for reconsideration
but the motion was denied in the questioned Resolution
dated November 13, 2003. Hence, this petition for review
on certiorari raising the following errors:

I

THE HONORABLE COURT OF APPEALS
ERRED IN NOT APPLYING ARTICLE 1349
AND ARTICLE 1460 OF THE NEW CIVIL
CODE IN THE CASE AT BAR.

II

THE HONORABLE COURT OF APPEALS
ERRED IN NOT APPLYING THE
PROVISION OF ARTICLE 1544 OF THE
NEW CIVIL CODE AND THE DOCTRINE
OF DOUBLE SALETHAT THE BUYER
WHO IS IN POSSESSION OF
THE TORRENS TITLE AND HAD THE
DEED OF SALE REGISTERED MUST
PREVAIL.

III

THE HONORABLE COURT OF APPEALS
ERRED IN NOT APPLYING ARTICLE 1391
OF THE NEW CIVIL CODE AND THE
DOCTRINE THAT IN CASE OF FRAUD,
ACTION FOR RECONVEYANCE MUST BE
BROUGHT WITHIN FOUR (4) YEARS
FROM THE DISCOVERY OF THE FRAUD.
IV

THE HONORABLE COURT OF APPEALS
ERRED IN AWARDING PRIVATE
RESPONDENT MORAL DAMAGES,
ATTORNEYS FEES AND LITIGATION
EXPENSES.
[8]


We deny the petition.
I
First, petitioners contend that the Deed of Absolute
Sale between LORETO and GABINO, JR. does not have a
determinate object. They anchor their claim on the
following discrepancies: (1) the object of the Deed of
Absolute Sale between LORETO and GABINO, JR. is Lot No.
1253 with an area of 1,604 square meters; (2) the object of
the Deed of Absolute Sale of Portion of Land between
LORETO and WILFREDO is a portion of Lot No. 1253,
known as Lot No. 1253-B, also with an area of 1,604
square meters;
[9]
(3) the Deed of Absolute Sale between
LORETO and GABINO, JR. shows that its object, Lot No.
1253, is not registered under the Land Registration Act nor
under the Spanish Mortgage Law; and (4) the property
subject of this action, Lot No. 1253-B, was taken from Lot
No. 1253 containing an area of 4,280 square meters
previously registered in the name of ZOILO under Original
Certificate of Title (OCT) No. RO-2301.
[10]
With these
discrepancies, petitioners contend that either the Deed of
Absolute Sale between LORETO and GABINO, JR. does not
have a determinate object or that Lot No. 1253-B, the
subject parcel, is not the object thereof. Hence, absent a
determinate object, the contract is void. They rely on
Articles 1349 and 1460 of the Civil Code, viz.:
Art. 1349. The object of
every contract must be determinate,
as to its kind. The fact that the quantity
is not determinate shall not be an
obstacle to the existence of the
contract, provided it is possible to
determine the same, without the need
of a new contract between the
parties.


Art. 1460. A thing is
determinate when it is particularly
designated or physically segregated
from all others of the same class.

The requisite that a thing be
determinate is satisfied if at the time
the contract is entered into, the thing
is capable of being made determinate
without the necessity of a new or
further agreement between the
parties.


Petitioners err. The evidence on record shows that
Lot No. 1253-B, the subject parcel, and the lot described as
Lot No. 1253 in the Deed of Absolute Sale of May 12,
1986between LORETO and GABINO, JR., are the same. In
the Deed of Absolute Sale, Lot No. 1253 is described, viz.:

A parcel of land (Lot No. 1253 of
the Cadastral Survey of San Jose), with
the improvements thereon. Bounded
on the North [by] 1254 and 1255; on
the South by road; on the East by 1253
and road on the West by 1240-Angel
Salazar; containing an area of 1,604
square meters more or less declared
under Tax Declaration No. 4159.
[11]


In the Deed of Absolute Sale of Portion of Land of
December 7, 1989 between LORETO and WILFREDO, the
subject parcel is described, viz.:

A parcel of
land (Lot No. 1253.
Ap-06-00271) of
the Cadastral
Survey of San Jose,
LRC Cad. Rec. No.
936), situated
at Atabay, San
Jose, Antique.
Bounded on the N.
and E. along lines
1-2-3 by lot 1255;
San Jose Cadastre;
on the S. along line
3-4 by Road; on the
W. along line 4-5
by Lot 1240; San
Jose Cadastre; and
on the N. along line
5-1 by Lot 1254,
San Jose Cadastre
containing an area
of [Four] Thousand
Two Hundred
Eighty (4,280)
square meters,
more or less.

of which a portion of land
subject of this sale is hereinbelow (sic)
particularly described as follows, to
wit:

A portion
of Lot No. 1253-B
of the Cadastral
Survey of San Jose,
situated
at Atabay, San
Jose, Antique.
Bounded on the
North by Lot No.
1254; South by
Road; West
by Lot1253-A; and
on the East by Lot
No. 1253-C;
containing an area
of 1,604 square
meters, more or
less.
[12]



The description of Lot No. 1253, the object of the
Deed of Absolute Sale, as not registered under Act No.
196[,] otherwise known as the Land Registration Act, nor
under the Spanish Mortgage Law
[13]
is a stray description
of the subject parcel. It is uncorroborated by any evidence
in the records. This description solely appears on the Deed
of Absolute Sale and the discrepancy was not explained by
LORETO who signed the Deed of Absolute Sale as vendor.
LORETO does not, in fact, deny the existence of the Deed
of Absolute Sale. He merely counters that the Deed of
Absolute Sale was purportedly a mortgage.
However, LORETOs claim that it was one of mortgage is
clearly negated by a Certification
[14]
issued by the Bureau
of Internal Revenue dated May 12, 1986. It certified that
LORETO was not required to pay the capital gains tax on
the transfer of Lot No. 1253 to GABINO, JR. because the
property was classified as an ordinary asset.

To be sure, petitioners could have easily shown that
LORETO owned properties other than Lot No. 1253 to
bolster their claim that the object of the Deed of Absolute
Sale was different from Lot No. 1253-B which is the object
described in the Deed of Absolute Sale of Portion of Land.
They did not proffer any evidence.

The trial court itself comprehensively traced the
origin of Lot No. 1253-B. It clearly demonstrated that the
subject parcel was originally part of the registered lot of
ZOILO. It also showed how the subject parcel was
eventually bounded by Lot No. 1253-A on the West and by
Lot No. 1253-C on the East, as the lot would be later
described in the Deed of Absolute Sale of Portion of Land.

The trial court found that ZOILO previously owned
Lot No. 1253 under OCT No. RO-2301 issued on March 3,
1931. On November 14, 1986, Entry No. 167922 was
inscribed in the certificate of title, per Order dated March
30, 1978 of Judge Noli Ma. Cortes of the then Court of First
Instance of Antique, stating that it was a reconstituted
certificate of title.
[15]
Lot No. 1253 was subdivided by
virtue of a subdivision plan dated June 19, 1987.
On January 20, 1987, an Extrajudicial Settlement of Estate
executed by LORETO, EFREN and PRISCILLA was entered as
Entry No. 170722. The OCT of ZOILO was cancelled by TCT
No. T-16693 in the names of LORETO, EFREN and
PRISCILLA on January 29, 1987. TCT No. T-16693 was
cancelled on the same day by TCT No. T-16694 in the
name of LORETO alone. The TCT was partially cancelled by
the issuance of TCTs covering Lot Nos. 1253-A, 1253-C and
1253-D. The TCT of Lot No. 1253-B was issued in the name
of WILFREDO married to LOLITA on February 15,
1990. WILFREDOs TCT No. T-18023 appears to be a
transfer from LORETOs TCT No. T-16694.

II
Next, petitioners contend that the appellate court
should have upheld the title of WILFREDO under Article
1544 of the Civil Code and the doctrine of double sale
where the buyer who is in possession of the Torrens Title
must prevail.
[16]
First, petitioners title was issued pursuant
to the purported Deed of Absolute Sale of Portion of Land
datedDecember 7, 1989. Second, WILFREDO did not see
any encumbrance at the back of the title of the subject lot
when he purchased it from LORETO on December 7, 1989.
Thus, since he is not bound to go beyond the certificate of
title, he has acquired the subject property in due course
and in good faith.

We disagree. Article 1544 of the Civil Code
states, viz.:
Art. 1544. If the same thing
should have been sold to different
vendees, the ownership shall be
transferred to the person who may
have first taken possession thereof in
good faith, if it should be movable
property.

Should it be immovable
property, the ownership shall belong
to the person acquiring it who in good
faith recorded it in the Registry of
Property.

Should there be no inscription,
the ownership shall pertain to the
person who in good faith was first in
the possession; and, in the absence
thereof, to the person who presents
the oldest title, provided there is good
faith.


Petitioners reliance on Article 1544 is misplaced.
While title to the property was issued in WILFREDOs name
on February 15, 1990, the following circumstances show
that he registered the subject parcel with evident bad
faith.
First, the Deed of Absolute Sale of Portion of
Land dated December 7, 1989 between LORETO and
WILFREDO is tainted with blatant irregularities. It is a fact
that the Deed of Absolute Sale of Portion of Land and the
Deed of Absolute Sale between GABINO, JR. and
WILFREDO are of even date. Both Deeds had the same
object Lot No. 1253-B. Both deeds were notarized by
Atty. Warloo Cardenal and bear the same entry in his
notarial register: Document No. 236, Page No. 49, Book
No. XI, Series of 1989.
Second, the testimony of a disinterested
witness, Febe Mabuhay, established the irregularity.
Mabuhay used to work as secretary for Atty. Cardenal and
co-signed as witness in both Deeds. She stated that Atty.
Cardenal instructed her to prepare the two documents in
the last week of November 1989. She was present when
GABINO, JR. signed the Deed of Absolute Sale. She
testified that after GABINO, JR. left, LORETO and his wife
FRANCISCA arrived and signed the Deed of Absolute Sale
of Portion of Land.
[17]
The Decision of the court a
quo further states, viz.:
[Mabuhay testified that when
she prepared the two documents, she]
noticed the similarity of Lot No. 1253
as technically described in both
documents but she did not call the
attention of Atty.Warlo[o] Cardenal.
[She likewise stated that Atty.
Cardenal] specifically instructed her to
assign the same document number to
the two documents notarized
on December 7, 1989.
[18]


Third, the testimony of Atty. Ernesto Estoya, then
Clerk of Court of the Regional Trial Court of Antique,
supports the claim that there was bad faith in the
execution of the Deed of Absolute Sale of Portion of Land.
Atty. Estoya brought the notarial record of Atty. Cardenal
for the year 1989 pursuant to a subpoena. He stated that
he had not brought both Deeds as required in the
subpoena because Doc. No. 236; Page No. 49; Book No.
XI; Series of 1989 as entered in the notarial register of
Atty. Cardenal could not be found in the files. He further
explained that the last document on page 48 of the
notarial register of Atty. Cardenal is Document No. 235,
while the first document on page 49 is Document No. 239,
leaving three unexplained gaps for document numbers
236, 237 and 238. Atty. Estoya stated that he was not the
one who received the 1989 notarial register of Atty.
Cardenal when the latter surrendered it since he assumed
office only in 1994.
[19]


Fourth, we give credence to the testimony of
GABINO, JR. that LORETO and WILFREDO had employed
the scheme to deprive him and his wife of their lawful title
to the subject property. The facts speak for themselves.
WILFREDO knew that he could not use the Deed of
Absolute Sale executed in his favor by GABINO, JR.
because the latter had no title to transfer. Without a title,
WILFREDO could not use the subject property as collateral
for a bank loan. Hence, LORETO, who had refused to
surrender the title to GABINO, JR. and in whose name the
land remained registered, had to execute the Deed of
Absolute Sale of Portion of Land in favor of WILFREDO.
Hence, it was convenient for WILFREDO to deny the
existence of the Deed of Absolute Sale of December 7,
1989 between him and GABINO, JR. But the evidence on
record shows that after he was able to register the subject
property in his name on February 15, 1990, WILFREDO
used the title as collateral in the loans that he contracted
with the Philippine National Bank onOctober 24, 1991 and
the Development Bank of the Philippines on December 1,
1993. This supports the claim of GABINO, JR. that
WILFREDO needed the lot for loaning purposes.

With these corroborating circumstances and the
following irrefragable documents on record, the evidence
preponderates in favor of GABINO, JR. One, he acquired
Lot No.1253-B from LORETO on May 12, 1986
[20]
by virtue
of the Deed of Absolute Sale. Two, the Bureau of Internal
Revenue issued a Certification, also on May 12, 1986, for
the exemption from the payment of capital gains tax when
LORETO sold to him the subject parcel. Three, GABINO, JR.
paid the real estate tax on the subject parcel in 1987. Four,
he filed a Petition for the Surrender of LORETOs title
on July 31, 1987 so he could transfer the title of the
property in his name.

Petitioners likewise err in their argument that the
contract of sale between LORETO and GABINO, JR.
is void on the ground that at the time of the sale on May
12, 1986, LORETO had a right to dispose only an aliquot
part of the yet undivided property of ZOILO. The subject
parcel, being an inherited property, is subject to the rules
of co-ownership under the Civil Code.

Co-ownership is the right of common dominion
which two or more persons have in a spiritual part of a
thing, not materially or physically divided.
[21]
Before the
partition of the property held in common, no individual or
co-owner can claim title to any definite portion thereof. All
that the co-owner has is an ideal or abstract quota or
proportionate share in the entire property.
[22]


LORETO sold the subject property to GABINO, JR.
on May 12, 1986 as a co-owner. LORETO had a right, even
before the partition of the property on January 19,
1987,
[23]
to transfer in whole or in part his undivided
interest in the lot even without the consent of his co-heirs.
This right is absolute in accordance with the well-settled
doctrine that a co-owner has full ownership of his pro-
indiviso share and has the right to alienate, assign or
mortgage it, and substitute another person for its
enjoyment.
[24]
Thus, what GABINO, JR. obtained by virtue
of the sale on May 12, 1986 were the same rights as the
vendor LORETO had as co-owner, in an ideal share
equivalent to the consideration given under their
transaction.
[25]


LORETO sold some 1,604 square meters of Lot No.
1253 to GABINO, JR. Consequently, when LORETO
purportedly sold to WILFREDO on December 7, 1989 the
same portion of the lot, he was no longer the owner of Lot
No. 1253-B. Based on the principle that no one can give
what he does not have,
[26]
LORETO could not have validly
sold to WILFREDO on December 7, 1989 what he no longer
had. As correctly pointed out by the appellate court, the
sale made by LORETO in favor of WILFREDO is void as
LORETO did not have the right to transfer the ownership of
the subject property at the time of sale.

III
Petitioners contend that since the subdivision plan of
Lot No. 1253 was only approved on January 19, 1987, the
appellate court can not presume
that the aliquot part of LORETO was the parcel designated
as Lot 1253-B.
[27]

Petitioners err. The mere fact that LORETO sold a
definite portion of the co-owned lot by metes and bounds
before partition does not, per se, render the sale a nullity.
We held in Lopez v. Vda. De Cuaycong
[28]
that the fact that
an agreement purported to sell a concrete portion of a co-
owned property does not render the sale void, for it is
well-established that the binding force of a contract must
be recognized as far as it is legally possible to do so.
[29]


In the case at bar, the contract of sale between
LORETO and GABINO, JR. on May 12, 1986 could be legally
recognized. At the time of sale, LORETO had an aliquot
share of one-third of the 4,280-square meter property or
some 1,426
[30]
square meters but sold some 1,604 square
meters to GABINO, JR. We have ruled that if a co-owner
sells more than his aliquot share in the property, the sale
will affect only his share but not those of the other co-
owners who did not consent to the sale.
[31]
Be that as it
may, the co-heirs of LORETO waived all their rights and
interests over Lot No. 1253 in favor of LORETO in an
Extrajudicial Settlement of Estate dated January 20, 1987.
They declared that they have previously received their
respective shares from the other estate of their parents
ZOILO and PURIFICACION.
[32]
The rights of GABINO, JR. as
owner over Lot No. 1253-B are thus preserved. These
rights were not effectively transferred by LORETO to
WILFREDO in the Deed of Absolute Sale of Portion of Land.
Nor were these rights alienated from GABINO, JR. upon
the issuance of the title to the subject property in the
name of WILFREDO. Registration of property is not a
means of acquiring ownership.
[33]
Its alleged
incontrovertibility cannot be successfully invoked by
WILFREDO because certificates of title cannot be used to
protect a usurper from the true owner or be used as a
shield for the commission of fraud.
[34]

IV
On the issue of prescription, petitioners contend that
the appellate court failed to apply the rule that an action
for reconveyance based on fraud prescribes after the lapse
of four years.
[35]
They cite Article 1391
[36]
of the Civil Code
and the case of Gerona v. De Guzman.
[37]


We disagree. This Court explained in Salvatierra v.
Court of Appeals,
[38]
viz.:
An action for reconveyance
based on an implied or constructive
trust must perforce prescribe
in ten years and not otherwise. A long
line of decisions of this Court, and of
very recent vintage at that, illustrates
this rule. Undoubtedly, it is now well-
settled that an action for reconveyance
based on an implied or constructive
trust prescribes in ten years from the
issuance of the Torrens title over the
property.The only discordant note, it
seems, is Balbin v. Medalla, which
states that the prescriptive period for
a reconveyance action is four years.
However, this variance can be
explained by the erroneous reliance
on Gerona v. de Guzman. But in
Gerona, the fraud was discovered on
June 25, 1948, hence Section 43(3) of
Act No. 190 was applied, the New Civil
Code not coming into effect until
August 30, 1950 xxx. It must be
stressed, at this juncture, that Article
1144 and Article 1456 are new
provisions. They have no counterparts
in the old Civil Code or in the old Code
of Civil Procedure, the latter being
then resorted to as legal basis of the
four-year prescriptive period for an
action for reconveyance of title of real
property acquired under false
pretenses.
[39]


[Thus,] under the present Civil
Code, xxx just as an implied or
constructive trust is an offspring of xxx
Art. 1456, xxx so is the corresponding
obligation to reconvey the property
and the title thereto in favor of the
true owner. In this context, and vis--
vis prescription, Article 1144 of the
Civil Code is applicable[, viz.:]

Art. 1144. The following
actions must be brought within ten
years from the time the right of action
accrues:

1) Upon a written
contract;
2) Upon an obligation
created by law;
3) Upon a
judgment.
[40]
(emphases
supplied)

Thus, in the case at bar, although the TCT of
WILFREDO became indefeasible after the lapse of one year
from the date of registration, the attendance of fraud in its
issuance created an implied trust in favor of GABINO, JR.
under Article 1456
[41]
of the Civil Code. Being an implied
trust, the action for reconveyance of the subject property
therefore prescribes within a period of ten years
from February 15, 1990. Thus, when respondents filed the
instant case with the court a quo on September 26, 1995,
it was well within the prescriptive period.
V
On the issue of damages, petitioners contend that
the grant is erroneous and the alleged connivance
between Atty. Cardenal and WILFREDO lacks basis.

We disagree. The evidence on record is clear that
petitioners committed bad faith in the execution of the
purported Deed of Absolute Sale of Portion of Land
datedDecember 7, 1989 between LORETO and WILFREDO.
As stated by the appellate court, viz.:
xxxx From the series of events, it
can be reasonably inferred that
appellees WILFREDO, LORETO and
Atty. Cardenal connived in attempting
to deprive appellants of Lot No. 1253-
B, hence, the appellants entitlement
to moral damages. Further, it is a well-
settled rule that attorneys fees are
allowed to be awarded if the claimant
is compelled to litigate with third
persons or to incur expenses to protect
his interest by reason of an unjustified
act or omission of the party for whom
it is sought. xxxx To protect
themselves, the appellants engaged
the services of counsel and incurred
expenses in the course of litigation.
Hence, we deem it equitable to award
attorneys fees to the appellant xxx.
[42]

IN VIEW WHEREOF, the petition is DENIED. The
assailed Decision and Resolution of the Court of Appeals in
CA-G.R. No. CV-68318 dated March 19,
2003 andNovember 13, 2003, respectively, are
AFFIRMED in toto. Costs against petitioners.

SO ORDERED.

Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 74470 March 8, 1989
NATIONAL GRAINS AUTHORITY and WILLLAM
CABAL, petitioners
vs.
THE INTERMEDIATE APPELLATE COURT and LEON
SORIANO, respondents.
Cordoba, Zapanta, Rola & Garcia for petitioner National
Grains Authority.
Plaridel Mar Israel for respondent Leon Soriano.

MEDIALDEA, J.:
This is a petition for review of the decision (pp. 9-21, Rollo)
of the Intermediate Appellate Court (now Court of
Appeals) dated December 23, 1985 in A.C. G.R. CV No.
03812 entitled, "Leon Soriano, Plaintiff- Appellee versus
National Grains Authority and William Cabal, Defendants
Appellants", which affirmed the decision of the Court of
First Instance of Cagayan, in Civil Case No. 2754 and its
resolution (p. 28, Rollo) dated April 17, 1986 which denied
the Motion for Reconsideration filed therein.
The antecedent facts of the instant case are as follows:
Petitioner National Grains Authority (now National Food
Authority, NFA for short) is a government agency created
under Presidential Decree No. 4. One of its incidental
functions is the buying of palay grains from qualified
farmers.
On August 23, 1979, private respondent Leon Soriano
offered to sell palay grains to the NFA, through William
Cabal, the Provincial Manager of NFA stationed at
Tuguegarao, Cagayan. He submitted the documents
required by the NFA for pre-qualifying as a seller, namely:
(1) Farmer's Information Sheet accomplished by Soriano
and certified by a Bureau of Agricultural Extension (BAEX)
technician, Napoleon Callangan, (2) Xerox copies of four
(4) tax declarations of the riceland leased to him and
copies of the lease contract between him and Judge
Concepcion Salud, and (3) his Residence Tax Certificate.
Private respondent Soriano's documents were processed
and accordingly, he was given a quota of 2,640 cavans of
palay. The quota noted in the Farmer's Information Sheet
represented the maximum number of cavans of palay that
Soriano may sell to the NFA.
In the afternoon of August 23, 1979 and on the following
day, August 24, 1979, Soriano delivered 630 cavans of
palay. The palay delivered during these two days were not
rebagged, classified and weighed. when Soriano
demanded payment of the 630 cavans of palay, he was
informed that its payment will be held in abeyance since
Mr. Cabal was still investigating on an information he
received that Soriano was not a bona tide farmer and the
palay delivered by him was not produced from his
farmland but was taken from the warehouse of a rice
trader, Ben de Guzman. On August 28, 1979, Cabal wrote
Soriano advising him to withdraw from the NFA
warehouse the 630 cavans Soriano delivered stating that
NFA cannot legally accept the said delivery on the basis of
the subsequent certification of the BAEX technician,
Napoleon Callangan that Soriano is not a bona fide farmer.
Instead of withdrawing the 630 cavans of palay, private
respondent Soriano insisted that the palay grains delivered
be paid. He then filed a complaint for specific performance
and/or collection of money with damages on November 2,
1979, against the National Food Authority and Mr. William
Cabal, Provincial Manager of NFA with the Court of First
Instance of Tuguegarao, and docketed as Civil Case No.
2754.
Meanwhile, by agreement of the parties and upon order of
the trial court, the 630 cavans of palay in question were
withdrawn from the warehouse of NFA. An inventory was
made by the sheriff as representative of the Court, a
representative of Soriano and a representative of NFA (p.
13, Rollo).
On September 30, 1982, the trial court rendered judgment
ordering petitioner National Food Authority, its officers
and agents to pay respondent Soriano (as plaintiff in Civil
Case No. 2754) the amount of P 47,250.00 representing
the unpaid price of the 630 cavans of palay plus legal
interest thereof (p. 1-2, CA Decision). The dispositive
portion reads as follows:
WHEREFORE, the Court renders
judgment in favor of the plaintiff and
against the defendants National Grains
Authority, and William Cabal and
hereby orders:
1. The National Grains Authority, now
the National Food Authority, its
officers and agents, and Mr. William
Cabal, the Provincial Manager of the
National Grains Authority at the time
of the filing of this case, assigned at
Tuguegarao, Cagayan, whomsoever is
his successors, to pay to the plaintiff
Leon T. Soriano, the amount of
P47,250.00, representing the unpaid
price of the palay deliveries made by
the plaintiff to the defendants
consisting of 630 cavans at the rate
Pl.50 per kilo of 50 kilos per cavan of
palay;
2. That the defendants National Grains
Authority, now National Food
Authority, its officer and/or agents,
and Mr. William Cabal, the Provincial
Manager of the National Grains
Authority, at the time of the filing of
this case assigned at Tuguegarao,
Cagayan or whomsoever is his
successors, are likewise ordered to pay
the plaintiff Leon T. Soriano, the legal
interest at the rate of TWELVE (12%)
percent per annum, of the amount of P
47,250.00 from the filing of the
complaint on November 20, 1979, up
to the final payment of the price of P
47,250.00;
3. That the defendants National Grains
Authority, now National Food
Authority, or their agents and duly
authorized representatives can now
withdraw the total number of bags
(630 bags with an excess of 13 bags)
now on deposit in the bonded
warehouse of Eng. Ben de Guzman at
Tuguegarao, Cagayan pursuant to the
order of this court, and as appearing in
the written inventory dated October
10, 1980, (Exhibit F for the plaintiff and
Exhibit 20 for the defendants) upon
payment of the price of P 47,250.00
and TWELVE PERCENT (12%) legal
interest to the plaintiff,
4. That the counterclaim of the
defendants is hereby dismissed;
5. That there is no pronouncement as
to the award of moral and exemplary
damages and attorney's fees; and
6. That there is no pronouncement as
to costs.
SO ORDERED (pp. 9-10, Rollo)
Petitioners' motion for reconsideration of the decision was
denied on December 6, 1982.
Petitioners' appealed the trial court's decision to the
Intermediate Appellate Court. In a decision promulgated
on December 23, 1986 (pp. 9-21, Rollo) the then
Intermediate Appellate Court upheld the findings of the
trial court and affirmed the decision ordering NFA and its
officers to pay Soriano the price of the 630 cavans of rice
plus interest. Petitioners' motion for reconsideration of
the appellate court's decision was denied in a resolution
dated April 17, 1986 (p. 28, Rollo).
Hence, this petition for review filed by the National Food
Authority and Mr. William Cabal on May 15, 1986 assailing
the decision of the Intermediate Appellate Court on the
sole issue of whether or not there was a contract of sale in
the case at bar.
Petitioners contend that the 630 cavans of palay delivered
by Soriano on August 23, 1979 was made only for
purposes of having it offered for sale. Further, petitioners
stated that the procedure then prevailing in matters of
palay procurement from qualified farmers were: firstly,
there is a rebagging wherein the palay is transferred from
a private sack of a farmer to the NFA sack; secondly, after
the rebagging has been undertaken, classification of the
palay is made to determine its variety; thirdly, after the
determination of its variety and convinced that it passed
the quality standard, the same will be weighed to
determine the number of kilos; and finally, it will be piled
inside the warehouse after the preparation of the
Warehouse Stock Receipt (WSP) indicating therein the
number of kilos, the variety and the number of bags.
Under this procedure, rebagging is the initial operative act
signifying acceptance, and acceptance will be considered
complete only after the preparation of the Warehouse
Stock Receipt (WSR). When the 630 cavans of palay were
brought by Soriano to the Carig warehouse of NFA they
were only offered for sale. Since the same were not
rebagged, classified and weighed in accordance with the
palay procurement program of NFA, there was no
acceptance of the offer which, to petitioners' mind is a
clear case of solicitation or an unaccepted offer to sell.
The petition is not impressed with merit.
Article 1458 of the Civil Code of the Philippines defines
sale as a contract whereby one of the contracting parties
obligates himself to transfer the ownership of and to
deliver a determinate thing, and the other party to pay
therefore a price certain in money or its equivalent. A
contract, on the other hand, is a meeting of minds
between two (2) persons whereby one binds himself, with
respect to the other, to give something or to render some
service (Art. 1305, Civil Code of the Philippines). The
essential requisites of contracts are: (1) consent of the
contracting parties, (2) object certain which is the subject
matter of the contract, and (3) cause of the obligation
which is established (Art. 1318, Civil Code of the
Philippines.
In the case at bar, Soriano initially offered to sell palay
grains produced in his farmland to NFA. When the latter
accepted the offer by noting in Soriano's Farmer's
Information Sheet a quota of 2,640 cavans, there was
already a meeting of the minds between the parties. The
object of the contract, being the palay grains produced in
Soriano's farmland and the NFA was to pay the same
depending upon its quality. The fact that the exact number
of cavans of palay to be delivered has not been
determined does not affect the perfection of the contract.
Article 1349 of the New Civil Code provides: ". . .. The fact
that the quantity is not determinate shall not be an
obstacle to the existence of the contract, provided it is
possible to determine the same, without the need of a
new contract between the parties." In this case, there was
no need for NFA and Soriano to enter into a new contract
to determine the exact number of cavans of palay to be
sold. Soriano can deliver so much of his produce as long as
it does not exceed 2,640 cavans.
In its memorandum (pp. 66-71, Rollo) dated December 4,
1986, petitioners further contend that there was no
contract of sale because of the absence of an essential
requisite in contracts, namely, consent. It cited Section
1319 of the Civil Code which states: "Consent is
manifested by the meeting of the offer and the acceptance
of the thing and the cause which are to constitute the
contract. ... " Following this line, petitioners contend that
there was no consent because there was no acceptance of
the 630 cavans of palay in question.
The above contention of petitioner is not correct Sale is a
consensual contract, " ... , there is perfection when there is
consent upon the subject matter and price, even if neither
is delivered." (Obana vs. C.A., L-36249, March 29, 1985,
135 SCRA 557, 560) This is provided by Article 1475 of the
Civil Code which states:
Art. 1475. The contract of sale is
perfected at the moment there is a
meeting of minds upon the thing which
is the object of the contract and upon
the price.
x x x
The acceptance referred to which determines consent is
the acceptance of the offer of one party by the other and
not of the goods delivered as contended by petitioners.
From the moment the contract of sale is perfected, it is
incumbent upon the parties to comply with their mutual
obligations or "the parties may reciprocally demand
performance" thereof. (Article 1475, Civil Code, 2nd par.).
The reason why NFA initially refused acceptance of the
630 cavans of palay delivered by Soriano is that it (NFA)
cannot legally accept the said delivery because Soriano is
allegedly not a bona fide farmer. The trial court and the
appellate court found that Soriano was a bona fide farmer
and therefore, he was qualified to sell palay grains to NFA.
Both courts likewise agree that NFA's refusal to accept was
without just cause. The above factual findings which are
supported by the record should not be disturbed on
appeal.
ACCORDINGLY, the instant petition for review is
DISMISSED. The assailed decision of the then Intermediate
Appellate Court (now Court of Appeals) is affirmed. No
costs.
SO ORDERED.

THIRD DIVISION
[G.R. No. 104482. January 22, 1996]
BELINDA TAREDO, for herself and in representation of
her brothers and sisters, and TEOFILA CORPUZ
TANEDO, representing her minor daughter
VERNA TANEDO, petitioners, vs. THE COURT OF
APPEALS, SPOUSES RICARDO M. TAREDO AND
TERESITA BARERA TAREDO,respondents.
D E C I S I O N
PANGANIBAN, J.:
Is a sale of future inheritance valid? In multiple sales
of the same real property, who has preference in
ownership? What is the probative value of the lower
courts finding of good faith in registration of such sales in
the registry of property? These are the main questions
raised in this Petition for review on certiorari under Rule
45 of the Rules of Court to set aside and reverse the
Decision
1
of the Court of Appeals
2
in CA-G.R. CV NO. 24987
promulgated on September 26, 1991 affirming the
decision of the Regional Trial Court, Branch 63, Third
Judicial Region, Tarlac, Tarlac in Civil Case No. 6328, and its
Resolution denying reconsideration thereof, promulgated
on May 27, 1992.
By the Courts Resolution on October 25, 1995, this
case (along with several others) was transferred from the
First to the Third Division and after due deliberation, the
Court assigned it to the undersigned ponenle for the
writing of this Decision.
The Facts
On October 20, 1962, Lazardo Taedo executed a
notarized deed of absolute sale in favor of his eldest
brother, Ricardo Taedo, and the latters wife, Teresita
Barera, private respondents herein, whereby he conveyed
to the latter in consideration of P1,500.00, one hectare of
whatever share I shall have over Lot No. 191 of the
cadastral survey of Gerona, Province of Tarlac and covered
by Title T-l3829 of the Register of Deeds of Tarlac, the
said property being his future inheritance from his
parents (Exh. 1). Upon the death of his father Matias,
Lazaro executed an Affidavit of Conformity
dated February 28, 1980 (Exh. 3) to re-affirm, respect.
acknowledge and validate the sale I made in 1962.
On January 13, 1981, Lazaro executed another notarized
deed of sale in favor of private respondents covering his
undivided ONE TWELVE (1/12) of a parcel of land known
as Lot 191 x x (Exh. 4). He acknowledged therein his
receipt of P 10,000.00 as consideration therefor. In
February 1981, Ricardo learned that Lazaro sold the same
property to his children, petitioners herein, through a
deed of sale dated December 29, 1980 (Exh. E). On June 7,
1982, private respondents recorded the Deed of Sale (Exh.
4) in their favor in the Registry of Deeds and the
corresponding entry was made in Transfer Certificate of
Title No. 166451 (Exh. 5).
Petitioners on July 16, 1982 filed a complaint for
rescission (plus damages) of the deeds of sale executed by
Lazaro in favor of private respondents covering the
property inherited by Lazaro from his father.
Petitioners claimed that their father, Lazaro,
executed an Absolute Deed of Sale dated December 29,
1980 (Exit. E), conveying to his ten children his allotted
portion under the extrajudicial partition executed by the
heirs of Matias, which deed included the land in litigation
(Lot 191).
Petitioners also presented in evidence: (1) a private
writing purportedly prepared and signed by Matias dated
December 28, 1978, stating that it was his desire that
whatever inheritance Lazaro would receive from him
should be given to his (Lazaros) children (Exh. A); (2) a
typewritten document dated March 10, 1979 signed by
Lazaro in the presence of two witnesses, wherein he
confirmed that he would voluntarily abide by the wishes of
his father, Matias, to give to his (Lazaros) children all the
property he would inherit from the latter (Exh. B); and (3)
a letter dated January 1, 1980 of Lazaro to his daughter,
Carmela, stating that his share in the extrajudicial
settlement of the estate of his father was intended for his
children, petitioners herein (Exh. C).
Private respondents, however presented in evidence
a Deed of Revocation of a Deed of Sale dated March 12,
1981 (Exh. 6), wherein Lazaro revoked the sale in favor of
petitioners for the reason that it was simulated or
fictitious - without any consideration whatsoever.
Shortly after the case a quo was filed, Lazaro
executed a sworn statement (Exh. G) which virtually
repudiated the contents of the Deed of Revocation of a
Deed of Sale (Exh. 6) and the Deed of Sale (Exh. 4) in favor
of private respondents. However, Lazaro testified that he
sold the property to Ricardo, and that it was a lawyer who
induced him to execute a deed of sale in favor of his
children after giving him five pesos (P5.00) to buy a drink
(TSN September 18, 1985, pp. 204-205).
The trial court decided in favor of private
respondents, holding that petitioners failed to adduce a
preponderance of evidence to support (their) claim. On
appeal, the Court of Appeals affirmed the decision of the
trial court, ruling that the Deed of Sale dated January 13,
1981 (Exh. 9) was valid and that its registration in good
faith vested title in said respondents.
The Issues
Petitioners raised the following errors in the
respondent Court, which they also now allege in the
instant Petition:
I. The trial court erred in concluding that the Contract of
Sale of October 20, 1962 (Exhibit 7, Answer) is merely
voidable or annulable and not void ab initio pursuant to
paragraph 2 of Article 1347 of the New Civil Code involving
as it does a future inheritance.
II. The trial court erred in holding that defendants-
appellees acted in good faith in registering the deed of
sale of January 13, 1981 (Exhibit 9) with the Register of
Deeds of Tarlac and therefore ownership of the land in
question passed on to defendants-appellees.
III. The trial court erred in ignoring and failing to consider
the testimonial and documentary evidence of plaintiffs-
appellants which clearly established by preponderance of
evidence that they are indeed the legitimate and lawful
owners of the property in question.
IV. The decision is contrary to law and the facts of the
case and the conclusions drawn from the established facts
are illogical and off-tangent.
From the foregoing, the issues may be restated as
follows:
1. Is the sale of a future inheritance valid?
2. Was the subsequent execution on January
13, 1981 (and registration with the
Registry of Property) of a deed of sale
covering the same property to the same
buyers valid?
3. May this Court review the findings of the
respondent Court (a) holding that the
buyers acted in good faith in registering
the said subsequent deed of sale and (b) in
failing to consider petitioners evidence?
Are the conclusions of the respondent
Court illogical and off-tangent?
The Courts Ruling
At the outset, let it be clear that the errors which
are reviewable by this Court in this petition for review on
certiorari are only those allegedly committed by the
respondent Court of Appeals and not directly those of the
trial court, which is not a party here. The assignment of
errors in the petition quoted above are therefore totally
misplaced, and for that reason, the petition should be
dismissed. But in order to give the parties substantial
justice we have decided to delve into the issues as above
re-stated. The errors attributed by petitioners to the latter
(trial) court will be discussed only insofar as they are
relevant to the appellate courts assailed Decision and
Resolution.
The sale made in 1962 involving future inheritance is
not really at issue here. In context, the assailed Decision
conceded it may be legally correct that a contract of sale
of anticipated future inheritance is null and void.
3

But to remove all doubts, we hereby categorically
rule that, pursuant to Article 1347 of the Civil Code, (n)o
contract may be entered into upon a future inheritance
except in cases expressly authorized by law.
Consequently, said contract made in 1962 is not
valid and cannot be the source of any right nor the creator
of any obligation between the parties.
Hence, the affidavit of conformity dated February
28, 1980, insofar as it sought to validate or ratify the 1962
sale, is also useless and, in the words of the respondent
Court, suffers from the same infirmity. Even private
respondents in their memorandum
4
concede this.
However, the documents that are critical to the
resolution of this case are: (a) the deed of sale of January
13, 1981 in favor of private respondents covering Lazaros
undivided inheritance of one-twelfth (1/12) share in Lot
No. 191, which was subsequently registered on June 7,
1982; and (b) the deed of sale dated December 29, 1980 in
favor of petitioners covering the same property. These two
documents were executed after the death of Matias (and
his spouse) and after a deed of extrajudicial settlement of
his (Matias) estate was executed, thus vesting in Lazaro
actual title over said property. In other words, these
dispositions, though conflicting, were no longer infected
with the infirmities of the 1962 sale.
Petitioners contend that what was sold on January
13, 1981 was only one-half hectare out of Lot No. 191,
citing as authority the trial courts decision. As earlier
pointed out, what is on review in these proceedings by this
Court is the Court of Appeals decision - which correctly
identified the subject matter of the January 13, 1981 sale
to be the entire undivided 1/12 share of Lazaro in Lot No.
191 and which is the same property disposed of on
December 29, 1980 in favor of petitioners.
Critical in determining which of these two deeds
should be given effect is the registration of the sale in
favor of private respondents with the register of deeds
on June 7, 1982.
Article 1544 of the Civil Code governs the
preferential rights of vendees in cases of multiple sales, as
follows:
Art. 1544. If the same thing should have been sold to
different vendees, the ownership shall be transferred to
the person who may have first taken possession thereof in
good faith, if it should be movable property.
Should it be immovable property, the ownership shall
belong to the person acquiring it who in good faith first
recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain
to the person who in good faith was first in the possession;
and, in the absence thereof, to the person who presents
the oldest title, provided there is good faith.
The property in question is land, an immovable, and
following the above-quoted law, ownership shall belong to
the buyer who in good faith registers it first in the registry
of property. Thus, although the deed of sale in favor of
private respondents was later than the one in favor of
petitioners, ownership would vest in the former because
of the undisputed fact of registration. On the other hand,
petitioners have not registered the sale to them at all.
Petitioners contend that they were in possession of
the property and that private respondents never took
possession thereof. As between two purchasers, the one
who registered the sale in his favor has a preferred right
over the other who has not registered his title, even if the
latter is in actual possession of the immovable property.
5

As to third issue, while petitioners conceded the fact
of registration, they nevertheless contended that it was
done in bad faith. On this issue, the respondent Court
ruled:
Under the second assignment of error, plaintiffs-
appellants contend that defendants-appellees acted in bad
faith when they registered the Deed of Sale in their favor
as appellee Ricardo already knew of the execution of the
deed of sale in favor of the plaintiffs; appellants cite the
testimony of plaintiff Belinda Tafledo to the effect that
defendant Ricardo Taedo called her up on January 4
or 5, 1981 to tell her that he was already the owner of the
land in question but the contract of sale between our
father and us were (sic) already consumated (pp. 9-10,
tsn, January 6, 1984). This testimony is obviously self-
serving, and because it was a telephone conversation, the
deed of sale dated December 29, 1980 was not shown;
Belinda merely told her uncle that there was already a
document showing that plaintiffs are the owners (p. 80).
Ricardo Taedo controverted this and testified that he
learned for the first time of the deed of sale executed by
Lazaro in favor of his children about a month or sometime
in February 1981 (p. 111, tsn, Nov. 28, 1984). x x x
6

The respondent Court, reviewing the trial courts findings,
refused to overturn the latters assessment of the
testimonial evidence, as follows:
We are not prepared to set aside the finding of the lower
court upholding Ricardo Tanedos testimony, as it involves
a matter of credibility of witnesses which the trial judge,
who presided at the hearing, was in a better position to
resolve. (Court of Appeals Decision, p. 6.)
In this connection, we note the tenacious allegations
made by petitioners, both in their basic petition and in
their memorandum, as follows:
1. The respondent Court allegedly ignored the
claimed fact that respondent Ricardo by
fraud and deceit and with foreknowledge
that the property in question had already
been sold to petitioners, made Lazaro
execute the deed of January 13, 1981;
2. There is allegedly adequate evidence to
show that only 1/2 of the purchase price of
P10,000.00 was paid at the time of the
execution of the deed of sale, contrary to
the written acknowledgment, thus
showing bad faith;
3. There is allegedly sufficient evidence
showing that the deed of revocation of the
sale in favor of petitioners was tainted
with fraud or deceit.
4. There is allegedly enough evidence to show
that private respondents took undue
advantage over the weakness and
unschooled and pitiful situation of Lazaro
Tafledo . . . and that respondent Ricardo
Taedo exercised moral ascendancy over
his younger brother he being the eldest
brother and who reached fourth year
college of law and at one time a former
Vice-Governor of Tarlac, while his younger
brother only attained first year high school
x x x ;
5. The respondent Court erred in not giving
credence to petitioners evidence,
especially Lazaro Taedos Sinumpaang
Salaysay dated July 27, 1982 stating that
Ricardo Taedo deceived the former in
executing the deed of sale in favor of
private respondents.
To be sure, there are indeed many conflicting
documents and testimonies as well as arguments over
their probative value and significance. Suffice it to say,
however, that all the above contentions involve questions
of fact, appreciation of evidence and credibility of
witnesses, which are not proper in this review. It is well-
settled that the Supreme Court is not a trier of facts. In
petitions for review under Rule 45 of the Revised Rules of
Court, only questions of law may be raised and passed
upon. Absent any whimsical or capricious exercise of
judgment, and unless the lack of any basis for the
conclusions made by the lower courts be amply
demonstrated, the Supreme Court will not disturb their
findings. At most, it appears that petitioners have shown
that their evidence was not believed by both the trial and
the appellate courts, and that the said courts tended to
give more credence to the evidence presented by private
respondents. But this in itself is not a reason for setting
aside such findings. We are far from convinced that both
courts gravely abused their respective authorities and
judicial prerogatives.
As held in the recent case of Chua Tiong Tay vs.
Court of Appeals and Goidrock Construction and
Development Corp.:
7

The Court has consistently held that the factual findings
of the trial court, as well as the Court of Appeals, are final
and conclusive and may not be reviewed on appeal.
Among the exceptional circumstances where a
reassessment of facts found by the lower courts is allowed
are when the conclusion is a finding grounded entirely on
speculation, surmises or conjectures; when the inference
made is manifestly absurd, mistaken or Impossible; when
there is grave abuse of discretion in the appreciation of
facts; when the judgment is premised on a
misapprehension of facts; when the findings went beyond
the issues of the case and the same are contrary to the
admissions of both appellant and appellee. After a careful
study of the case at bench, we find none of the above
grounds present to justify the re-evaluation of the findings
of fact made by the courts below.
In the same vein, the ruling in the recent case
of South Sea Surety and Insurance Company, Inc. vs. Hon.
Court of Appeals, et al.
[8]
is equally applicable to the
present case:
We see no valid reason to discard the factual conclusions
of the appellate court. x x x (I)t is not the function of this
Court to assess and evaluate all over again the evidence,
testimonial and documentary, adduced by the parties,
particularly where, such as here, the findings of both the
trial court and the appellate court on the matter
coincide. (italics supplied)
WHEREFORE, the petition is DENIED and the assailed
Decision of the Court of Appeals is AFFIRMED. No Costs.
SO ORDERED.

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 131679 February 1, 2000
CAVITE DEVELOPMENT BANK and FAR EAST BANK AND
TRUST COMPANY, petitioners,
vs.
SPOUSES CYRUS LIM and LOLITA CHAN LIM and COURT
OF APPEALS, respondents.
MENDOZA, J.:
This is a petition for review on certiorari of the decision
1
of
the Court of Appeals in C.A. GR CV No. 42315 and the
order dated December 9, 1997 denying petitioners'
motion for reconsideration.
The following facts are not in dispute.
Petitioners Cavite Development Bank (CDB) and Far East
Bank and Trust Company (FEBTC) are banking institutions
duly organized and existing under Philippine laws. On or
about June 15, 1983, a certain Rodolfo Guansing obtained
a loan in the amount of P90,000.00 from CDB, to secure
which he mortgaged a parcel of land situated at No. 63
Calavite Street, La Loma, Quezon City and covered by TCT
No. 300809 registered in his name. As Guansing defaulted
in the payment of his loan, CDB foreclosed the mortgage.
At the foreclosure sale held on March 15, 1984, the
mortgaged property was sold to CDB as the highest bidder.
Guansing failed to redeem, and on March 2, 1987, CDB
consolidated title to the property in its name. TCT No.
300809 in the name of Guansing was cancelled and, in lieu
thereof, TCT No. 355588 was issued in the name of
CDB.1wphi1.nt
On June 16, 1988, private respondent Lolita Chan Lim,
assisted by a broker named Remedios Gatpandan, offered
to purchase the property from CDB. The written Offer to
Purchase, signed by Lim and Gatpandan, states in part:
We hereby offer to purchase your property at
#63 Calavite and Retiro Sts., La Loma, Quezon
City for P300,000.00 under the following terms
and conditions:
(1) 10% Option Money;
(2) Balance payable in cash;
(3) Provided that the property shall be
cleared of illegal occupants or tenants.
Pursuant to the foregoing terms and conditions of the
offer, Lim paid CDB P30,000.00 as Option Money, for
which she was issued Official Receipt No. 3160, dated June
17, 1988, by CDB. However, after some time following up
the sale, Lim discovered that the subject property was
originally registered in the name of Perfecto Guansing,
father of mortgagor Rodolfo Guansing, under TCT No.
91148. Rodolfo succeeded in having the property
registered in his name under TCT No. 300809, the same
title he mortgaged to CDB and from which the latter's title
(TCT No. 355588) was derived. It appears, however, that
the father, Perfecto, instituted Civil Case No. Q-39732 in
the Regional Trial Court, Branch 83, Quezon City, for the
cancellation of his son's title. On March 23, 1984, the trial
court rendered a decision
2
restoring Perfecto's previous
title (TCT No. 91148) and cancelling TCT No. 300809 on the
ground that the latter was fraudulently secured by
Rodolfo. This decision has since become final and
executory.
Aggrieved by what she considered a serious
misrepresentation by CDB and its mother-company,
FEBTC, on their ability to sell the subject property, Lim,
joined by her husband, filed on August 29, 1989 an action
for specific performance and damages against petitioners
in the Regional Trial Court, Branch 96, Quezon City, where
it was docketed as Civil Case No. Q-89-2863. On April 20,
1990, the complaint was amended by impleading the
Register of Deeds of Quezon City as an additional
defendant.
On March 10, 1993, the trial court rendered a decision in
favor of the Lim spouses. It ruled that: (1) there was a
perfected contract of sale between Lim and CDB, contrary
to the latter's contention that the written offer to
purchase and the payment of P30,000.00 were merely pre-
conditions to the sale and still subject to the approval of
FEBTC; (2) performance by CDB of its obligation under the
perfected contract of sale had become impossible on
account of the 1984 decision in Civil Case No. Q-39732
cancelling the title in the name of mortgagor Rodolfo
Guansing; (3) CDB and FEBTC were not exempt from
liability despite the impossibility of performance, because
they could not credibly disclaim knowledge of the
cancellation of Rodolfo Guansing's title without the
admitting their failure to discharge their duties to the
public as reputable banking institutions; and (4) CDB and
FEBTC are liable for damages for the prejudice caused
against the Lims.
3
Based on the foregoing findings, the trial
court ordered CDB and FEBTC to pay private respondents,
jointly and severally, the amount of P30,000.00 plus
interest at the legal rate computed from June 17, 1988
until full payment. It also ordered petitioners to pay
private respondents, jointly and severally, the amounts of
P250,000.00 as moral damages, P50,000.00 as exemplary
damages, P30,000.00 as attorney's fees, and the costs of
the suit.
4

Petitioners brought the matter to the Court of Appeals,
which, on October 14, 1997, affirmed in toto the decision
of the Regional Trial Court. Petitioners moved for
reconsideration, but their motion was denied by the
appellate court on December 9, 1997. Hence, this petition.
Petitioners contend that
1. The Honorable Court of Appeals erred when it
held that petitioners CDB and FEBTC were aware
of the decision dated March 23, 1984 of the
Regional Trial Court of Quezon City in Civil Case
No. Q-39732.
2. The Honorable Court of Appeals erred in
ordering petitioners to pay interest on the
deposit of THIRTY THOUSAND PESOS
(P30,000.00) by applying Article 2209 of the New
Civil Code.
3. The Honorable Court of Appeals erred in
ordering petitioners to pay moral damages,
exemplary damages, attorney's fees and costs of
suit.
I.
At the outset, it is necessary to determine the legal
relation, if any, of the parties.
Petitioners deny that a contract of sale was ever perfected
between them and private respondent Lolita Chan Lim.
They contend that Lim's letter-offer clearly states that the
sum of P30,000,00 was given as option money, not as
earnest money.
5
They thus conclude that the contract
between CDB and Lim was merely an option contract, not
a contract of sale.
The contention has no merit. Contracts are not defined by
the parries thereto but by principles of law.
6
In
determining the nature of a contract, the courts are not
bound by the name or title given to it by the contracting
parties.
7
In the case at bar, the sum of P30,000.00,
although denominated in the offer to purchase as "option
money," is actually in the nature of earnest money or
down payment when considered with the other terms of
the offer. In Carceler v. Court of Appeals,
8
we explained
the nature of an option contract, viz.
An option contract is a preparatory contract in
which one party grants to the other, for a fixed
period and under specified conditions, the
power to decide, whether or not to enter into a
principal contract, it binds the party who has
given the option not to enter into the principal
contract with any other person during the
period; designated, and within that period, to
enter into such contract with the one to whom
the option was granted, if the latter should
decide to use the option. It is a separate
agreement distinct from the contract to which
the parties may enter upon the consummation
of the option.
An option contract is therefore a contract separate from
and preparatory to a contract of sale which, if perfected,
does not result in the perfection or consummation of the
sale. Only when the option is exercised may a sale be
perfected.
In this case, however, after the payment of the 10% option
money, the Offer to Purchase provides for the payment
only of the balance of the purchase price, implying that
the "option money" forms part of the purchase price. This
is precisely the result of paying earnest money under Art.
1482 of the Civil Code. It is clear then that the parties in
this case actually entered into a contract of sale, partially
consummated as to the payment of the price. Moreover,
the following findings of the trial court based on the
testimony of the witnesses establish that CDB accepted
Lim's offer to purchase:
It is further to be noted that CDB and FEBTC
already considered plaintiffs' offer as good and
no longer subject to a final approval. In his
testimony for the defendants on February 13,
1992, FEBTC's Leomar Guzman stated that he
was then in the Acquired Assets Department of
FEBTC wherein plaintiffs' offer to purchase was
endorsed thereto by Myoresco Abadilla, CDB's
senior vice-president, with a recommendation
that the necessary petition for writ of possession
be filed in the proper court; that the
recommendation was in accord with one of the
conditions of the offer, i.e., the clearing of the
property of illegal occupants or tenants (tsn, p.
12); that, in compliance with the request, a
petition for writ of possession was thereafter
filed on July 22, 1988 (Exhs. 1 and 1-A); that the
offer met the requirements of the banks; and
that no rejection of the offer was thereafter
relayed to the plaintiffs (p. 17); which was not a
normal procedure, and neither did the banks
return the amount of P30,000.00 to the
plaintiffs.
9

Given CDB's acceptance of Lim's offer to purchase, it
appears that a contract of sale was perfected and, indeed,
partially executed because of the partial payment of the
purchase price. There is, however, a serious legal obstacle
to such sale, rendering it impossible for CDB to perform its
obligation as seller to deliver and transfer ownership of
the property.
Nemo dat quod non habet, as an ancient Latin maxim says.
One cannot give what one does not have. In applying this
precept to a contract of sale, a distinction must be kept in
mind between the "perfection" and "consummation"
stages of the contract.
A contract of sale is perfected at the moment there is a
meeting of minds upon the thing which is the object of the
contract and upon the price.
10
It is, therefore, not required
that, at the perfection stage, the seller be the owner of the
thing sold or even that such subject matter of the sale
exists at that point in time.
11
Thus, under Art. 1434 of the
Civil Code, when a person sells or alienates a thing which,
at that time, was not his, but later acquires title thereto,
such title passes by operation of law to the buyer or
grantee. This is the same principle behind the sale of
"future goods" under Art. 1462 of the Civil Code. However,
under Art. 1459, at the time of delivery or consummation
stage of the sale, it is required that the seller be the owner
of the thing sold. Otherwise, he will not be able to comply
with his obligation to transfer ownership to the buyer. It is
at the consummation stage where the principle of nemo
dat quod non habet applies.
In Dignos v. Court of Appeals,
12
the subject contract of sale
was held void as the sellers of the subject land were no
longer the owners of the same because of a prior
sale.
13
Again, in Nool v. Court of Appeals,
14
we ruled that a
contract of repurchase, in which the seller does not have
any title to the property sold, is invalid:
We cannot sustain petitioners' view. Article 1370
of the Civil Code is applicable only to valid and
enforceable contracts. The Regional Trial Court
and the Court of Appeals rules that the principal
contract of sale contained in Exhibit C and the
auxiliary contract of repurchase in Exhibit D are
both void. This conclusion of the two lower
courts appears to find support in Dignos v. Court
of Appeals, where the Court held:
Be that as it may, it is evident that
when petitioners sold said land to the
Cabigas spouses, they were no longer
owners of the same and the sale is null
and void.
In the present case, it is clear that the sellers no
longer had any title to the parcels of land at the
time of sale. Since Exhibit D, the alleged contract
of repurchase, was dependent on the validity of
Exhibit C, it is itself void. A void contract cannot
give rise to a valid one. Verily, Article 1422 of the
Civil Code provides that (a) contract which is the
direct result of a previous illegal contract, is also
void and inexistent.
We should however add that Dignos did not cite
its basis for ruling that a "sale is null and void"
where the sellers "were no longer the owners"
of the property. Such a situation (where the
sellers were no longer owners) does not appear
to be one of the void contracts enumerated in
Article 1409 of the Civil Code. Moreover, the
Civil Code itself recognizes a sale where the
goods are to be acquired . . . by the seller after
the perfection of the contract of sale, clearly
implying that a sale is possible even if the seller
was not the owner at the time of sale, provided
he acquires title to the property later on.
In the present case, however, it is likewise clear
that the sellers can no longer deliver the object
of the sale to the buyers, as the buyers
themselves have already acquired title and
delivery thereof from the rightful owner, the
DBP. Thus, such contract may be deemed to be
inoperative and may thus fall, by analogy, under
item No. 5 of Article 1409 of the Civil Code:
Those which contemplate an impossible service.
Article 1459 of the Civil Code provides that "the
vendor must have a right to transfer the
ownership thereof [subject of the sale] at the
time it is delivered." Here, delivery of ownership
is no longer possible. It has become impossible.
15

In this case, the sale by CDB to Lim of the property
mortgaged in 1983 by Rodolfo Guansing must, therefore,
be deemed a nullity for CDB did not have a valid title to
the said property. To be sure, CDB never acquired a valid
title to the property because the foreclosure sale, by virtue
of which, the property had been awarded to CDB as
highest bidder, is likewise void since the mortgagor was
not the owner of the property foreclosed.
A foreclosure sale, though essentially a "forced sale," is
still a sale in accordance with Art. 1458 of the Civil Code,
under which the mortgagor in default, the forced seller,
becomes obliged to transfer the ownership of the thing
sold to the highest bidder who, in turn, is obliged to pay
therefor the bid price in money or its equivalent. Being a
sale, the rule that the seller must be the owner of the
thing sold also applies in a foreclosure sale. This is the
reason Art. 2085
16
of the Civil Code, in providing for the
essential requisites of the contract of mortgage and
pledge, requires, among other things, that the mortgagor
or pledgor be the absolute owner of the thing pledged or
mortgaged, in anticipation of a possible foreclosure sale
should the mortgagor default in the payment of the loan.
There is, however, a situation where, despite the fact that
the mortgagor is not the owner of the mortgaged
property, his title being fraudulent, the mortgage contract
and any foreclosure sale arising therefrom are given effect
by reason of public policy. This is the doctrine of "the
mortgagee in good faith" based on the rule that all
persons dealing with property covered by a Torrens
Certificate of Title, as buyers or mortgagees, are not
required to go beyond what appears on the face of the
title.
17
The public interest in upholding the indefeasibility
of a certificate of title, as evidence of the lawful ownership
of the land or of any encumbrance thereon, protects a
buyer or mortgagee who, in good faith, relied upon what
appears on the face of the certificate of title.
This principle is cited by petitioners in claiming that, as a
mortgagee bank, it is not required to make a detailed
investigation of the history of the title of the property
given as security before accepting a mortgage.
We are not convinced, however, that under the
circumstances of this case, CDB can be considered a
mortgagee in good faith. While petitioners are not
expected to conduct an exhaustive investigation on the
history of the mortgagor's title, they cannot be excused
from the duty of exercising the due diligence required of
banking institutions. In Tomas v. Tomas,
18
we noted that it
is standard practice for banks, before approving a loan, to
send representatives to the premises of the land offered
as collateral and to investigate who are real owners
thereof, noting that banks are expected to exercise more
care and prudence than private individuals in their
dealings, even those involving registered lands, for their
business is affected with public interest. We held thus:
We, indeed, find more weight and vigor in a
doctrine which recognizes a better right for the
innocent original registered owner who obtained
his certificate of title through perfectly legal and
regular proceedings, than one who obtains his
certificate from a totally void one, as to prevail
over judicial pronouncements to the effect that
one dealing with a registered land, such as a
purchaser, is under no obligation to look beyond
the certificate of title of the vendor, for in the
latter case, good faith has yet to be established
by the vendee or transferee, being the most
essential condition, coupled with valuable
consideration, to entitle him to respect for his
newly acquired title even as against the holder
of an earlier and perfectly valid title. There might
be circumstances apparent on the face of the
certificate of title which could excite suspicion as
to prompt inquiry, such as when the transfer is
not by virtue of a voluntary act of the original
registered owner, as in the instant case, where it
was by means of a self-executed deed of extra-
judicial settlement, a fact which should be noted
on the face of Eusebia Tomas certificate of title.
Failing to make such inquiry would hardly be
consistent with any pretense of good faith,
which the appellant bank invokes to claim the
right to be protected as a mortgagee, and for the
reversal of the judgment rendered against it by
the lower court.
19

In this case, there is no evidence that CDB observed its
duty of diligence in ascertaining the validity of Rodolfo
Guansing's title. It appears that Rodolfo Guansing obtained
his fraudulent title by executing an Extra-Judicial
Settlement of the Estate With Waiver where he made it
appear that he and Perfecto Guansing were the only
surviving heirs entitled to the property, and that Perfecto
had waived all his rights thereto. This self-executed deed
should have placed CDB on guard against any possible
defect in or question as to the mortgagor's title. Moreover,
the alleged ocular inspection report
20
by CDB's
representative was never formally offered in evidence.
Indeed, petitioners admit that they are aware that the
subject land was being occupied by persons other than
Rodolfo Guansing and that said persons, who are the heirs
of Perfecto Guansing, contest the title of Rodolfo.
21

II.
The sale by CDB to Lim being void, the question now arises
as to who, if any, among the parties was at fault for the
nullity of the contract. Both the trial court and the
appellate court found petitioners guilty of fraud, because
on June 16, 1988, when Lim was asked by CDB to pay the
10% option money, CDB already knew that it was no
longer the owner of the said property, its title having been
cancelled.
22
Petitioners contend that: (1) such finding of
the appellate court is founded entirely on speculation and
conjecture; (2) neither CDB nor FEBTC was a party in the
case where the mortgagor's title was cancelled; (3) CDB is
not privy to any problem among the Guansings; and (4)
the final decision cancelling the mortgagor's title was not
annotated in the latter's title.
As a rule, only questions of law may be raised in a petition
for review, except in circumstances where questions of
fact may be properly raised.
23
Here, while petitioners raise
these factual issues, they have not sufficiently shown that
the instant case falls under any of the exceptions to the
above rule. We are thus bound by the findings of fact of
the appellate court. In any case, we are convinced of
petitioners' negligence in approving the mortgage
application of Rodolfo Guansing.
III.
We now come to the civil effects of the void contract of
sale between the parties. Article 1412(2) of the Civil Code
provides:
If the act in which the unlawful or forbidden
cause consists does not constitute a criminal
offense, the following rules shall be observed:
x x x x x x x x x
(2) When only one of the contracting parties is at
fault, he cannot recover what he has given by
reason of the contract, or ask for the fulfillment
of what has been promised him. The other, who
is not at fault, may demand the return of what
he has given without any obligation to comply
with his promise.
Private respondents are thus entitled to recover the
P30,000,00 option money paid by them. Moreover, since
the filing of the action for damages against petitioners
amounted to a demand by respondents for the return of
their money, interest thereon at the legal rate should be
computed from August 29, 1989, the date of filing of Civil
Case No. Q-89-2863, not June 17, 1988, when petitioners
accepted the payment. This is in accord with our ruling
inCastillo v. Abalayan
24
that in case of avoid sale, the seller
has no right whatsoever to keep the money paid by virtue
thereof and should refund it, with interest at the legal
rate, computed from the date of filing of the complaint
until fully paid. Indeed, Art. 1412(2) which provides that
the non-guilty party "may demand the return of what he
has given" clearly implies that without such prior demand,
the obligation to return what was given does not become
legally demandable.
Considering CDB's negligence, we sustain the award of
moral damages on the basis of Arts. 21 and 2219 of the
Civil Code and our ruling in Tan v. Court of Appeals
25
that
moral damages may be recovered even if a bank's
negligence is not attended with malice and bad faith. We
find, however, that the sum of P250,000.00 awarded by
the trial court is excessive. Moral damages are only
intended to alleviate the moral suffering undergone by
private respondent, not to enrich them at the expenses of
the petitioners.
26
Accordingly, the award of moral
damages must be reduced to P50,000.00.
Likewise, the award of P50,000.00 as exemplary damages,
although justified under Art. 2232 of the Civil Code, is
excessive and should be reduced to P30,000.00. The award
of P30,000.00 attorney's fees based on Art. 2208, pars. 1,
2, 5 and 11 of the Civil Code should similarly be reduced to
P20,000.00.
WHEREFORE, the decision of the Court of Appeals is
AFFIRMED with the MODIFICATION as to the award of
damages as above stated.1wphi1.nt
SO ORDERED.

SECOND DIVISION

HEIRS OF SALVADOR HERMOSILLA, namely:
ADELAIDA H. DOLLETON, RUBEN HERMOSILLA,
LOLITA H. DE LA VEGA, ERLINDA H. INOVIO, CELIA H.
VIVIT, ZENAIDA H. ACHOY, PRECILLA H. LIMPIAHOY,
and EDGARDO HERMOSILLA,
Petitioners,


-versus-


Spouses JAIME REMOQUILLO and LUZ REMOQUILLO,
Respondents.
G.R. No. 167320

Present:

QUISUMBING, Chairperson,
CARPIO,
CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.



Promulgated:


January 30, 2007
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- - - - - - - - - - - - - x

D E C I S I O N

CARPIO MORALES, J.:

Petitioners Heirs of Salvador Hermosilla,
namely: Adelaida H. Dolleton, Ruben Hermosilla, Lolita H.
de la
Vega, Erlinda H. Inovio,
[1]
Celia
[2]
H. Vivit, Zenaida H. Achoy,
Precilla
[3]
H. Limpiahoy, and Edgardo Hermosilla, assail the
Court of Appeals Decision
[4]
dated September 29, 2004
which reversed the trial courts decision in their favor and
accordingly dismissed their complaint.
Subject of the controversy is a 65-square meter
portion of a lot located in Poblacion, San Pedro, Laguna.

On August 31, 1931, the Republic of
the Philippines acquired through purchase the San
Pedro Tunasan Homesite.

Apolinario Hermosilla (Apolinario), who was
occupying a lot in San Pedro Tunasan Homesite until his
death in 1964, caused the subdivision of the lot into two,
Lot 12 with an area of 341 square meters, and Lot 19 with
an area of 341 square meters of which the 65 square
meters subject of this controversy form part.

On April 30, 1962, Apolinario executed a Deed of
Assignment transferring possession of Lot 19 in favor of his
grandson, herein respondent
Jaime Remoquillo (Jaime). As the Land Tenure
Administration (LTA) later found that Lot 19 was still
available for disposition to qualified applicants, Jaime,
being its actual occupant, applied for its acquisition before
the LTA on May 10, 1963.

On July 8, 1963, Apolinario conveyed Lot 12 to
his son Salvador Hermosilla (Salvador), Jaimes uncle.

Salvador later filed an application to
purchase Lot 12 which was awarded to him by the defunct
Land Authority on December 16, 1971.

On February 10, 1972, Jaime and his
uncle Salvador forged a
Kasunduan ng Paglipat Ng Karapatan sa Isang Lagay na L
upang Solar (Kasunduan) whereby Jaime
transferred ownership of the 65 square meters (the
questioned property) in favor of Salvador.

After Apolinario died, his daughter
Angela Hermosilla filed a protest before the Land
Authority, which became the National Housing Authority
(NHA),
[5]
contending that as an heir of the deceased, she is
also entitled to Lots 12 and 19. By Resolution of June 10,
1981, the NHA dismissed the protest.

The NHA later awarded on March 16, 1986 Lot
19 to Jaime for which he and his wife were issued a title,
Transfer Certificate of Title No. T-156296, on September
15, 1987.
[6]


On May 25, 1992, petitioners filed an action for
Annulment of Title on the ground of fraud with damages
against Jaime and his spouse, together with the Register of
Deeds, before the Regional Trial Court (RTC) of Bian,
Laguna, alleging that by virtue of the Kasunduan executed
in 1972, Jaime had conveyed to his uncle Salvador the
questioned propertypart of Lot 19 covered by TCT No. T-
156296 which was issued in 1987.

By Decision
[7]
of May 11, 1999, the RTC of Bian,
Laguna, Branch 25, found the Kasunduan a perfected
contract of sale, there being a meeting of the minds upon
an identified object and upon a specific price, and that
ownership over the questioned property had already been
transferred and delivered to Salvador.

On the alleged failure of consideration of
the Kasunduan, the trial court held that the same did not
render the contract void, but merely allowed an action for
specific performance. The dispositive portion of the trial
courts Decision reads:

WHEREFORE, judgment is
hereby rendered declaring plaintiffs as
co-owners of the 65 square meters of
the 341 square meters covered by TCT
T-156296, registered in the name of
defendants. The Court hereby directs
the Register of Deeds of
Laguna, Calamba Branch, to cancel said
Transfer Certificate of Title, and in lieu
thereof, to issue another [to] plaintiffs
[as] co-owners of the above portion.

No pronouncement as to
costs.

SO
ORDERED.
[8]
(Underscoring supplied)


The Court of Appeals, reversing the decision of
the trial court, held that the Kasunduan was void because
at the time of its execution in 1972, the Republic of the
Philippines was still the owner of Lot 19, hence, no
right thereover was transmitted by Jaime who was
awarded the Lot in 1986, and consequently no right was
transmitted by Salvador through succession to
petitioners. And it found no evidence of fraud in Jaimes
act of having Lot 19, including the questioned property,
registered in his and his wifes name in 1987.

At all events, the appellate court held that the
action had prescribed, it having been filed in 1992, more
than four years from the issuance to Jaime and his wife of
the Transfer Certificate of Title.

Hence, the present petition for review on
certiorari.

Petitioners argue that the application of the law
on prescription would perpetrate fraud and spawn
injustice, they citing Cometa v. Court of Appeals;
[9]
and
that at any rate, prescription does not lie against a co-
owner. Cometa involves a different factual milieu
concerning the right of redemption, however. And
petitioners contention that prescription does not lie
against a co-owner fails because only the title covering the
questioned property, which petitioners claim to solely
own, is being assailed.

While this Court finds that the action is, contrary
to the appellate courts ruling, not barred by the statute of
limitations, it is still dismissible as discussed below.

Albeit captioned as one for Annulment of Title,
the Complaint ultimately seeks the reconveyance of the
property.

From the allegations of the Complaint,
petitioners seek the reconveyance of the property based
on implied trust. The prescriptive period for
the reconveyance of fraudulently registered real property
is 10 years, reckoned from the date of the issuance of the
certificate of title,
[10]
if the plaintiff is not in possession,
but imprescriptible if he is in possession of the property.

An action for reconveyance based on
an implied trust prescribes in ten
years. The ten-year prescriptive
period applies only if there is an
actual need to reconvey the property
as when the plaintiff is not in
possession of the property. However,
if the plaintiff, as the real owner of the
property also remains in possession of
the property, the prescriptive period to
recover the title and possession of the
property does not run against him. In
such a case, an action
for reconveyance, if nonetheless filed,
would be in the nature of a suit for
quieting of title, an action that
is imprescriptible.
[11]
(Emphasis and
underscoring supplied)


It is undisputed that petitioners houses occupy
the questioned property and that respondents have not
been in possession thereof.
[12]
Since there was no actual
need to reconvey the property as petitioners remained in
possession thereof, the action took the nature of a suit for
quieting of title, it having been filed to enforce an alleged
implied trust after Jaime refused to segregate title
over Lot 19. One who is in actual possession of a piece of
land claiming to be the owner thereof may wait until his
possession is disturbed or his title is attacked before taking
steps to vindicate his right.
[13]
From the body of the
complaint, this type of action denotes imprescriptibility.

As priorly stated, however, when
the Kasunduan was executed in 1972 by Jaime in favor
of Salvador petitioners predecessor-in-interest Lot 19,
of which the questioned property forms part, was still
owned by the
Republic. Nemo dat quod non habet.
[14]
Nobody can give
what he does not possess. Jaime could not thus have
transferred anything to Salvador via the Kasunduan.

Claiming exception to the rule, petitioners posit
that at the time the Kasunduan was executed by Jaime in
1972, his application which was filed in 1963 for the award
to him of Lot 19 was still pending, hence,
the Kasunduan transferred to Salvador Jaimes vested right
to purchase the same, in support of which they cite a law
on estoppel, Art. 1434 of the Civil Code, which provides
that *w+hen a person who is not the owner of a thing sells
or alienates and delivers it and later, the seller or grantor
acquires title thereto, such title passes by operation of law
to the buyer or grantee.
[15]


Petitioners reliance on Article 1434 of the Civil
Code does not lie. The principles of estoppel apply insofar
as they are not in conflict with the provisions of the Civil
Code, the Code of Commerce, the Rules of Court
and special laws.
[16]


Land Authority Administrative Order No. 4
(1967), RULES AND REGULATIONS GOVERNING
DISPOSITION OF THE LAGUNA SETTLEMENT PROJECT IN
SAN PEDRO, LAGUNA, proscribes the conveyance of the
privilege or preference to purchase a land from the San
Pedro Tunasan project before it is awarded to a tenant
orbona fide occupant, thus:

SEC. 6. Privilege of Preference to
Purchase Intransferable; Waiver or
Forfeiture Thereof. From the date of
acquisition of the estate by the
Government and before issuance of
the Order of Award, no tenant or bona
fide occupant in whose favor the land
may be sold shall transfer or
encumber the privilege or preference
to purchase the land, and any transfer
or encumbrance made in violation
hereof shall be null and
void: Provided, however, That such
privilege or preference may be waived
or forfeited only in favor of the Land
Authority . . .
[17]
(Italics in the original,
emphasis and underscoring supplied)


Petitioners insistence on any right to the
property under the Kasunduan thus fails.

*T+he transfer became one in violation
of law (the rules of the PHHC being
promulgated in pursuance of law have
the force of law) and therefore
void ab initio. Hence, appellant
acquired no right over the lot from a
contract void ab initio, no rights are
created. Estoppel, as postulated by
petitioner, will not apply for it cannot
be predicated on an illegal act. It is
generally considered that as between
the parties to a contract, validity
cannot be given to it by estoppel if it
is prohibited by law or is against
public policy.
[18]
(Emphasis and
underscoring supplied)


Petitioners go on to postulate that if
the Kasunduan is void, it follows that the 1962 Deed of
Assignment executed by Apolinario in favor of Jaime is
likewise void to thus deprive the latter of any legal basis
for his occupation and acquisition of Lot 19.

Petitioners position fails. Petitioners lose sight
of the fact that, as reflected above, Jaime acquired Lot 19
in his own right, independently of the Deed of
Assignment.

In another vein, since the property was
previously a public land, petitioners have no personality to
impute fraud or misrepresentation against the State or
violation of the law.
[19]
If the title was in fact fraudulently
obtained, it is the State which should file the suit to
recover the property through the Office of the Solicitor
General. The title originated from a grant by the
government, hence, its cancellation is a matter between
the grantor and the grantee.
[20]


At all events, for an action
for reconveyance based on fraud to prosper, the plaintiff
must prove by clear and convincing evidence not only his
title to the property but also the fact of fraud. Fraud is
never presumed. Intentional acts to deceive and deprive
another of his right, or in some manner injure him must be
specifically alleged and proved by the plaintiff by clear and
convincing evidence.
[21]
Petitioners failed to discharge this
burden, however.







WHEREFORE, the petition is, in light of the
foregoing ratiocination, DENIED.

SO ORDERED.

THIRD DIVISION


HEIRS OF ARTURO
REYES, represented by
Evelyn R. San
Buenaventura,
Petitio
ners,




- versus -




ELENA SOCCO-BELTRAN,
Res
pondent .
G. R. No. 176474


Present:

YNARES-
SANTIAGO,J.,
Chairper
son,
AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.

Promulgated:

November 27, 2008
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- - - - - - x


D E C I S I O N


CHICO-NAZARIO, J.:


This is a Petition for Review on Certiorari under Rule
45 of the Rules of Court, assailing the Decision
[1]
dated 31
January 2006 rendered by the Court of Appeals in CA-G.R.
SP No. 87066, which affirmed the Decision
[2]
dated 30 June
2003 of the Office of the President, in O.P. Case No. 02-A-
007, approving the application of respondent ElenaSocco-
Beltran to purchase the subject property.

The subject property in this case is a parcel of
land originally identified as Lot No. 6-B, situated in Zamora
Street, Dinalupihan, Bataan, with a total area of 360
square meters. It was originally part of a larger parcel of
land, measuring 1,022 square meters, allocated to the
Spouses
Marcelo Laquian and Constancia Socco (Spouses Laquian),
who paid for the same with Japanese money. When
Marcelo died, the property was left to his
wife Constancia. Upon Constancias subsequent death,
she left the original parcel of land, along with her other
property, with her heirs her siblings,
namely: Filomena Eliza Socco, Isabel Socco de Hipolito,
Miguel R. Socco, and Elena Socco-Beltran.
[3]
Pursuant to
an unnotarized document entitled Extrajudicial
Settlement of the Estate of the
Deceased Constancia R. Socco, executed
by Constancias heirs sometime in 1965, the parcel of land
was partitioned into three lotsLot No. 6-A, Lot No. 6-B,
and Lot No. 6-C.
[4]
The subject property, Lot No. 6-B, was
adjudicated to respondent, but no title had been issued in
her name.

On 25 June 1998, respondent Elena Socco-
Beltran filed an application for the purchase of Lot No. 6-B
before the Department of Agrarian Reform (DAR), alleging
that it was adjudicated in her favor in the extra-judicial
settlement of Constancia Soccos estate.
[5]


Petitioners herein, the heirs of the late Arturo
Reyes, filed their protest to respondents petition before
the DAR on the ground that the subject property was sold
by respondents brother, Miguel R. Socco, in favor of their
father, Arturo Reyes, as evidenced by the Contract to Sell,
dated 5 September 1954, stipulating that:
[6]


That I am one of the co-heirs
of the Estate of the
deceased Constancia Socco; and that I
am to inherit as such a portion of her
lot consisting of Four Hundred Square
Meters (400) more or less located on
the (sic) Zamora St., Municipality
of Dinalupihan, Province of Bataan,
bounded as follows:

x x x x

That for or in consideration of
the sum of FIVE PESOS (P5.00) per
square meter, hereby sell, convey and
transfer by way of this conditional
sale the said 400 sq.m. more or less
unto Atty. Arturo C. Reyes, his heirs,
administrator and assigns x x x.
(Emphasis supplied.)


Petitioners averred that they took physical possession of
the subject property in 1954 and had been uninterrupted
in their possession of the said property since then.

Legal Officer Brigida Pinlac of the
DAR Bataan Provincial Agrarian Reform Office conducted
an investigation, the results of which were contained in
her Report/ Recommendation dated 15 April 1999. Other
than recounting the afore-mentioned facts, Legal
Officer Pinlac also made the following findings in her
Report/Recommendation:
[7]


Further investigation was
conducted by the undersigned and
based on the documentary evidence
presented by both parties, the
following facts were gathered: that
the house of [the] Reyes family is
adjacent to the landholding in question
and portion of the subject property
consisting of about 15 meters [were]
occupied by the heirs of Arturo Reyes
were a kitchen and bathroom [were]
constructed therein; on the remaining
portion a skeletal form made of hollow
block[s] is erected and according to the
heirs of late Arturo Reyes, this was
constructed since the year (sic) 70s at
their expense; that construction of the
said skeletal building was not
continued and left unfinished which
according to the affidavit of
Patricia Hipolito the Reyes family
where (sic) prevented by
Elena Socco in their attempt of
occupancy of the subject landholding;
(affidavit of Patricia Hipolito is hereto
attached as Annex F); that
Elena Socco cannot physically and
personally occupy the subject property
because of the skeletal building made
by the Reyes family who have been
requesting that they be paid for the
cost of the construction and the same
be demolished at the expense of
Elena Socco; that according to
Elena Socco, [she] is willing to waive
her right on the portion where [the]
kitchen and bathroom is (sic)
constructed but not the whole of Lot
[No.] 6-B adjudicated to her; that the
Reyes family included the subject
property to the sworn statement of
value of real properties filed before the
municipality of Dinalupihan, Bataan,
copies of the documents are hereto
attached as Annexes G and H; that
likewise ElenaSocco has been
continuously and religiously paying the
realty tax due on the said property.


In the end, Legal Officer Pinlac recommended
the approval of respondents petition for issuance of title
over the subject property, ruling that respondent was
qualified to own the subject property pursuant to Article
1091 of the New Civil Code.
[8]
Provincial Agrarian Reform
Officer (PARO) Raynor Taroy concurred in the said
recommendation in his Indorsement dated 22 April
1999.
[9]


In an Order dated 15 September 1999, DAR
Regional Director Nestor R. Acosta, however, dismissed
respondents petition for issuance of title over the subject
property on the ground that respondent was not an actual
tiller and had abandoned the said property for 40 years;
hence, she had already renounced her right to recover the
same.
[10]
Thedispositive part of the Order reads:

1. DISMISSING the claims of
Elena Socco-Beltran, duly represented
by Myrna Socco for lack of merit;

2. ALLOCATING Lot No. 6-B
under Psd-003-008565 with an area of
360 square meters, more or less,
situated Zamora
Street, Dinalupihan, Bataan, in favor of
the heirs of Arturo Reyes.

3. ORDERING the
complainant to refrain from any act
tending to disturb the peaceful
possession of herein respondents.

4. DIRECTING the MARO
of Dinalupihan, Bataan to process the
pertinent documents for the issuance
of CLOA in favor of the heirs of Arturo
Reyes.
[11]



Respondent filed a Motion for Reconsideration
of the foregoing Order, which was denied by DAR Regional
Director Acosta in another Order dated 15 September
1999.
[12]


Respondent then appealed to the Office of the
DAR Secretary. In an Order, dated 9 November 2001, the
DAR Secretary reversed the Decision of DAR Regional
Director Acosta after finding that neither petitioners
predecessor-in-interest, Arturo Reyes, nor respondent was
an actual occupant of the subject property. However,
since it was respondent who applied to purchase the
subject property, she was better qualified to own said
property as opposed to petitioners, who did not at all
apply to purchase the same. Petitioners were further
disqualified from purchasing the subject property because
they were not landless. Finally, during the investigation of
Legal Officer Pinlac, petitioners requested that respondent
pay them the cost of the construction of the skeletal house
they built on the subject property. This was construed by
the DAR Secretary as a waiver by petitioners of their right
over the subject property.
[13]
In the said Order, the DAR
Secretary ordered that:

WHEREFORE, premises
considered, the September 15, 1999
Order is hereby SET ASIDE and a new
Order is hereby issued APPROVING the
application to purchase Lot [No.] 6-B of
ElenaSocco-Beltran.
[14]



Petitioners sought remedy from the Office of the
President by appealing the 9 November 2001 Decision of
the DAR Secretary. Their appeal was docketed as O.P.
Case No. 02-A-007. On 30 June 2003, the Office of the
President rendered its Decision denying petitioners
appeal and affirming the DAR Secretarys
Decision.
[15]
The fallo of the Decision reads:

WHEREFORE, premises
considered, judgment appealed from
is AFFIRMED and the instant
appeal DISMISSED.
[16]



Petitioners Motion for Reconsideration was
likewise denied by the Office of the President in a
Resolution dated 30 September 2004.
[17]
In the said
Resolution, the Office of the President noted that
petitioners failed to allege in their motion the date when
they received the Decision dated 30 June 2003. Such date
was material considering that the petitioners Motion for
Reconsideration was filed only on 14 April 2004, or almost
nine months after the promulgation of the decision sought
to be reconsidered. Thus, it ruled that petitioners Motion
for Reconsideration, filed beyond fifteen days from receipt
of the decision to be reconsidered, rendered the said
decision final and executory.

Consequently, petitioners filed an appeal before
the Court of Appeals, docketed as CA-G.R. SP No.
87066. Pending the resolution of this case, the DAR
already issued on8 July 2005 a Certificate of Land
Ownership Award (CLOA) over the subject property in
favor of the respondents niece and representative,
Myrna Socco-Beltran.
[18]
Respondent passed away on 21
March 2001,
[19]
but the records do not ascertain the
identity of her legal heirs and her legatees.

Acting on CA-G.R. SP No. 87066, the Court of
Appeals subsequently promulgated its Decision, dated 31
January 2006, affirming the Decision dated 30 June
2003 of the Office of the President. It held that petitioners
could not have been actual occupants of the subject
property, since actual occupancy requires the positive act
of occupying and tilling the land, not just the introduction
of an unfinished skeletal structure thereon. The Contract
to Sell on which petitioners based their claim over the
subject property was executed by Miguel Socco, who was
not the owner of the said property and, therefore, had no
right to transfer the same. Accordingly, the Court of
Appeals affirmed respondents right over the subject
property, which was derived form the
original allocatees thereof.
[20]
The fallo of the said
Decision reads:

WHEREFORE, premises
considered, the instant PETITION FOR
REVIEW is DISMISSED. Accordingly,
the Decision dated 30 June 2003 and
the Resolution dated 30 December
2004 both issued by the Office of the
President are
hereby AFFIRMED in toto.
[21]



The Court of Appeals denied petitioners Motion
for Reconsideration of its Decision in a Resolution dated 16
August 2006.
[22]


Hence, the present Petition, wherein petitioners
raise the following issues:

I

WHETHER OR NOT THE HONORABLE
COURT OF APPEALS ERRED IN
AFFIRMING THE FINDINGS OF THE
OFFICE OF THE PRESIDENT THAT THE
SUBJECT LOT IS VACANT AND THAT
PETITIONERS ARE NOT ACTUAL
OCCUPANTS THEREOF BY DENYING
THE LATTERS CLAIM THAT THEY HAVE
BEEN IN OPEN, CONTINUOUS,
EXCLUSIVE,NOTORIOUS AND AVDERSE
POSSESSION THEREOF SINCE 1954 OR
FOR MORE THAN THIRTY (30) YEARS.


II

WHETHER OR NOT THE COURT OF
APPEALS ERRED WHEN IT HELD THAT
PETITIONERS CANNOT LEGALLY
ACQUIRE THE SUBJECT PROPERTY AS
THEY ARE NOT CONSIDERED LANDLESS
AS EVIDENCED BY A TAX
DECLARATION.

III

WHETHER OR NOT THE COURT OF
APPEALS ERRED IN HOLDING THAT
WHATEVER RESERVATION WE HAVE
OVER THE RIGHT OF MYRNA SOCCO TO
SUCCEED WAS ALREADY SETTLED
WHEN NO LESS THAN MIGUEL SOCCO
(PREDECESSOR-IN INTEREST OF HEREIN
PETITIONERS) EXECUTED HIS WAIVER
OF RIGHT DATED APRIL 19, 2005 OVER
THE SUBJECT PROPERTY IN FAVOR OF
MYRNA SOCCO.

IV

WHETHER OR NOT THE COURT OF
APPEALS ERRED WHEN IT DENIED
PETITIONERS MOTION FOR NEW TRIAL
THEREBY BRUSHING ASIDE THE FACT
THAT MYRNA V. SOCCO-ARIZO
GROSSLY MISREPRESENTED IN HER
INFORMATION SHEET OF
BENEFICIARIES AND APPLICATION TO
PURCHASE LOT IN LANDED ESTATES
THAT SHE IS A FILIPINO CITIZEN, WHEN
IN TRUTH AND IN FACT, SHE IS
ALREADY AN AMERICAN NATIONAL.
[23]



The main issue in this case is whether or not
petitioners have a better right to the subject property over
the respondent. Petitioners claim over the subject
property is anchored on the Contract to Sell executed
between Miguel Socco and Arturo Reyes on 5 September
1954. Petitioners additionally allege that they and their
predecessor-in-interest, Arturo Reyes, have been in
possession of the subject lot since 1954 for an
uninterrupted period of more than 40 years.

The Court is unconvinced.

Petitioners cannot derive title to the subject
property by virtue of the Contract to Sell. It was
unmistakably stated in the Contract and made clear to
both parties thereto that the vendor, Miguel R. Socco, was
not yet the owner of the subject property and was merely
expecting to inherit the same as his share as a co-heir
of Constancias estate.
[24]
It was also declared in the
Contract itself that Miguel R. Soccos conveyance of the
subject to the buyer, Arturo Reyes, was a conditional
sale. It is, therefore, apparent that the sale of the subject
property in favor of Arturo Reyes was conditioned upon
the event that Miguel Socco would actually inherit and
become the owner of the said property. Absent such
occurrence, Miguel R. Socco never acquired ownership of
the subject property which he could validly transfer to
Arturo Reyes.

Under Article 1459 of the Civil Code on contracts
of sale, The thing must be licit and the vendor must have
a right to transfer ownership thereof at the time it is
delivered. The law specifically requires that the vendor
must have ownership of the property at the time it is
delivered. Petitioners claim that the property was
constructively delivered to them in 1954 by virtue of the
Contract to Sell. However, as already pointed out by this
Court, it was explicit in the Contract itself that, at the time
it was executed, Miguel R. Socco was not yet the owner of
the property and was only expecting to inherit it. Hence,
there was no valid sale from which ownership of the
subject property could have transferred from
Miguel Socco to Arturo Reyes. Without acquiring
ownership of the subject property, Arturo Reyes also could
not have conveyed the same to his heirs, herein
petitioners.

Petitioners, nevertheless, insist that they
physically occupied the subject lot for more than 30 years
and, thus, they gained ownership of the property through
acquisitive prescription, citing Sandoval v. Insular
Government
[25]
and San Miguel Corporation v. Court of
Appeals.
[26]


In Sandoval, petitioners therein sought the
enforcement of Section 54, paragraph 6 of Act No. 926,
otherwise known as the Land Registration Act, which
required -- for the issuance of a certificate of title to
agricultural public lands -- the open, continuous, exclusive,
and notorious possession and occupation of the same in
good faith and under claim of ownership for more than ten
years. After evaluating the evidence presented, consisting
of the testimonies of several witnesses and proof that
fences were constructed around the property, the Court in
the afore-stated case denied the petition on the ground
that petitioners failed to prove that they exercised acts of
ownership or were in open, continuous, and peaceful
possession of the whole land, and had caused it to be
enclosed to the exclusion of other persons. It further
decreed that whoever claims such possession shall
exercise acts of dominion and ownership which cannot be
mistaken for the momentary and accidental enjoyment of
the property.
[27]


In San Miguel Corporation, the Court reiterated the
rule that the open, exclusive, and undisputed possession
of alienable public land for the period prescribed by law
creates the legal fiction whereby land ceases to be public
land and is, therefore, private property. It stressed,
however, that the occupation of the land for 30 years must
beconclusively established. Thus, the evidence offered by
petitioner therein tax declarations, receipts, and the sole
testimony of the applicant for registration, petitioners
predecessor-in-interest who claimed to have occupied the
land before selling it to the petitioner were considered
insufficient to satisfy the quantum of proof required to
establish the claim of possession required for acquiring
alienable public land.
[28]


As in the two aforecited cases, petitioners herein
were unable to prove actual possession of the subject
property for the period required by law. It was
underscored in San Miguel Corporation that the open,
continuous, exclusive, and notorious occupation of
property for more than 30 years must be no less
than conclusive, such quantum of proof being necessary to
avoid the erroneous validation of actual fictitious claims of
possession over the property that is being claimed.
[29]


In the present case, the evidence presented by
the petitioners falls short of being conclusive. Apart from
their self-serving statement that they took possession of
the subject property, the only proof offered to support
their claim was a general statement made in the
letter
[30]
dated 4 February 2002 of Barangay Captain
Carlos Gapero, certifying that Arturo Reyes was the
occupant of the subject property since peace time and at
present. The statement is rendered doubtful by the fact
that as early as 1997, when respondent filed her petition
for issuance of title before the DAR, Arturo Reyes had
already died and was already represented by his heirs,
petitioners herein.

Moreover, the certification given
by Barangay Captain Gapero that Arturo Reyes occupied
the premises for an unspecified period of time, i.e., since
peace time until the present, cannot prevail over Legal
Officer Pinlacs more particular findings in her
Report/Recommendation. Legal Officer Pinlac reported
that petitioners admitted that it was only in the 1970s that
they built the skeletal structure found on the subject
property. She also referred to the averments made by
Patricia Hipolito in an Affidavit,
[31]
dated 26 February 1999,
that the structure was left unfinished because respondent
prevented petitioners from occupying the subject
property. Such findings disprove petitioners claims that
their predecessor-in-interest, Arturo Reyes, had been in
open, exclusive, and continuous possession of the
property since 1954. The adverted findings were the
result of Legal OfficerPinlacs investigation in the course of
her official duties, of matters within her expertise which
were later affirmed by the DAR Secretary, the Office of the
President, and the Court of Appeals. The factual findings
of such administrative officer, if supported by evidence,
are entitled to great respect.
[32]


In contrast, respondents claim over the subject
property is backed by sufficient evidence. Her
predecessors-in-interest, the spouses Laquian, have been
identified as the original allocatees who have fully paid for
the subject property. The subject property was allocated
to respondent in the extrajudicial settlement by the heirs
of Constanciasestate. The document entitled Extra-
judicial Settlement of the Estate of the
Deceased Constancia Socco was not notarized and, as a
private document, can only bind the parties
thereto. However, its authenticity was never put into
question, nor was its legality impugned. Moreover,
executed in 1965 by the heirs of Constancia Socco, or
more than 30 years ago, it is an ancient document which
appears to be genuine on its face and therefore its
authenticity must be upheld.
[33]
Respondent has
continuously paid for the realty tax due on the subject
property, a fact which, though not conclusive, served to
strengthen her claim over the property.
[34]


From the foregoing, it is only proper that
respondents claim over the subject property be
upheld. This Court must, however, note that the Order of
the DAR Secretary, dated 9 November 2001, which
granted the petitioners right to purchase the property, is
flawed and may be assailed in the proper
proceedings. Records show that the DAR affirmed that
respondents predecessors-in-interest,
Marcelo Laquian and Constancia Socco, having been
identified as the original allocatee, have fully paid for the
subject property as provided under an agreement to
sell. By the nature of a contract or agreement to sell, the
title over the subject property is transferred to the vendee
upon the full payment of the stipulated
consideration. Upon the full payment of the purchase
price, and absent any showing that the allocatee violated
the conditions of the agreement, ownership of the subject
land should be conferred upon the allocatee.
[35]
Since the
extrajudicial partition
transferring Constancia Soccos interest in the subject land
to the respondent is valid, there is clearly no need for the
respondent to purchase the subject property, despite the
application for the purchase of the property erroneously
filed by respondent. The only act which remains to be
performed is the issuance of a title in the name of her legal
heirs, now that she is deceased.

Moreover, the Court notes that the records have
not clearly established the right of respondents
representative, Myrna Socco-Arizo, over the subject
property. Thus, it is not clear to this Court why the DAR
issued on 8 July 2005 a CLOA
[36]
over the subject property
in favor of Myrna Socco-Arizo. Respondents death does
not automatically transmit her rights to the property to
Myrna Socco-Beltran. Respondent only authorized
Myrna Socco-Arizo, through a Special Power of
Attorney
[37]
dated 10 March 1999, to represent her in the
present case and to administer the subject property for
her benefit. There is nothing in the Special Power of
Attorney to the effect that Myrna Socco-Arizo can take
over the subject property as owner thereof upon
respondents death. That Miguel V. Socco, respondents
only nephew, the son of the late Miguel R. Socco, and
MyrnaSocco-Arizos brother, executed a waiver of his right
to inherit from respondent, does not automatically mean
that the subject property will go to Myrna Socco-Arizo,
absent any proof that there is no other qualified heir to
respondents estate. Thus, this Decision does not in any
way confirm the issuance of the CLOA in favor of
Myrna Socco-Arizo, which may be assailed in appropriate
proceedings.

IN VIEW OF THE FOREGOING, the instant
Petition is DENIED. The assailed Decision of the Court of
Appeals in CA-G.R. SP No. 87066, promulgated on 31
January 2006, is AFFIRMED with MODIFICATION. This
Court withholds the confirmation of the validity of title
over the subject property in the name of Myrna Socco-
Arizo pending determination of respondents legal heirs in
appropriate proceedings. No costs.

SO ORDERED.