G.R. No.

L-29972 January 26, 1976

ROSARIO CARBONELL, petitioner,

vs.
HONORABLE COURT OF APPEALS, JOSE PONCIO, EMMA INFANTE and
RAMON INFANTE, respondents.

MAKASIAR, J.

Petitioner seeks a review of the resolution of the Court of Appeals (Special Division of
Five) dated October 30, 1968, reversing its decision of November 2, 1967 (Fifth Division),
and its resolution of December 6, 1968 denying petitioner's motion for reconsideration.

The dispositive part of the challenged resolution reads:

Wherefore, the motion for reconsideration filed on behalf of appellee Emma

Infante, is hereby granted and the decision of November 2, 1967, is hereby
annulled and set aside. Another judgement shall be entered affirming in
toto that of the court a quo, dated January 20, 1965, which dismisses the
plaintiff's complaint and defendant's counterclaim.

Without costs.

The facts of the case as follows:

Prior to January 27, 1955, respondent Jose Poncio, a native of the Batanes Islands, was the
owner of the parcel of land herein involve with improvements situated at 179 V. Agan
St., San Juan, Rizal, having an area of some one hundred ninety-five (195) square meters,
more or less, covered by TCT No. 5040 and subject to mortgage in favor of the Republic
Savings Bank for the sum of P1,500.00. Petitioner Rosario Carbonell, a cousin and adjacent
neighbor of respondent Poncio, and also from the Batanes Islands, lived in the adjoining
lot at 177 V. Agan Street.

Both petitioners Rosario Carbonell and respondent Emma Infante offered to buy the said
lot from Poncio (Poncio's Answer, p. 38, rec. on appeal).

Respondent Poncio, unable to keep up with the installments due on the mortgage,
approached petitioner one day and offered to sell to the latter the said lot, excluding the
house wherein respondent lived. Petitioner accepted the offer and proposed the price of
P9.50 per square meter. Respondent Poncio, after having secured the consent of his wife
and parents, accepted the price proposed by petitioner, on the condition that from the
purchase price would come the money to be paid to the bank.
Petitioner and respondent Jose Poncio then went to the Republic Savings Bank and
secured the consent of the President thereof for her to pay the arrears on the mortgage
and to continue the payment of the installments as they fall due. The amount in arrears
reached a total sum of P247.26. But because respondent Poncio had previously told her
that the money, needed was only P200.00, only the latter amount was brought by
petitioner constraining respondent Jose Poncio to withdraw the sum of P47.00 from his
bank deposit with Republic Savings Bank. But the next day, petitioner refunded to Poncio
the sum of P47.00.

On January 27, 1955, petitioner and respondent Poncio, in the presence of a witness, made
and executed a document in the Batanes dialect, which, translated into English, reads:

CONTRACT FOR ONE HALF LOT WHICH I BOUGHT FROM

JOSE PONCIO

Beginning today January 27, 1955, Jose Poncio can start living on the lot
sold by him to me, Rosario Carbonell, until after one year during which
time he will not pa anything. Then if after said one can he could not find
an place where to move his house, he could still continue occupying the
site but he should pay a rent that man, be agreed.

(Sgd) JOSE PONCIO

(Sgd.) ROSARIO CARBONELL
(Sgd) CONSTANCIO MEONADA
Witness

(Pp. 6-7 rec. on appeal).

Thereafter, petitioner asked Atty. Salvador Reyes, also from the Batanes Islands, to
prepare the formal deed of sale, which she brought to respondent Poncio together with
the amount of some P400.00, the balance she still had to pay in addition to her assuming
the mortgaged obligation to Republic Savings Bank.

Upon arriving at respondent Jose Poncio's house, however, the latter told petitioner that
he could not proceed any more with the sale, because he had already given the lot to
respondent Emma Infants; and that he could not withdraw from his deal with respondent
Mrs. Infante, even if he were to go to jail. Petitioner then sought to contact respondent
Mrs. Infante but the latter refused to see her.

On February 5, 1955, petitioner saw Emma Infante erecting a all around the lot with a
gate.
Petitioner then consulted Atty. Jose Garcia, who advised her to present an adverse claim
over the land in question with the Office of the Register of Deeds of Rizal. Atty. Garcia
actually sent a letter of inquiry to the Register of Deeds and demand letters to private
respondents Jose Poncio and Emma Infante.

In his answer to the complaint Poncio admitted "that on January 30, 1955, Mrs. Infante
improved her offer and he agreed to sell the land and its improvements to her for
P3,535.00" (pp. 38-40, ROA).

In a private memorandum agreement dated January 31, 1955, respondent Poncio indeed
bound himself to sell to his corespondent Emma Infante, the property for the sum of
P2,357.52, with respondent Emma Infante still assuming the existing mortgage debt in
favor of Republic Savings Bank in the amount of P1,177.48. Emma Infante lives just
behind the houses of Poncio and Rosario Carbonell.

On February 2, 1955, respondent Jose Poncio executed the formal deed of sale in favor of
respondent Mrs. Infante in the total sum of P3,554.00 and on the same date, the latter paid
Republic Savings Bank the mortgage indebtedness of P1,500.00. The mortgage on the lot
was eventually discharged.

Informed that the sale in favor of respondent Emma Infante had not yet been registered,
Atty. Garcia prepared an adverse claim for petitioner, who signed and swore to an
registered the same on February 8, 1955.

The deed of sale in favor of respondent Mrs. Infante was registered only on February 12,
1955. As a consequence thereof, a Transfer Certificate of Title was issued to her but with
the annotation of the adverse claim of petitioner Rosario Carbonell.

Respondent Emma Infante took immediate possession of the lot involved, covered the
same with 500 cubic meters of garden soil and built therein a wall and gate, spending the
sum of P1,500.00. She further contracted the services of an architect to build a house; but
the construction of the same started only in 1959 — years after the litigation actually
began and during its pendency. Respondent Mrs. Infante spent for the house the total
amount of P11,929.00.

On June 1, 1955, petitioner Rosario Carbonell, thru counsel, filed a second amended
complaint against private respondents, praying that she be declared the lawful owner of
the questioned parcel of land; that the subsequent sale to respondents Ramon R. Infante
and Emma L. Infante be declared null and void, and that respondent Jose Poncio be
ordered to execute the corresponding deed of conveyance of said land in her favor and
for damages and attorney's fees (pp. 1-7, rec. on appeal in the C.A.).
Respondents first moved to dismiss the complaint on the ground, among others, that
petitioner's claim is unenforceable under the Statute of Frauds, the alleged sale in her
favor not being evidenced by a written document (pp. 7-13, rec. on appeal in the C.A.);
and when said motion was denied without prejudice to passing on the question raised
therein when the case would be tried on the merits (p. 17, ROA in the C.A.), respondents
filed separate answers, reiterating the grounds of their motion to dismiss (pp. 18-23, ROA
in the C.A.).

During the trial, when petitioner started presenting evidence of the sale of the land in
question to her by respondent Poncio, part of which evidence was the agreement written
in the Batanes dialect aforementioned, respondent Infantes objected to the presentation
by petitioner of parole evidence to prove the alleged sale between her and respondent
Poncio. In its order of April 26, 1966, the trial court sustained the objection and dismissed
the complaint on the ground that the memorandum presented by petitioner to prove said
sale does not satisfy the requirements of the law (pp. 31-35, ROA in the C.A.).

From the above order of dismissal, petitioner appealed to the Supreme Court (G.R. No.
L-11231) which ruled in a decision dated May 12, 1958, that the Statute of Frauds, being
applicable only to executory contracts, does not apply to the alleged sale between
petitioner and respondent Poncio, which petitioner claimed to have been partially
performed, so that petitioner is entitled to establish by parole evidence "the truth of this
allegation, as well as the contract itself." The order appealed from was thus reversed, and
the case remanded to the court a quo for further proceedings (pp. 26-49, ROA in the C.A.).

After trial in the court a quo; a decision was, rendered on December 5, 1962, declaring the
second sale by respondent Jose Poncio to his co-respondents Ramon Infante and Emma
Infante of the land in question null and void and ordering respondent Poncio to execute
the proper deed of conveyance of said land in favor of petitioner after compliance by the
latter of her covenants under her agreement with respondent Poncio (pp. 5056, ROA in
the C.A.).

On January 23, 1963, respondent Infantes, through another counsel, filed a motion for re-
trial to adduce evidence for the proper implementation of the court's decision in case it
would be affirmed on appeal (pp. 56-60, ROA in the C.A.), which motion was opposed
by petitioner for being premature (pp. 61-64, ROA in the C.A.). Before their motion for
re-trial could be resolved, respondent Infantes, this time through their former counsel,
filed another motion for new trial, claiming that the decision of the trial court is contrary
to the evidence and the law (pp. 64-78, ROA in the C.A.), which motion was also opposed
by petitioner (pp. 78-89, ROA in the C.A.).

The trial court granted a new trial (pp. 89-90, ROA in the C.A.), at which re-hearing only
the respondents introduced additional evidence consisting principally of the cost of
improvements they introduced on the land in question (p. 9, ROA in the C.A.).
After the re-hearing, the trial court rendered a decision, reversing its decision of
December 5, 1962 on the ground that the claim of the respondents was superior to the
claim of petitioner, and dismissing the complaint (pp. 91-95, ROA in the C.A.), From this
decision, petitioner Rosario Carbonell appealed to the respondent Court of Appeals (p.
96, ROA in the C.A.).

On November 2, 1967, the Court of Appeals (Fifth Division composed of Justices Magno
Gatmaitan, Salvador V. Esguerra and Angle H. Mojica, speaking through Justice Magno
Gatmaitan), rendered judgment reversing the decision of the trial court, declaring
petitioner therein, to have a superior right to the land in question, and condemning the
defendant Infantes to reconvey to petitioner after her reimbursement to them of the sum
of P3,000.00 plus legal interest, the land in question and all its improvements (Appendix
"A" of Petition).

Respondent Infantes sought reconsideration of said decision and acting on the motion for
reconsideration, the Appellate Court, three Justices (Villamor, Esguerra and Nolasco) of
Special Division of Five, granted said motion, annulled and set aside its decision of
November 2, 1967, and entered another judgment affirming in toto the decision of the
court a quo, with Justices Gatmaitan and Rodriguez dissenting (Appendix "B" of Petition).

Petitioner Rosario Carbonell moved to reconsider the Resolution of the Special Division
of Five, which motion was denied by Minute Resolution of December 6, 1968 (but with
Justices Rodriguez and Gatmaitan voting for reconsideration) [Appendix "C" of Petition].

Hence, this appeal by certiorari.

Article 1544, New Civil Code, which is decisive of this case, recites:

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 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 (emphasis
supplied).

It is essential that the buyer of realty must act in good faith in registering his deed of sale
to merit the protection of the second paragraph of said Article 1544.
Unlike the first and third paragraphs of said Article 1544, which accord preference to the
one who first takes possession in good faith of personal or real property, the second
paragraph directs that ownership of immovable property should be recognized in favor
of one "who in good faith first recorded" his right. Under the first and third paragraph, good
faith must characterize the act of anterior registration (DBP vs. Mangawang, et al., 11
SCRA 405; Soriano, et al. vs. Magale, et al., 8 SCRA 489).

If there is no inscription, what is decisive is prior possession in good faith. If there is

inscription, as in the case at bar, prior registration in good faith is a pre-condition to
superior title.

When Carbonell bought the lot from Poncio on January 27, 1955, she was the only buyer
thereof and the title of Poncio was still in his name solely encumbered by bank mortgage
duly annotated thereon. Carbonell was not aware — and she could not have been aware
— of any sale of Infante as there was no such sale to Infante then. Hence, Carbonell's prior
purchase of the land was made in good faith. Her good faith subsisted and continued to
exist when she recorded her adverse claim four (4) days prior to the registration of
Infantes's deed of sale. Carbonell's good faith did not cease after Poncio told her on
January 31, 1955 of his second sale of the same lot to Infante. Because of that information,
Carbonell wanted an audience with Infante, which desire underscores Carbonell's good
faith. With an aristocratic disdain unworthy of the good breeding of a good Christian and
good neighbor, Infante snubbed Carbonell like a leper and refused to see her. So
Carbonell did the next best thing to protect her right — she registered her adversed claim
on February 8, 1955. Under the circumstances, this recording of her adverse claim should
be deemed to have been done in good faith and should emphasize Infante's bad faith
when she registered her deed of sale four (4) days later on February 12, 1955.

Bad faith arising from previous knowledge by Infante of the prior sale to Carbonell is
shown by the following facts, the vital significance and evidenciary effect of which the
respondent Court of Appeals either overlooked of failed to appreciate:

(1) Mrs. Infante refused to see Carbonell, who wanted to see Infante after she was
informed by Poncio that he sold the lot to Infante but several days before Infante
registered her deed of sale. This indicates that Infante knew — from Poncio and from the
bank — of the prior sale of the lot by Poncio to Carbonell. Ordinarily, one will not refuse
to see a neighbor. Infante lives just behind the house of Carbonell. Her refusal to talk to
Carbonell could only mean that she did not want to listen to Carbonell's story that she
(Carbonell) had previously bought the lot from Poncio.

(2) Carbonell was already in possession of the mortgage passbook [not Poncio's saving
deposit passbook — Exhibit "1" — Infantes] and Poncio's copy of the mortgage contract,
when Poncio sold the lot Carbonell who, after paying the arrearages of Poncio, assumed
the balance of his mortgaged indebtedness to the bank, which in the normal course of
business must have necessarily informed Infante about the said assumption by Carbonell
of the mortgage indebtedness of Poncio. Before or upon paying in full the mortgage
indebtedness of Poncio to the Bank. Infante naturally must have demanded from Poncio
the delivery to her of his mortgage passbook as well as Poncio's mortgage contract so that
the fact of full payment of his bank mortgage will be entered therein; and Poncio, as well
as the bank, must have inevitably informed her that said mortgage passbook could not
be given to her because it was already delivered to Carbonell.

If Poncio was still in possession of the mortgage passbook and his copy of the mortgage
contract at the time he executed a deed of sale in favor of the Infantes and when the
Infantes redeemed his mortgage indebtedness from the bank, Poncio would have
surrendered his mortgage passbook and his copy of the mortgage contract to the Infantes,
who could have presented the same as exhibits during the trial, in much the same way
that the Infantes were able to present as evidence Exhibit "1" — Infantes, Poncio's savings
deposit passbook, of which Poncio necessarily remained in possession as the said deposit
passbook was never involved in the contract of sale with assumption of mortgage. Said
savings deposit passbook merely proves that Poncio had to withdraw P47.26, which
amount was tided to the sum of P200.00 paid by Carbonell for Poncio's amortization
arrearages in favor of the bank on January 27, 1955; because Carbonell on that day
brought with her only P200.00, as Poncio told her that was the amount of his arrearages
to the bank. But the next day Carbonell refunded to Poncio the sum of P47.26.

(3) The fact that Poncio was no longer in possession of his mortgage passbook and that
the said mortgage passbook was already in possession of Carbonell, should have
compelled Infante to inquire from Poncio why he was no longer in possession of the
mortgage passbook and from Carbonell why she was in possession of the same (Paglago,
et. al vs. Jara et al 22 SCRA 1247, 1252-1253). The only plausible and logical reason why
Infante did not bother anymore to make such injury , w because in the ordinary course
of business the bank must have told her that Poncio already sold the lot to Carbonell who
thereby assumed the mortgage indebtedness of Poncio and to whom Poncio delivered
his mortgage passbook. Hoping to give a semblance of truth to her pretended good faith,
Infante snubbed Carbonell's request to talk to her about the prior sale to her b Poncio of
the lot. As aforestated, this is not the attitude expected of a good neighbor imbued with
Christian charity and good will as well as a clear conscience.

(4) Carbonell registered on February 8, 1955 her adverse claim, which was accordingly
annotated on Poncio's title, four [4] days before Infante registered on February 12, 1955
her deed of sale executed on February 2, 1955. Here she was again on notice of the prior
sale to Carbonell. Such registration of adverse claim is valid and effective (Jovellanos vs.
Dimalanta, L-11736-37, Jan. 30, 1959, 105 Phil. 1250-51).

(5) In his answer to the complaint filed by Poncio, as defendant in the Court of First
Instance, he alleged that both Mrs. Infante and Mrs. Carbonell offered to buy the lot at
P15.00 per square meter, which offers he rejected as he believed that his lot is worth at
least P20.00 per square meter. It is therefore logical to presume that Infante was told by
Poncio and consequently knew of the offer of Carbonell which fact likewise should have
put her on her guard and should have compelled her to inquire from Poncio whether or
not he had already sold the property to Carbonell.

As recounted by Chief Justice Roberto Concepcion, then Associate Justice, in the

preceding case of Rosario Carbonell vs. Jose Poncio, Ramon Infante and Emma Infante
(1-11231, May 12, 1958), Poncio alleged in his answer:

... that he had consistently turned down several offers, made by plaintiff, to
buy the land in question, at P15 a square meter, for he believes that it is
worth not less than P20 a square meter; that Mrs. Infante, likewise, tried to
buy the land at P15 a square meter; that, on or about January 27, 1955,
Poncio was advised by plaintiff that should she decide to buy the property
at P20 a square meter, she would allow him to remain in the property for
one year; that plaintiff then induced Poncio to sign a document, copy of which if
probably the one appended to the second amended complaint; that Poncio signed it
'relying upon the statement of the plaintiff that the document was a permit for him
to remain in the premises in the event defendant decided to sell the property to the
plaintiff at P20.00 a square meter'; that on January 30, 1955, Mrs. Infante
improved her offer and agreed to sell the land and its improvement to her for
P3,535.00; that Poncio has not lost 'his mind,' to sell his property, worth at
least P4,000, for the paltry sum P1,177.48, the amount of his obligation to
the Republic Saving s Bank; and that plaintiff's action is barred by the
Statute of Frauds. ... (pp. 38-40, ROA, emphasis supplied).

II

EXISTENCE OF THE PRIOR SALE TO CARBONELL

DULY ESTABLISHED

(1) In his order dated April 26, 1956 dismissing the complaint on the ground that the
private document Exhibit "A" executed by Poncio and Carbonell and witnessed by
Constancio Meonada captioned "Contract for One-half Lot which I Bought from Jose
Poncio," was not such a memorandum in writing within the purview of the Statute of
Frauds, the trial judge himself recognized the fact of the prior sale to Carbonell when he
stated that "the memorandum in question merely states that Poncio is allowed to stay in the
property which he had sold to the plaintiff. There is no mention of the reconsideration, a
description of the property and such other essential elements of the contract of sale. There
is nothing in the memorandum which would tend to show even in the slightest manner
that it was intended to be an evidence of contract sale. On the contrary, from the terms of
the memorandum, it tends to show that the sale of the property in favor of the plaintiff is already
an accomplished act. By the very contents of the memorandum itself, it cannot therefore, be
considered to be the memorandum which would show that a sale has been made by
Poncio in favor of the plaintiff" (p. 33, ROA, emphasis supplied). As found by the trial
court, to repeat the said memorandum states "that Poncio is allowed to stay in the property
which he had sold to the plaintiff ..., it tends to show that the sale of the property in favor of the
plaintiff is already an accomplished act..."

(2) When the said order was appealed to the Supreme Court by Carbonell in the previous
case of Rosario Carbonell vs. Jose Poncio, Ramon Infante and Emma Infante
(L-11231, supra), Chief Justice Roberto Concepcion, then Associate Justice, speaking for a
unanimous Court, reversed the aforesaid order of the trial court dismissing the
complaint, holding that because the complaint alleges and the plaintiff claims that the
contract of sale was partly performed, the same is removed from the application of the
Statute of Frauds and Carbonell should be allowed to establish by parol evidence the
truth of her allegation of partial performance of the contract of sale, and further stated:

Apart from the foregoing, there are in the case at bar several circumstances
indicating that plaintiff's claim might not be entirely devoid of factual basis.
Thus, for instance, Poncio admitted in his answer that plaintiff had offered several
times to purchase his land.

Again, there is Exhibit A, a document signed by the defendant. It is in the Batanes

dialect, which, according to plaintiff's uncontradicted evidence, is the one spoken
by Poncio, he being a native of said region. Exhibit A states that Poncio would stay
in the land sold by him to plaintiff for one year, from January 27, 1955, free of
charge, and that, if he cannot find a place where to transfer his house
thereon, he may remain upon. Incidentally, the allegation in Poncio's answer to
the effect that he signed Exhibit A under the belief that it "was a permit for him to
remain in the premises in the" that "he decided to sell the property" to the plaintiff
at P20 a sq. m." is, on its face, somewhat difficult to believe. Indeed, if he had not
decided as yet to sell the land to plaintiff, who had never increased her offer of P15
a square meter, there was no reason for Poncio to get said permit from her. Upon
the other hand, if plaintiff intended to mislead Poncio, she would have caused
Exhibit A to be drafted, probably, in English , instead of taking the trouble of seeing
to it that it was written precisely in his native dialect, the Batanes.
Moreover, Poncio's signature on Exhibit A suggests that he is neither illiterate
nor so ignorant as to sign document without reading its contents, apart from the
fact that Meonada had read Exhibit A to him and given him a copy thereof, before
he signed thereon, according to Meonada's uncontradicted testimony.

Then, also, defendants say in their brief:

The only allegation in plaintiff's complaint that bears any

relation to her claim that there has been partial performance
 of the supposed contract of sale, is the notation of the sum of
P247.26 in the bank book of defendant Jose Poncio. The noting
or jotting down of the sum of P247.26 in the bank book of Jose
Poncio does not prove the fact that the said amount was the
purchase price of the property in question. For all we knew,
the sum of P247.26 which plaintiff claims to have paid to the
Republic Savings Bank for the account of the defendant,
assuming that the money paid to the Republic Savings Bank
came from the plaintiff, was the result of some usurious loan
or accomodation, rather than earnest money or part payment
of the land. Neither is it competent or satisfactory evidence to
prove the conveyance of the land in question the fact that the
bank book account of Jose Poncio happens to be in the
possession of the plaintiff. (Defendants-Appellees' brief, pp.
25-26).

How shall We know why Poncio's bank deposit book is in plaintiffs possession, or
whether there is any relation between the P247.26 entry therein and the partial
payment of P247.26 allegedly made by plaintiff to Poncio on account of the price of
his land, if we do not allow the plaintiff to explain it on the witness stand? Without
expressing any opinion on the merits of plaintiff's claim, it is clear, therefore, that
she is entitled , legally as well as from the viewpoint of equity, to an opportunity to
introduce parol evidence in support of the allegations of her second amended
complaint. (pp. 46-49, ROA, emphasis supplied).

(3) In his first decision of December 5, 1962 declaring null and void the sale in favor of
the Infantes and ordering Poncio to execute a deed of conveyance in favor of Carbonell,
the trial judge found:

... A careful consideration of the contents of Exh. 'A' show to the satisfaction of
the court that the sale of the parcel of land in question by the defendant Poncio in
favor of the plaintiff was covered therein and that the said Exh. "a' was also
executed to allow the defendant to continue staying in the premises for the stated
period. It will be noted that Exh. 'A' refers to a lot 'sold by him to me' and having
been written originally in a dialect well understood by the defendant Poncio, he
signed the said Exh. 'A' with a full knowledge and consciousness of the terms and
consequences thereof. This therefore, corroborates the testimony of the plaintiff
Carbonell that the sale of the land was made by Poncio. It is further pointed out
that there was a partial performance of the verbal sale executed by Poncio in favor
of the plaintiff, when the latter paid P247.26 to the Republic Savings Bank on
account of Poncio's mortgage indebtedness. Finally, the possession by the plaintiff
of the defendant Poncio's passbook of the Republic Savings Bank also adds
credibility to her testimony. The defendant contends on the other hand that
the testimony of the plaintiff, as well as her witnesses, regarding the sale of
 the land made by Poncio in favor of the plaintiff is inadmissible under the
provision of the Statute of Fraud based on the argument that the note Exh.
"A" is not the note or memorandum referred to in the to in the Statute of
Fraud. The defendants argue that Exh. "A" fails to comply with the
requirements of the Statute of Fraud to qualify it as the note or
memorandum referred to therein and open the way for the presentation of
parole evidence to prove the fact contained in the note or
memorandum. The defendant argues that there is even no description of the lot
referred to in the note, especially when the note refers to only one half lot. With
respect to the latter argument of the Exhibit 'A', the court has arrived at the
conclusion that there is a sufficient description of the lot referred to in Exh. 'A' as
none other than the parcel of land occupied by the defendant Poncio and where he
has his improvements erected. The Identity of the parcel of land involved herein is
sufficiently established by the contents of the note Exh. "A". For a while, this
court had that similar impression but after a more and thorough
consideration of the context in Exh. 'A' and for the reasons stated above, the
Court has arrived at the conclusion stated earlier (pp. 52-54, ROA, emphasis
supplied).

(4) After re-trial on motion of the Infantes, the trial Judge rendered on January 20, 1965
another decision dismissing the complaint, although he found

1. That on January 27, 1955, the plaintiff purchased from the defendant Poncio a
parcel of land with an area of 195 square meters, more or less, covered by TCT
No. 5040 of the Province of Rizal, located at San Juan del Monte, Rizal, for
the price of P6.50 per square meter;

2. That the purchase made by the plaintiff was not reduced to writing except
for a short note or memorandum Exh. A, which also recited that the
defendant Poncio would be allowed to continue his stay in the premises,
among other things, ... (pp. 91-92, ROA, emphasis supplied).

From such factual findings, the trial Judge confirms the due execution of Exhibit "A", only
that his legal conclusion is that it is not sufficient to transfer ownership (pp. 93-94, ROA).

(5) In the first decision of November 2, 1967 of the Fifth Division of the Court of Appeals
composed of Justices Esguerra (now Associate Justice of the Supreme Court), Gatmaitan
and Mojica, penned by Justice Gatmaitan, the Court of Appeals found that:

... the testimony of Rosario Carbonell not having at all been attempted to be
disproved by defendants, particularly Jose Poncio, and corroborated as it is by the
private document in Batanes dialect, Exhibit A, the testimony being to the effect
that between herself and Jose there had been celebrated a sale of the property
excluding the house for the price of P9.50 per square meter, so much so that on faith
 of that, Rosario had advanced the sum of P247.26 and binding herself to pay unto
Jose the balance of the purchase price after deducting the indebtedness to the Bank
and since the wording of Exhibit A, the private document goes so far as to
describe their transaction as one of sale, already consummated between them, note
the part tense used in the phrase, "the lot sold by him to me" and going so far
even as to state that from that day onwards, vendor would continue to live
therein, for one year, 'during which time he will not pay anything' this can only
mean that between Rosario and Jose, there had been a true contract of sale,
consummated by delivery constitutum possession, Art. 1500, New Civil
Code;vendor's possession having become converted from then on, as a mere tenant
of vendee, with the special privilege of not paying rental for one year, — it is true
that the sale by Jose Poncio to Rosario Carbonell corroborated documentarily only
by Exhibit A could not have been registered at all, but it was a valid contract
nonetheless, since under our law, a contract sale is consensual, perfected by mere
consent, Couto v. Cortes, 8 Phil 459, so much so that under the New Civil
Code, while a sale of an immovable is ordered to be reduced to a public
document, Art. 1358, that mandate does not render an oral sale of realty
invalid, but merely incapable of proof, where still executory and action is
brought and resisted for its performance, 1403, par. 2, 3; but where already
wholly or partly executed or where even if not yet, it is evidenced by a
memorandum, in any case where evidence to further demonstrate is
presented and admitted as the case was here, then the oral sale becomes
perfectly good, and becomes a good cause of action not only to reduce it to the form
of a public document, but even to enforce the contract in its entirety, Art. 1357;
and thus it is that what we now have is a case wherein on the one hand Rosario
Carbonell has proved that she had an anterior sale, celebrated in her favor on 27
January, 1955, Exhibit A, annotated as an adverse claim on 8 February, 1955, and
on other, a sale is due form in favor of Emma L. Infante on 2 February, 1955,
Exhibit 3-Infante, and registered in due form with title unto her issued on
12 February, 1955; the vital question must now come on which of these two
sales should prevail; ... (pp. 74-76, rec., emphasis supplied).

(6) In the resolution dated October 30, 1968 penned by then Court of Appeals Justice
Esguerra (now a member of this Court), concurred in by Justices Villamor and Nolasco,
constituting the majority of a Special Division of Five, the Court of Appeals, upon motion
of the Infantes, while reversing the decision of November 2, 1967 and affirming the
decision of the trial court of January 20, 1965 dismissing plaintiff's complaint, admitted the
existence and genuineness of Exhibit "A", the private memorandum dated January 27, 1955,
although it did not consider the same as satisfying "the essential elements of a contract of
sale," because it "neither specifically describes the property and its boundaries, nor
mention its certificate of title number, nor states the price certain to be paid, or contrary
to the express mandate of Articles 1458 and 1475 of the Civil Code.
(7) In his dissent concurred in by Justice Rodriguez, Justice Gatmaitan maintains his
decision of November 2, 1967 as well as his findings of facts therein, and reiterated that
the private memorandum Exhibit "A", is a perfected sale, as a sale is consensual and
consummated by mere consent, and is binding on and effective between the parties. This
statement of the principle is correct [pp. 89-92, rec.].

III

ADEQUATE CONSIDERATION OR PRICE FOR THE SALE

IN FAVOR OF CARBONELL

It should be emphasized that the mortgage on the lot was about to be foreclosed by the
bank for failure on the part of Poncio to pay the amortizations thereon. To forestall the
foreclosure and at the same time to realize some money from his mortgaged lot, Poncio
agreed to sell the same to Carbonell at P9.50 per square meter, on condition that Carbonell
[1] should pay (a) the amount of P400.00 to Poncio and 9b) the arrears in the amount of
P247.26 to the bank; and [2] should assume his mortgage indebtedness. The bank
president agreed to the said sale with assumption of mortgage in favor of Carbonell an
Carbonell accordingly paid the arrears of P247.26. On January 27, 1955, she paid the
amount of P200.00 to the bank because that was the amount that Poncio told her as his
arrearages and Poncio advanced the sum of P47.26, which amount was refunded to him
by Carbonell the following day. This conveyance was confirmed that same day, January
27, 1955, by the private document, Exhibit "A", which was prepared in the Batanes dialect
by the witness Constancio Meonada, who is also from Batanes like Poncio and Carbonell.

The sale did not include Poncio's house on the lot. And Poncio was given the right to
continue staying on the land without paying any rental for one year, after which he
should pay rent if he could not still find a place to transfer his house. All these terms are
part of the consideration of the sale to Carbonell.

It is evident therefore that there was ample consideration, and not merely the sum of
P200.00, for the sale of Poncio to Carbonell of the lot in question.

But Poncio, induced by the higher price offered to him by Infante, reneged on his
commitment to Carbonell and told Carbonell, who confronted him about it, that he would
not withdraw from his deal with Infante even if he is sent to jail The victim, therefore, "of
injustice and outrage is the widow Carbonell and not the Infantes, who without moral
compunction exploited the greed and treacherous nature of Poncio, who, for love of
money and without remorse of conscience, dishonored his own plighted word to
Carbonell, his own cousin.

Inevitably evident therefore from the foregoing discussion, is the bad faith of Emma
Infante from the time she enticed Poncio to dishonor his contract with Carbonell, and
instead to sell the lot to her (Infante) by offering Poncio a much higher price than the price
for which he sold the same to Carbonell. Being guilty of bad faith, both in taking physical
possession of the lot and in recording their deed of sale, the Infantes cannot recover the
value of the improvements they introduced in the lot. And after the filing by Carbonell
of the complaint in June, 1955, the Infantes had less justification to erect a building
thereon since their title to said lot is seriously disputed by Carbonell on the basis of a
prior sale to her.

With respect to the claim of Poncio that he signed the document Exhibit "A" under the
belief that it was a permit for him to remain in the premises in ease he decides to sell the
property to Carbonell at P20.00 per square meter, the observation of the Supreme Court
through Mr. Chief Justice Concepcion in G.R. No. L-11231, supra, bears repeating:

... Incidentally, the allegation in Poncio's answer to the effect that he signed
Exhibit A under the belief that it 'was a permit for him to remain in the
premises in the event that 'he decided to sell the property' to the plaintiff at
P20.00 a sq. m is, on its face, somewhat difficult to believe. Indeed, if he had
not decided as yet to sell that land to plaintiff, who had never increased her
offer of P15 a square meter, there as no reason for Poncio to get said permit
from her. Upon the they if plaintiff intended to mislead Poncio, she would
have Exhibit A to be drafted, probably, in English, instead of taking the
trouble of seeing to it that it was written precisely in his native dialect, the
Batanes. Moreover, Poncio's signature on Exhibit A suggests that he is
neither illiterate nor so ignorant as to sign a document without reading its
contents, apart from the fact that Meonada had read Exhibit A to him-and
given him a copy thereof, before he signed thereon, according to Meonada's
uncontradicted testimony. (pp. 46-47, ROA).

As stressed by Justice Gatmaitan in his first decision of November 2, 1965, which he

reiterated in his dissent from the resolution of the majority of the Special Division. of Five
on October 30, 1968, Exhibit A, the private document in the Batanes dialect, is a valid
contract of sale between the parties, since sale is a consensual contract and is perfected
by mere consent (Couto vs. Cortes, 8 Phil. 459). Even an oral contract of realty is all
between the parties and accords to the vendee the right to compel the vendor to execute
the proper public document As a matter of fact, Exhibit A, while merely a private
document, can be fully or partially performed, to it from the operation of the statute of
frauds. Being a all consensual contract, Exhibit A effectively transferred the possession of
the lot to the vendee Carbonell by constitutum possessorium (Article 1500, New Civil
Code); because thereunder the vendor Poncio continued to retain physical possession of
the lot as tenant of the vendee and no longer as knew thereof. More than just the signing
of Exhibit A by Poncio and Carbonell with Constancio Meonada as witness to fact the
contract of sale, the transition was further confirmed when Poncio agreed to the actual
payment by at Carbonell of his mortgage arrearages to the bank on January 27, 1955 and
by his consequent delivery of his own mortgage passbook to Carbonell. If he remained
owner and mortgagor, Poncio would not have surrendered his mortgage passbook to'
Carbonell.

IV

IDENTIFICATION AND DESCRIPTION OF THE DISPUTED LOT IN THE

MEMORANDUM EXHIBIT "A"

The claim that the memorandum Exhibit "A" does not sufficiently describe the disputed
lot as the subject matter of the sale, was correctly disposed of in the first decision of the
trial court of December 5, 1962, thus: "The defendant argues that there is even no
description of the lot referred to in the note (or memorandum), especially when the note
refers to only one-half lot. With respect to the latter argument of the defendant, plaintiff
points out that one- half lot was mentioned in Exhibit 'A' because the original description
carried in the title states that it was formerly part of a bigger lot and only segregated later.
The explanation is tenable, in (sic) considering the time value of the contents of Exh. 'A',
the court has arrived at the conclusion that there is sufficient description of the lot
referred to in Exh. As none other than the parcel of lot occupied by the defendant Poncio
and where he has his improvements erected. The Identity of the parcel of land involved
herein is sufficiently established by the contents of the note Exh. 'A'. For a while, this
court had that similar impression but after a more and through consideration of the
context in Exh. 'A' and for the reasons stated above, the court has arrived to (sic) the
conclusion stated earlier" (pp. 53-54, ROA).

Moreover, it is not shown that Poncio owns another parcel with the same area, adjacent
to the lot of his cousin Carbonell and likewise mortgaged by him to the Republic Savings
Bank. The transaction therefore between Poncio and Carbonell can only refer and does
refer to the lot involved herein. If Poncio had another lot to remove his house, Exhibit A
would not have stipulated to allow him to stay in the sold lot without paying any rent for
one year and thereafter to pay rental in case he cannot find another place to transfer his
house.

While petitioner Carbonell has the superior title to the lot, she must however refund to
respondents Infantes the amount of P1,500.00, which the Infantes paid to the Republic
Savings Bank to redeem the mortgage.

It appearing that the Infantes are possessors in bad faith, their rights to the improvements
they introduced op the disputed lot are governed by Articles 546 and 547 of the New
Civil Code. Their expenses consisting of P1,500.00 for draining the property, filling it with
500 cubic meters of garden soil, building a wall around it and installing a gate and
P11,929.00 for erecting a b ' bungalow thereon, are useful expenditures, for they add to
the value of the property (Aringo vs. Arenas, 14 Phil. 263; Alburo vs. Villanueva, 7 Phil.
277; Valencia vs. Ayala de Roxas, 13 Phil. 45).

Under the second paragraph of Article 546, the possessor in good faith can retain the
useful improvements unless the person who defeated him in his possession refunds him
the amount of such useful expenses or pay him the increased value the land may have
acquired by reason thereof. Under Article 547, the possessor in good faith has also the
right to remove the useful improvements if such removal can be done without damage
to the land, unless the person with the superior right elects to pay for the useful
improvements or reimburse the expenses therefor under paragraph 2 of Article 546.
These provisions seem to imply that the possessor in bad faith has neither the right of
retention of useful improvements nor the right to a refund for useful expenses.

But, if the lawful possessor can retain the improvements introduced by the possessor in
bad faith for pure luxury or mere pleasure only by paying the value thereof at the time
he enters into possession (Article 549 NCC), as a matter of equity, the Infantes, although
possessors in bad faith, should be allowed to remove the aforesaid improvements, unless
petitioner Carbonell chooses to pay for their value at the time the Infantes introduced
said useful improvements in 1955 and 1959. The Infantes cannot claim reimbursement for
the current value of the said useful improvements; because they have been enjoying such
improvements for about two decades without paying any rent on the land and during
which period herein petitioner Carbonell was deprived of its possession and use.

WHEREFORE, THE DECISION OF THE SPECIAL DIVISION OF FIVE OF THE COURT

OF APPEALS OF OCTOBER 30, 1968 IS HEREBY REVERSED; PETITIONER ROSARIO
CARBONELL IS HEREBY DECLARED TO HAVE THE SUPERIOR RIGHT TO THE
LAND IN QUESTION AND IS HEREBY DIRECTED TO REIMBURSE TO PRIVATE
RESPONDENTS INFANTES THE SUM OF ONE THOUSAND FIVE HUNDRED PESOS
(P1,500.00) WITHIN THREE (3) MONTHS FROM THE FINALITY OF THIS DECISION;
AND THE REGISTER OF DEEDS OF RIZAL IS HEREBY DIRECTED TO CANCEL
TRANSFER CERTIFICATE OF TITLE NO. 37842 ISSUED IN FAVOR OF PRIVATE
RESPONDENTS INFANTES COVERING THE DISPUTED LOT, WHICH CANCELLED
TRANSFER CERTIFICATE OF TITLE NO. 5040 IN THE NAME OF JOSE PONCIO, AND
TO ISSUE A NEW TRANSFER CERTIFICATE OF TITLE IN FAVOR OF PETITIONER
ROSARIO CARBONELL UPON PRESENTATION OF PROOF OF PAYMENT BY HER
TO THE INFANTES OF THE AFORESAID AMOUNT OF ONE THOUSAND FIVE
HUNDRED PESOS (P1,500.00).

PRIVATE RESPONDENTS INFANTES MAY REMOVE THEIR AFOREMENTIONED

USEFUL IMPROVEMENTS FROM THE LOT WITHIN THREE (3) MONTHS FROM THE
FINALITY OF THIS DECISION, UNLESS THE PETITIONER ROSARIO CARBONELL
ELECTS TO ACQUIRE THE SAME AND PAYS THE INFANTES THE AMOUNT OF
THIRTEEN THOUSAND FOUR HUNDRED TWENTY-NINE PESOS (P13,429.00)
WITHIN THREE (3) MONTHS FROM THE FINALITY OF THIS DECISION. SHOULD
PETITIONER CARBONELL FAIL TO PAY THE SAID AMOUNT WITHIN THE
AFORESTATED PERIOD OF THREE (3) MONTHS FROM THE FINALITY OF THIS
DECISION, THE PERIOD OF THREE (3) MONTHS WITHIN WHICH THE
RESPONDENTS INFANTES MAY REMOVE THEIR AFOREMENTIONED USEFUL
IMPROVEMENTS SHALL COMMENCE FROM THE EXPIRATION OF THE THREE (3)
MONTHS GIVEN PETITIONER CARBONELL TO PAY FOR THE SAID USEFUL
IMPROVEMENTS.

WITH COSTS AGAINST PRIVATE RESPONDENTS.

Castro, C.J, Aquino and Martin, JJ., concur.