Sales Revalida Batch 2

1. Banzon v. Cruz

Facts:

Sometime in 1952, Maximo Sta. Maria obtained crop loans from the Philippine National Bank
(hereinafter referred as the bank). Respondent Associated Insurance Surety Co., Inc. (hereinafter
referred to as Associated) acted as surety of Sta. Maria, filing surety bonds in favor of the bank to
answer for prompt repayment of the loans. Petitioner Antonio R. Banzon and Emilio Ma. Naval in turn
acted as indemnitors of Associated and were obligated to indemnify and hold harmless Associated
from any liability thus acting as surety of the loan. Sta. Maria failed to pay his obligations to the bank,
which accordingly demanded payment from Associated as surety. Instead of paying the bank, Associated
filed a complaint with the CFI of Manila against debtor Sta. Maria and indemnitors Banzon and Naval.
The CFI rendered judgment ordering Sta. Maria, Banzon and Naval “to pay jointly and severally unto
plaintiff for the benefit of the Philippine National Bank”.

According to the Banzons’ petition at bar, sometime in 1965, even before ownership over the two
parcels of land belonging to the Banzons could be consolidated in the name of Associated “in clear
collusion and confederation with (respondent) Pedro Cardenas, allowed and permitted the latter to
execute and levy one of the two parcels of land for a judgment debt of P5,100.00 (of Associated in favor
of Cardenas)” notwithstanding that the property in question was worth P130,000.00 more or less, and
further notwithstanding the fact that said respondent (Associated) knew the property was merely being
held in trust by it for the benefit of the Philippine National Bank and therefore, not being the legal
owner thereof, it cannot validly dispose of it in any manner.” The Cardenas spouses thereafter filed with
the CFI of Rizal a case to secure possession from the Banzons of the lot. The CA rendered judgment
dismissing the petition because it found the same to be allegedly “merely a device to prevent the
execution of a final judgment by the filing of a new suit based upon the same grounds which have
already been interposed and passed upon in the case where the final judgment had already been
rendered”.

Issue: WON the petitioners are entitled to the possession of the property.

Held:

The Court ruled that the petitioners are entitled to a writ restoring the status quo ante. A mandatory
writ shall therefore issue commanding respondent court to forthwith restore petitioners to their
possession of the lot from which they have been removed by enforcement of said respondent court’s
enjoined order of demolition and writ of possession.

When Associated nevertheless prematurely and contrary to the intent and condition of the basic 1957
judgment levied in execution on the two Caloocan City lots of Banzon the interest it acquired was clearly
impressed with a trust character. Such acquisition of Banzon’s properties by Associated was effected, if
not through fraud on Associated’s part, certainly through mistake and there Associated was “by force of
law, considered a trustee of implied trust for the benefit of the person from whom the property comes”
by virtue of Article 1456 of the Code — since Associated not having paid nor having been compelled to
pay the bank had no right in law or equity to so execute the judgment against Banzon as indemnitor.
Had there been no fraudulent concealment or suppression of the fact of such non-payment by
Associated or a mistaken notion just assumed without factual basis that Associted had paid the bank and
was thus entitled to enforce its judgement against Banzon as indemnitor, the writ for execution of the
judgment against Banzon’s properties would not been issued.

Furthermore, Associated’s conduct, upon being sued by the Philippine National Bank directly with the
principal debtor Sta. Maria for collection of the debtmand sentenced by the Pampanga court of first
instance in 1963 (which it did not appeal) to pay the debt in the much lesser amount of only P15,446.44,
excluding interests, in not so discharging its liability notwithstanding that it had already executed its
1957 judgment against Banzon as indemnitor and taken in execution Banzon’s two properties, was
indeed rank fraud. Associated therefore stands legally bound by force of law to now discharge its
implied trust and return Banzon’s properties to him as their true and rightful owner.

2. EDCA Publishing v. Spouses Santos

Facts:

On October 5, 1981, a person identifying himself as Professor Jose Cruz placed an order by telephone
with the petitioner company for 406 books, payable on delivery. EDCA prepared the corresponding
invoice and delivered the books as ordered, for which Cruz issued a personal check covering the
purchase price of P8,995.65. On October 7, 1981, Cruz sold 120 of the books to private respondent
Leonor Santos who, after verifying the seller’s ownership from the invoice he showed her, paid him
P1,700.00. Meanwhile, EDCA having become suspicious over a second order placed by Cruz even before
clearing of his first check, made inquiries with the De la Salle College where he had claimed to be a dean
and was informed that there was no such person in its employ. Further verification revealed that Cruz
had no more account or deposit with the Philippine Amanah Bank, against which he had drawn the
payment check. EDCA then went to the police, which set a trap and arrested Cruz. On the night of the
same date, EDCA sought the assistance of the police which forced their way into the store of the private
respondents and threatened Leonor Santos with prosecution for buying stolen property.

It is the contention of the petitioner that the private respondents have not established their ownership
of the disputed books because they have not even produced a receipt to prove they had bought the
stock.

Issue: WON the petitioner was unlawfully deprived of its movable property.

Held:

The Court ruled against the petitioner. The argument that the private respondents did not acquire the
books in good faith has been dismissed by the lower courts, and the Court agrees. Leonor Santos first
ascertained the ownership of the books from the EDCA invoice showing that they had been sold to Cruz,
who said he was selling them for a discount because he was in financial need. Private respondents are in
the business of buying and selling books and often deal with hard-up sellers who urgently have to part
with their books at reduced prices. To Leonor Santos, Cruz must have been only one of the many such
sellers she was accustomed to dealing with. It is hardly bad faith for anyone in the business of buying
and selling books to buy them at a discount and resell them for a profit.
The petitioner argues that it was, because the impostor acquired no title to the books that he could have
validly transferred to the private respondents. Its reason is that as the payment check bounced for lack
of funds, there was a failure of consideration that nullified the contract of sale between it and Cruz.

The contract of sale is consensual and is perfected once agreement is reached between the parties on
the subject matter and the consideration. According to the Civil Code:

Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the
thing which is the object of the contract and upon the price.

From that moment, the parties may reciprocally demand performance, subject to the provisions
of the law governing the form of contracts.

xxx xxx xxx

Art. 1477. The ownership of the thing sold shall be transferred to the vendee upon the actual or
constructive delivery thereof.

Art. 1478. The parties may stipulate that ownership in the thing shall not pass to the purchaser
until he has fully paid the price.

It is clear from the above provisions, particularly the last one quoted, that ownership in the thing sold
shall not pass to the buyer until full payment of the purchase only if there is a stipulation to that effect.
Otherwise, the rule is that such ownership shall pass from the vendor to the vendee upon the actual or
constructive delivery of the thing sold even if the purchase price has not yet been paid.

Non-payment only creates a right to demand payment or to rescind the contract, or to criminal
prosecution in the case of bouncing checks. But absent the stipulation above noted, delivery of the thing
sold will effectively transfer ownership to the buyer who can in turn transfer it to another.

Actual delivery of the books having been made, Cruz acquired ownership over the books which he could
then validly transfer to the private respondents. The fact that he had not yet paid for them to EDCA was
a matter between him and EDCA and did not impair the title acquired by the private respondents to the
books.

One may well imagine the adverse consequences if the phrase “unlawfully deprived” were to be
interpreted in the manner suggested by the petitioner. A person relying on the seller’s title who buys a
movable property from him would have to surrender it to another person claiming to be the original
owner who had not yet been paid the purchase price therefore. The buyer in the second sale would be
left holding the bag, so to speak, and would be compelled to return the thing bought by him in good
faith without even the right to reimbursement of the amount he had paid for it. It would certainly be
unfair now to make the private respondents bear the prejudice sustained by EDCA as a result of its own
negligence. We cannot see the justice in transferring EDCA’s loss to the Santoses who had acted in good
faith, and with proper care, when they bought the books from Cruz. It is clear that its remedy is not
against the private respondents but against Tomas de la Peña, who has apparently caused all this
trouble. The private respondents have themselves been unduly inconvenienced, and for merely
transacting a customary deal not really unusual in their kind of business. It is they and not EDCA who
have a right to complain.
 3. Philippine Suburban Development Corp., v. Auditor General

Facts:

On June 8, 1960, at a meeting with the Cabinet, the President of the Philippines, acting on the reports of
the Committee created to survey suitable lots for relocating squatters in Manila and suburbs, and of the
Social Welfare Administrator together with the recommendation of the Manager of the Government
Service Insurance System, approved in principle the acquisition by the People's Homesite and Housing
Corporation of the unoccupied portion of the Sapang Palay Estate in Sta. Maria, Bulacan for relocating
the squatters who desire to settle north of Manila, and of another area either in Las Piñas or Parañaque,
Rizal, or Bacoor, Cavite for those who desire to settle south of Manila. The project was to be financed
through the flotation of bonds under the charter of the PHHC in the amount of P4.5 million, the same to
be absorbed by the Government Service Insurance System. The President, through the Executive
Secretary, informed the PHHC of such approval by letter bearing the same date (Annex “B”).

On June 10, 1960, the Board of Directors of the PHHC passed Resolution No. 700 (Annex "C") authorizing
the purchase of the unoccupied portion of the Sapang Palay Estate at P0.45 per square meter "subject
to the following conditions precedent:

xxxx

4. That the contract of sale shall first be approved by the Auditor General pursuant to Executive
Order dated February 3, 1959.

xxxx

On July 13, 1960, the President authorized the floating of bonds under Republic Act Nos. 1000 and 1322
in the amount of P7,500,000.00 to be absorbed by the GSIS, in order to finance the acquisition by the
PHHC of the entire Sapang Palay Estate at a price not to exceed P0.45 per sq. meter.

On December 29, 1960, after an exchange of communications, petitioner Philippine Suburban

The above document was not registered in the Office of the Register of Deeds until March 14, 1961, due
to the fact, petitioner claims, that the PHHC could not at once advance the money needed for
registration expenses.

It appears that as early as the first week of June, 1960, prior to the signing of the deed by the parties,
the PHHC acquired possession of the property, with the consent of petitioner, to enable the said PHHC
to proceed immediately with the construction of roads in the new settlement and to resettle the
squatters and flood victims in Manila who were rendered homeless by the floods or ejected from the
lots which they were then occupying

Issue: WON the presumptive delivery of the property under Article 1498 of the Civil Code does not apply
because of the requirement in the contract that the sale shall first be approved by the Auditor General,
pursuant to the Executive Order dated February 3, 1959 and later by the President, and that the
petitioner should register the deed and secure a new title in the name of the vendee before the
government can be compelled to pay the balance of P1,676,223.00 of the purchase price.

Held:

Where the contract already bears the approval of the President, the action of the Auditor General would
no longer be necessary because under the said Administrative Order, the President has, at any rate, the
final say.

Under the civil law, delivery (tradition) as a mode of transmission of ownership maybe actual (real
tradition) or constructive (constructive tradition). When the sale of real property is made in a public
instrument, the execution thereof is equivalent to the delivery of the thing object of the contract, if from
the deed the contrary does not appear or cannot clearly be inferred.

In other words, there is symbolic delivery of the property subject of the sale by the execution of the
public instrument, unless from the express terms of the instrument, or by clear inference therefrom, this
was not the intention of the parties. Such would be the case, for instance, when a certain date is fixed
for the purchaser to take possession of the property subject of the conveyance, or where, in case of sale
by installments, it is stipulated that until the last installment is made, the title to the property should
remain with the vendor, or when the vendor reserves the right to use and enjoy the property until the
gathering of the pending crops, 4 or where the vendor has no control over the thing sold at the moment
of the sale, and, therefore, its material delivery could not have been made.

In the case at bar, there is no question that the vendor had actually placed the vendee in possession and
control over the thing sold, even before the date of the sale. The condition that petitioner should first
register the deed of sale and secure a new title in the name of the vendee before the latter shall pay the
balance of the purchase price, did not preclude the transmission of ownership. In the absence of an
express stipulation to the contrary, the payment of the purchase price of the goods is not a condition
precedent to the transfer of title to the buyer, but title passes by the delivery of the goods.

We fail to see the merit in respondent's insistence that, although possession was transferred to the
vendee and the deed of sale was executed in a public instrument on December 29, 1960, the vendor still
remains as owner of the property until the deed of sale is actually registered with the Office of the
Register of Deeds, because the land sold is registered under the Torrens System. In a long line of cases
already decided by this Court, the constant doctrine has been that, as between the parties to a contract
of sale, registration is not necessary to make it valid and effective, for actual notice is equivalent to
registration. 7 Indeed, Section 50 of the Land Registration Act provides that, even without the act of
registration, a deed purporting to convey or affect registered land shall operate as a contract between
the parties. The registration is intended to protect the buyer against claims of third persons arising from
subsequent alienations by the vendor, and is certainly not necessary to give effect to the deed of sale, as
between the parties to the contract.
 5. Rosaroso v. Soria

Facts:

Spouses Luis Rosaroso (Luis) and Honorata Duazo (Honorata) acquired several real properties in Daan
Bantayan, Cebu City, including the subject properties. The couple had nine (9) children namely: Hospicio,
Arturo, Florita, Lucila, Eduardo, Manuel, Cleofe, Antonio, and Angelica. On April 25, 1952, Honorata
died. Later on, Luis married Lourdes Pastor Rosaroso (Lourdes).

On January 16, 1995, a complaint for Declaration of Nullity of Documents with Damages was filed by
Luis, as one of the plaintiffs, against his daughter, Lucila R. Soria (Lucila); Lucila's daughter, Laila S.
Solutan (Laila); and Meridian Realty Corporation (Meridian). Due to Luis' untimely death, however, an
amended complaint was filed on January 6, 1996, with the spouse of Laila, Ham Solutan (Ham); and Luis'
second wife, Lourdes, included as defendants.

In the Amended Complaint, it was alleged by petitioners Hospicio D. Rosaroso, Antonio D. Rosaroso
(Antonio), Angelica D. Rosaroso (Angelica), and Cleofe R. Labindao (petitioners) that on November 4,
1991, Luis, with the full knowledge and consent of his second wife, Lourdes, executed the Deed of
Absolute Sale 4 (First Sale) covering the properties with Transfer Certificate of Title (TCT) No. 31852 (Lot
No. 8); TCT. No. 11155 (Lot 19); TCT No. 10885 (Lot No. 22); TCT No. 10886 (Lot No. 23); and Lot Nos.
5665 and 7967, all located at Daanbantayan, Cebu, in their favor.

They also alleged that, despite the fact that the said properties had already been sold to them,
respondent Laila, in conspiracy with her mother, Lucila, obtained the Special Power of Attorney (SPA), 6
dated April 3, 1993, from Luis (First SPA); that Luis was then sick, infirm, blind, and of unsound mind;
that Lucila and Laila accomplished this by affixing Luis' thumb mark on the SPA which purportedly
authorized Laila to sell and convey, among others, Lot Nos. 8, 22 and 23, which had already been sold to
them; and that on the strength of another SPA 7 by Luis, dated July 21, 1993 (Second SPA), respondents
Laila and Ham mortgaged Lot No. 19 to Vital Lending Investors, Inc. for and in consideration of the
amount of P150,000.00 with the concurrence of Lourdes.

Petitioners further averred that a second sale took place on August 23, 1994, when the respondents
made Luis sign the Deed of Absolute Sale 9 conveying to Meridian three (3) parcels of residential land
for P960,500.00 (Second Sale); that Meridian was in bad faith when it did not make any inquiry as to
who were the occupants and owners of said lots; and that if Meridian had only investigated, it would
have been informed as to the true status of the subject properties and would have desisted in pursuing
their acquisition.

Petitioners, thus, prayed that they be awarded moral damages, exemplary damages, attorney's fees,
actual damages, and litigation expenses and that the two SPAs and the of sale in favor of Meridian be
declared null and void ab initio.
On their part, respondents Lucila and Laila contested the First Sale in favor of petitioners. They
submitted that even assuming that it was valid, petitioners were estopped from questioning the Second
Sale in favor of Meridian because they failed not only in effecting the necessary transfer of the title, but
also in annotating their interests on the titles of the questioned properties. With respect to the assailed
SPAs and the deed of absolute sale executed by Luis, they claimed that the documents were valid
because he was conscious and of sound mind and body when he executed them. In fact, it was Luis
together with his wife who received the check payment issued by Meridian where a big part of it was
used to foot his hospital and medical expenses.

Respondent Meridian, in its Answer with Compulsory Counterclaim, averred that Luis was fully aware of
the conveyances he made. In fact, Sophia Sanchez (Sanchez), Vice-President of the corporation,
personally witnessed Luis affix his thumb mark on the deed of sale in its favor. As to petitioners'
contention that Meridian acted in bad faith when it did not endeavor to make some inquiries as to the
status of the properties in question, it countered that before purchasing the properties, it checked the
titles of the said lots with the Register of Deeds of Cebu and discovered therein that the First Sale
purportedly executed in favor of the plaintiffs was not registered with the said Register of Deeds. Finally,
it argued that the suit against it was filed in bad faith.

On her part, Lourdes posited that her signature as well as that of Luis appearing on the deed of sale in
favor of petitioners, was obtained through fraud, deceit and trickery. She explained that they signed the
prepared deed out of pity because petitioners told them that it was necessary for a loan application. In
fact, there was no consideration involved in the First Sale. With respect to the Second Sale, she never
encouraged the same and neither did she participate in it. It was purely her husband's own volition that
the Second Sale materialized. She, however, affirmed that she received Meridian's payment on behalf of
her husband who was then bedridden.

After the case was submitted for decision, the RTC ruled in favor of petitioners. Luis lost his right to
dispose of the said properties to Meridian from the time he executed the first deed of sale in favor of
petitioners.

On appeal, the CA reversed and set aside the RTC decision. The CA ruled that the first deed of sale in
favor of petitioners was void because they failed to prove that they indeed tendered a consideration for
the four (4) parcels of land.

With respect to the validity of the Second Sale, the CA stated that it was valid because the documents
were notarized and, as such, they enjoyed the presumption of regularity.

Issue: WON Meridian is a buyer in good faith.

Held:

The fact that Meridian had them first registered will not help its cause. In case of double sale, Article
1544 of the Civil Code provides:

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 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 possession; and, in the absence thereof; to the person who presents the oldest title,
provided there is good faith.

Otherwise stated, ownership of an immovable property which is the subject of a double sale shall be
transferred: (1) to the person acquiring it who in good faith first recorded it in the Registry of Property;
(2) in default thereof, to the person who in good faith was first in possession; and (3) in default thereof,
to the person who presents the oldest title, provided there is good faith. The requirement of the law
then is two-fold: acquisition in good faith and registration in good faith. Good faith must concur with the
registration. If it would be shown that a buyer was in bad faith, the alleged registration they have made
amounted to no registration at all.

When a piece of land is in the actual possession of persons other than the seller, the buyer must be wary
and should investigate the rights of those in possession. Without making such inquiry, one cannot claim
that he is a buyer in good faith. When a man proposes to buy or deal with realty, his duty is to read the
public manuscript, that is, to look and see who is there upon it and what his rights are. A want of caution
and diligence, which an honest man of ordinary prudence is accustomed to exercise in making
purchases, is in contemplation of law, a want of good faith. The buyer who has failed to know or
discover that the land sold to him is in adverse possession of another is a buyer in bad faith.

In another case, it was held that if a vendee in a double sale registers the sale after he has acquired
knowledge of a previous sale, the registration constitutes a registration in bad faith and does not confer
upon him any right. If the registration is done in bad faith, it is as if there is no registration at all, and the
buyer who has first taken possession of the property in good faith shall be preferred.

In the case at bench, the fact that the subject properties were already in the possession of persons other
than Luis was never disputed.

6. Skunac Corp., v. Sylianteng

Facts:

The civil cases before the [Regional Trial Court of Pasig City] involved two (2) parcels of land identified as
Lot 1, with an area of 1,250 square meters (Civil Case No. 63987) and Lot 2, with an area of 990 square
meters (Civil Case No. 63988), both found in Block 2 of the Pujalte Subdivision situated along Wilson
Street, Greenhills, San Juan City which are portions of a parcel of land previously registered in the name
of Luis A. Pujalte on October 29, 1945 and covered by Transfer Certificate of Title ("TCT") No. (-78865) (-
2668) -93165 ("Mother Title") of the Register of Deeds for the City of Manila.

Plaintiffs-appellants Roberto S. Sylianteng and Caesar S. Sylianteng ("appellants") base their claim of
ownership over the subject lots a Deed of Absolute Sale executed in their favor by their mother,
Emerenciana Sylianteng ("Emerenciana"), on June 27, 1983. Appellants further allege that Emerenciana
acquired the lots from the late Luis Pujalte [Luis] through a Deed of Sale dated June 20, 1958 as
reflected in Entry No. P.E. 4023, annotated on the covering TCT, by virtue of which she was issued TCT
No. 42369. Then, when she sold the lots to appellants, TCT No. 39488, covering the same, was issued in
their names.

[Herein petitioners] Skunac Corporation ("Skunac") and Alfonso F. Enriquez ("Enriquez"), on the other
hand, claim that a certain Romeo Pujalte who was declared by the RTC of Pasig City, Branch 151 in
Special Proceedings No. 3366 as the sole heir of Luis Pujalte, caused the reconstitution of the Mother
Title resulting to its cancellation and the issuance of TCT No. 5760-R in his favor. Romeo Pujalte then
allegedly sold the lots to Skunac and Enriquez in 1992. Thus, from TCT No. 5760-R, TCT No. 5888-R, for
Lot 1 was issued in the name of Skunac, while TCT No. 5889-R for Lot 2 was issued in the name of
Enriquez.

[Respondents] contend that they have a better right to the lots in question because the transactions
conveying the same to them preceded those claimed by [petitioners] as source of the latter's titles.
[Respondents] further assert that [petitioners] could not be considered as innocent purchasers in good
faith and for value because they had prior notice of the previous transactions as stated in the
memorandum of encumbrances annotated on the titles covering the subject lots.

[Petitioners], for their part, maintain that [respondents] acquired the lots under questionable
circumstances it appearing that there was no copy of the Deed of Sale, between Emerenciana and Luis
Pujalte, on file with the Office of the Register of Deeds.

On November 16, 2007, the Regional Trial Court of Pasig (RTC) rendered judgment in favor of herein
petitioners.

Herein respondents then filed an appeal with the CA. On August 10, 2012, the CA promulgated its
assailed Decision, reversing the decision of the RTC of Pasig.

At the outset, the Court observes that the main issues raised in the instant petition are essentially
questions of fact. It is settled that, as a rule, in petitions for review on certiorari under Rule 45 of the
Rules of Court, only questions of law may be put in issue.

Questions of fact cannot be entertained. There are, however, recognized exceptions to this rule.

In the instant case, the findings of the CA and the RTC are conflicting. It, thus, behooves this Court to
entertain the questions of fact raised by petitioners and review the records of this case to resolve these
conflicting findings.

Issue: WON there is double sale.

Held:

Reliance by the trial and appellate courts on Article 1544 of the Civil Code is misplaced. The requisites
that must concur for Article 1544 to apply are:

(a) The two (or more sales) transactions must constitute valid sales;

(b) The two (or more) sales transactions must pertain to exactly the same subject matter;

(c) The two (or more) buyers at odds over the rightful ownership of the subject matter must
each represent conflicting interests; and
 (d) The two (or more) buyers at odds over the rightful ownership of thi subject matter must each
have bought from the very same seller.

Obviously, said provision has no application in cases where the sales involved were initiated not by just
one but two vendors. 12 In the present case, the subject lots were sold to petitioners and respondents
by two different vendors — Emerenciana and Romeo Pujalte (Romeo). Hence, Article 1544 of the Civil
Code is not applicable.

Nonetheless, the Court agrees with the findings and conclusion of the CA that Emerenciana's acquisition
of the subject lots from Luis and her subsequent sale of the same to respondents are valid and lawful.
Petitioners dispute such finding. To prove their contention, they assail the authenticity and due
execution of the deed of sale between Luis and Emerenciana.

7. Taina Manigque Stone v. Cattleya Land Inc.

Facts:

On November 6, 1992, Cattleya entered into a Contract of Conditional Sale with the Tecson spouses
covering nine parcels of land, including the subject property. In this transaction the Tecson spouses were
represented by Atty. Salvador S. Pizarras (Atty. Pizarras). The Contract of Conditional Sale was entered in
the Primary Book of the Office of the Register of Deeds of Bohol that same day, per Entry No. 83422. On
August 30, 1993, the parties executed a Deed of Absolute Sale covering the subject property. This Deed
of Absolute Sale was also entered in the Primary Book on October 4, 1993, per Entry No. 87549.
However, neither the Contract of Conditional Sale nor the Deed of Absolute Sale could be annotated on
the certificate of title covering the subject property because the then Register of Deeds of Bohol, Atty.
Narciso S. De la Serna (Atty. De la Serna) refused to annotate both deeds. According to Atty. De la Serna
it was improper to do so because of the writ of attachment that was annotated on the certificate of title
of the subject property, in connection with the said Civil Case No. 3399.

On December 1, 1993, Atty. Cabilao, Jr. and Atty. Pizarras, in representation of their respective clients,
again requested Atty. De la Serna to annotate the Deed of Absolute Sale and all other pertinent
documents on the original certificate of title covering the subject property. But Atty. De la Serna refused
anew — this time saying that he would accede to the request only if he was presented with a court
order to that effect. Atty. De la Serna still refused the request to annotate, even after Atty. Cabilao, Jr.
had told him that all that he (Atty. Cabilao, Jr.) was asking was for the Deed of Absolute Sale to be
annotated on the original certificate of title, and not for Atty. De la Serna to issue a new transfer of title
to the subject property.

The writ of attachment on the certificate of title to the subject property was, however, lifted, after the
parties in Civil Case No. 3399 reached an amicable settlement or compromise agreement. Even then,
however, Cattleya did not still succeed in having the aforementioned Deed of Absolute Sale registered,
and in having title to the subject property transferred to its name, because it could not surrender the
owner's copy of TCT No. 17655, which was in possession of the Tecson spouses. According to Cattleya,
the Tecson spouses could not deliver TCT No. 17655 to it, because according to the Tecson spouses this
certificate of title had been destroyed in a fire which broke out in Sierra Bullones, Bohol.

This claim by the Tecson spouses turned out to be false, however, because Atty. Cabilao, Jr. came to
know, while following up the registration of the August 30, 1993 Deed of Absolute Sale at the Office of
the Register of Deeds of Bohol, that the owner's copy of TCT No. 17655 had in fact been presented by
Taina at the Office of the Register of Deeds of Bohol, along with the Deed of Sale that was executed by
the Tecson spouses, in favor of Taina covering the subject property.

It appears that when Taina's then common-law husband, Michael (Mike) Stone, visited Bohol sometime
in December 1985, he fell in love with the place and decided to buy a portion of the beach lot in Doljo,
Panglao, Bohol. They met with Col. Tecson, and the latter agreed to sell them a portion of the beach lot
for US$8,805.00. Mike and Taina made an initial downpayment of US$1,750.00 (or equivalent
P35,000.00 at that time) for a portion of a beach lot, but did not ask for a receipt for this initial
downpayment. On June 1, 1987, a Deed of Absolute Sale covering the subject portion was executed by
Col. Tecson in Taina's favor. Subsequent payments were made by Mike totalling P40,000.00, as of
August 29, 1986, although another payment of P5,000.00 was made sometime in August 1987. The last
payment in the amount of P32,000.00, was made in September 1987. 10 In 1990, Troadio Tecson, Jr.,
the son of Col. Tecson and Taina's brother-in-law, delivered to Taina the owner's copy of TCT No. 17655.

On February 8, 1995, Taina sought to have her Deed of Absolute Sale registered with the Office of the
Register of Deeds of Bohol, and on that occasion presented the owner's copy of TCT No. 17655. In
finding for Cattleya, the RTC held that the sale entered by the Tecson spouses with Cattleya and with
Taina involving one and the same property was a double sale, and that Cattleya had a superior right to
the lot covered thereby, because Cattleya was the first to register the sale in its favor in good faith; that
although at the time of the sale the TCT covering the subject property could not yet be issued, and the
deed of sale could not be annotated thereon due to a pending case between the vendors-spouses
(Tecson spouses) and Tantrade, Inc., the evidence convincingly showed nonetheless that it was Cattleya
that was the first to register the sale in its favor with the Office of the Provincial Registry of Deeds of
Bohol on October 4, [1993] as shown in Entry No. 87549. 20 Furthermore, the RTC found that Cattleya
had no notice, nor was it aware, of Taina's claim to the subject property, and that the only impediment
it (Cattleya) was aware of was the pending case (Civil Case No. 3399) between Tantrade Corporation and
Bohol Resort Hotel, Inc.

Taina herself admitted that at the time she caused the sale to be registered and title thereto issued to
her, she knew or was otherwise aware that the very same lot had already been sold to Cattleya, or at
least claimed by the latter — and this is a state of affairs constitutive of bad faith on her part.

Issue: WON Article 1544 of the Civil Code, the article which governs double sales, controls this case.

Held:

Given the fact that the sale by the Tecson spouses to Taina as Mike's dummy was totally abhorrent and
repugnant to the Philippine Constitution, and is thus, void ab initio, it stands to reason that there can be
no double sale to speak of here. In the case of Fudot v. Cattleya Land, Inc., 43 which fortuitously also
involved the Tecson spouses and Cattleya, we held thus —

The petition is bereft of merit.

Petitioner's arguments, which rest on the assumption that there was a double sale, must fail.

In the first place, there is no double sale to speak of. Art. 1544 of the Civil Code, which provides
the rule on double sale, applies only to a situation where the same property is validly sold to
 different vendees. In this case, there is only one sale to advert to, that between the spouses
Tecson and respondent.

In Remalante v. Tibe, this Court ruled that the Civil Law provision on double sale is not
applicable where there is only one valid sale, the previous sale having been found to be
fraudulent. Likewise, in Espiritu and Apostol v. Valerio, where the same parcel of land was
purportedly sold to two different parties, the Court held that despite the fact that one deed of
sale was registered ahead of the other, Art. 1544 of the Civil Code will not apply where said
deed is found to be a forgery , the result of this being that the right of the other vendee should
prevail.

The trial court declared that the sale between the spouses Tecson and petitioner is invalid, as it
bears the forged signature of Asuncion. . . . 44 (Citations omitted; emphasis supplied)

In view of the fact that the sale in the case at bench is worse off (because it is constitutionally infirm)
than the sale in the Fudot case, which merely involves a violation of the pertinent provisions of the Civil
Code, this Court must affirm, as it hereby affirms the CA's ruling that, "there is only one sale to reckon
with, that is, the sale to Cattleya.

8. Spring Homes Subdivision Co., Inc. v. Spouses Tablada, Jr.

Facts:

Spouses Lumbres entered into a Joint Venture Agreement with Spring Homes through its chairman, the
late Rolando Pasic, for the development of several parcels of land. The Spouses Lumbres transferred the
titles to the parcels of land in the name of Spring Homes.

Spring Homes entered into a Contract to Sell with Spouses Pedro Tablada for the sale of a parcel of land.
Spouses Lumbres filed with RTC Calamba a complaint for Collection of Sum of Money, Specific
Performance and Damages with prayer for the issuance of a Writ of Preliminary Attachment against
Spring Homes for its alleged failure to comply with the terms of the Joint Venture Agreement. Spring
Homes executed a Deed of Absolute Sale in favor of the Spouses Tablada. The title over the subject
property, however, remained with Spring Homes for its failure to cause the cancellation of the TCT and
the issuance of a new one in favor of the Spouses Tablada.

The Spouses Lumbres and Spring Homes entered into a Compromise Agreement wherein Spring Homes
conveyed the subject property, as well as several others, to the Spouses Lumbres. The Spouses Lumbres
started collecting deficiency payments from the subdivision lot buyers. When no payment was received,
the Spouses Lumbres caused the cancellation of the Contract to Sell previously executed by Spring
Homes in favor of the Spouses Tablada. the Spouses Lumbres and Spring Homes executed a Deed of
Absolute Sale over the subject property, and as a result, a new title was issued in the name of the
Spouses Lumbres.

The Spouses Lumbres filed an ejectment suit of their own before MTCC Calamba demanding that the
Spouses Tablada vacate the subject property and pay rentals due thereon. The MTCC, however,
dismissed the suit, ruling that the Spouses Lumbres registered their title over the subject property in bad
faith. Such ruling was reversed RTC which found that there was no valid deed of absolute sale between
the Spouses Tablada and Spring Homes. Nevertheless, the CA, on appeal, agreed with the MTCC and
reinstated the decision thereof.

Issue: WON Spouses Lumbres acquired ownership over the property.

Held:

The principle of primus tempore, potior jure (first in time, stronger in right) gains greater significance in
case of a double sale of immovable property. Thus, the Court has consistently ruled that ownership of an
immovable property which is the subject of a double sale shall be transferred: (1) to the person
acquiring it who in good faith first recorded it in the Registry of Property; (2) in default thereof, to the
person who in good faith was first in possession; and (3) in default thereof, to the person who presents
the oldest title, provided there is good faith. The requirement of the law then is two-fold: acquisition in
good faith and registration in good faith. Good faith must concur with the registration — that is, the
registrant must have no knowledge of the defect or lack of title of his vendor or must not have been
aware of facts which should have put him upon such inquiry and investigation as might be necessary to
acquaint him with the defects in the title of his vendor. If it is shown that a buyer was in bad faith, the
alleged registration they have made amounted to no registration at all.

Here, the first buyers of the subject property, the Spouses Tablada, were able to take said property into
possession but failed to register the same because of Spring Homes' unjustified failure to deliver the
owner's copy of the title whereas the second buyers, the Spouses Lumbres, were able to register the
property in their names. But while said the Spouses Lumbres successfully caused the transfer of the title
in their names, the same was done in bad faith. As correctly observed by the Court in Spouses Lumbres
v. Spouses Tablada, 56 the Spouses Lumbres cannot claim good faith since at the time of the execution
of their Compromise Agreement with Spring Homes, they were indisputably and reasonably informed
that the subject lot was previously sold to the Spouses Tablada. They were also already aware that the
Spouses Tablada had constructed a house thereon and were in physical possession thereof. They
cannot, therefore, be permitted to freely claim good faith on their part for the simple reason that the
First Deed of Absolute Sale between Spring Homes and the Spouses Tablada was not annotated at the
back of the subject property's title. It is beyond the Court's imagination how spouses Lumbres can feign
ignorance to the first sale when the records clearly reveal that they even made numerous demands on
the Spouses Tablada to pay, albeit erroneously, an alleged balance of the purchase price.

Indeed, knowledge gained by the first buyer of the second sale cannot defeat the first buyer's rights
except only as provided by law, as in cases where the second buyer first registers in good faith the
second sale ahead of the first. Such knowledge of the first buyer does bar her from availing of her rights
under the law, among them, first her purchase as against the second buyer. But conversely, knowledge
gained by the second buyer of the first sale defeats his rights even if he is first to register the second
sale, since such knowledge taints his prior registration with bad faith.

Accordingly, in order for the Spouses Lumbres to obtain priority over the Spouses Tablada, the law
requires a continuing good faith and innocence or lack of knowledge of the first sale that would enable
their contract to ripen into full ownership through prior registration. But from the very beginning, the
Spouses Lumbres had already known of the fact that the subject property had previously been sold to
the Spouses Tablada, by virtue of a valid Deed of Absolute Sale. In fact, the Spouses Tablada were
already in possession of said property and had even constructed a house thereon. Clearly then, the
Spouses Lumbres were in bad faith the moment they entered into the second Deed of Absolute Sale and
thereafter registered the subject property in their names. For this reason, the Court cannot, therefore,
consider them as the true and valid owners of the disputed property and permit them to retain title
thereto.

9. Edu v. Gomez

Facts:

Subject matter of this case is a 1968 model Volkwagen, bantam car, Engine No. H-5254416, Chassis No.
118673654, allegedly owned by Lt. Walter A. Bala of Clark Airbase, Angeles City, under whose name the
car was allegedly registered on May 19, 1970 at the Angeles City Land Transportation Commission
Agency, under File No. 2B-7281.

The Office of the Commission on Land Transportation received a report on August 25, 1970 from the
Manila Adjustment Company that the abovementioned car was stolen on June 29, 1970 from the
residence of Lt. Bala, at 63 Makiling Street, Plaridel Subdivision, Angeles City. Petitioners Eduardo
Domingo, Carlos Rodriguez, and Patricio Yambao, agents of Anti-Carnapping Unit (ANCAR) of the
Philippine Constabulary, on detail with the Land Transportation Commission, on February 2, 1971,
recognized subject car in the possession of herein private respondent Lucila Abello and immediately
seized and impounded the car as stolen property. Likewise, herein petitioner Romeo F. Edu, then
Commissioner of Land Transportation, seized the car pursuant to Section 60 of Republic Act 4136 which
empowers him to seize the motor vehicle for delinquent registration aside from his implicit power
deducible from Sec. 4(5), Sec. 5 and 31 of said Code, "to seize motor vehicles fraudulently or otherwise
not properly registered."

On February 15, 1971, herein private respondent Lucila Abello filed a complaint for replevin with
damages in respondent court, impleading herein petitioners, praying for judgment, among others, to
order the sheriff or other proper officer of the court to take the said property (motor vehicle) into his
custody and to dispose of it in accordance with law.

On February 18, 1971, respondent judge of the then Court of First Instance of Manila issued the order
for the seizure of the personal property. Solicitor Vicente Torres, appearing for the herein petitioners,
submits that the car in question legally belongs to Lt. Walter A. Bala under whose name it is originally
registered at Angeles City Land Transportation Commission Agency; that it was stolen from him and,
upon receipt by the Land Transportation Commissioner of the report on the theft case and that the car
upon being recognized by the agents of the ANCAR in the possession of private respondent Lucila
Abello, said agents seized the car and impounded it as stolen vehicle. With respect to the replevin filed
by private respondent Lucila Abello, respondent Court of First Instance Judge found that the car in
question was acquired by Lucila Abello by purchase from its registered owner, Marcelino Guansing, for
the valuable consideration of P9,000.00, under the notarial deed of absolute sale, dated August 11,
1970; that she has been in possession thereof since then until February 3, 1971 when the car was seized
from her by the petitioners who acted in the belief that it is the car which was originally registered in the
name of Lt. Walter A. Bala and from whom it was allegedly stolen sometime in June 1970.llcd

Issue:

Held:
There is no merit in the petition considering that the acquirer or the purchaser in good faith of a chattel
of movable property is entitled to be respected and protected in his possession as if he were the true
owner thereof until a competent court rules otherwise. In the meantime, as the true owner, the
possessor in good faith cannot be compelled to surrender possession nor to be required to institute an
action for the recovery of the chattel, whether or not an indemnity bond is issued in his favor. The filing
of an information charging that the chattel was illegally obtained through estafa from its true owner by
the transferor of the bona fide possessor does not warrant disturbing the possession of the chattel
against the will of the possessor.

10. Duran v. Intermediate Appellate Court

Facts:

Petitioner Circe S. Duran owned two (2) parcels of land (Lots 5 and 6, Block A, Psd 32780) covered by
Transfer Certificate of Title No. 1647 of the Register of Deeds of Caloocan City which she had purchased
from the Moja Estate. She left the Philippines in June 1954 and returned in May 1966.

On May 13, 1963, a Deed of Sale of the two lots mentioned above was made in favor of Circe's mother,
Fe S. Duran who, on December 3, 1965, mortgaged the same property to private respondent Erlinda B.
Marcelo-Tiangco. When petitioner Circe S. Duran came to know about the mortgage made by her
mother, she wrote the Register of Deeds of Caloocan City informing the latter that she had not given her
mother any authority to sell or mortgage any of her properties in the Philippines. Failing to get an
answer from the registrar, she returned to the Philippines. Meanwhile, when her mother, Fe S. Duran,
failed to redeem the mortgage properties, foreclosure proceedings were initiated by private respondent
Erlinda B. Marcelo-Tiangco and, ultimately, the sale by the sheriff and the issuance of Certificate of Sale
in favor of the latter.

Petitioner Circe S. Duran claims that the Deed of Sale in favor of her mother Fe S. Duran is a forgery,
saying that at the time of its execution in 1963 she was in the United States. On the other hand, the
adverse party alleges that the signatures of Circe S. Duran in the said Deed are genuine and,
consequently, the mortgage made by Fe S. Duran in favor of private respondent is valid.

With respect to the issue as to whether the signature of petitioner Circe S. Duran in the Deed of Sale is a
forgery or not, respondent appellate court held the same to be genuine because there is the
presumption of regularity in the case of a public document and "the fact that Circe has not been able to
satisfactorily prove that she was in the United States at the time the deed was executed in 1963.

Issue: WON private respondent Erlinda B. Marcelo-Tiangco was a buyer in good faith and for value.

Held:

Otherwise stated, good faith is the opposite of fraud and it refers to the state of mind which is
manifested by the acts of the individual concerned. In the case at bar, private respondents, in good faith
relied on the certificate of title in the name of Fe S. Duran and as aptly stated by respondent appellate
court "[e]ven on the supposition that the sale was void, the general rule that the direct result of a
previous illegal contract cannot be valid (on the theory that the spring cannot rise higher than its source)
cannot apply here for We are confronted with the functionings of the Torrens System of Registration.
The doctrine to follow is simple enough: a fraudulent or forged document of sale may become the ROOT
of a valid title if the certificate of title has already been transferred from the name of the true owner to
the name of the forger or the name indicated by the forger." (p. 147, Rollo)

Thus, where innocent third persons relying on the correctness of the certificate of title issued, acquire
rights over the property, the court cannot disregard such rights and order the total cancellation of the
certificate for that would impair public confidence in the certificate of title; otherwise everyone dealing
with property registered under the torrens system would have to inquire in every instance as to
whether the title had been regularly or irregularly issued by the court. Indeed, this is contrary to the
evident purpose of the law. Every person dealing with registered land may safely rely on the correctness
of the certificate of title issued therefor and the law will in no way oblige him to go behind the certificate
to determine the condition of the property. Stated differently, an innocent purchaser for value relying
on a torrens title issued is protected. A mortgagee has the right to rely on what appears in the certificate
of title and, in the absence of anything to excite suspicion, he is under no obligation to look beyond the
certificate and investigate the title of the mortgagor appearing on the face of said certificate.

11. J.M. Tuason Co., Inc. v. Court of Appeals

Facts:

Petitioner executed, in favor of Ricardo de Leon, a contract to sell a lot with the agreed price of P24.60
per square meter. At the execution of the contract, Ricardo de Leon paid the down-payment of
P4,190.86 and agreed to pay the balance in the monthly installment of P498.63 including the agreed
annual interest of 10%. Meanwhile, on April 10, 1953, petitioner signed a compromise agreement with
the Deudors. On July 19, 1965 with the consent of the petitioner, Ricardo de Leon transferred all his
rights to the lot in favor of his parents, herein private respondents Alfonso and Rosario de Leon. On the
same date, private respondents paid the outstanding balance of the purchase price. At the time of the
execution of the contract to sell, the contracting parties knew that a portion of the lot in question was
actually occupied by Ramon Rivera. However, it was their understanding that the latter will be ejected
by the petitioner from the premises. Petitioner filed a complaint of ejectment against Ramon Rivera
before the CFI and later petitioner Ricardo de Leon and respondents Alfonso and Rosario de Leon as
necessary parties and they were evicted from the premises in the question which was affirmed by the
CA. Private respondents filed the proper action before the CFI of Manila action against J.M. Tuason Co.,
Inc. to enforce the vendor warranty against eviction or to recover the value of the land plus damages.

The CFI decided the case against herein petitioner J.M. Co., Inc. which was affirmed by the CA.

Issue: WON the respondents are entitled to the vendor’s warranty eviction.

Held:

The Court ruled that without being shown to be vendees in good faith, herein respondents are not
entitled to the warranty against eviction nor are they entitled to recover damages (Article 1555 of the
Civil Code). The prior right of Ramon Rivera to purchase the lot in litigation was based more on his prior
occupancy to the same since 1949, about which fact respondents De Leon were informed by petitioner
at the time of the execution of the contract to sell. The execution of the compromise agreement merely
recognized this prior right, under the condition as stipulated in said agreement, that it was possible to
do so.

The Court did not have the hesitation to give to petitioner the benefit of the doubt of its having acted in
good faith, which is always presumed, without any intention of taking advantage of the other party
dealing with it. Good faith consists in an honest intention to abstain from taking any unconscientious
advantage of another. Good faith is an opposite of fraud and of bad faith and its non-existence must be
established by competent proof.

Moreover, at the time of the execution of the contract to sell it is an admitted fact that Ricardo de Leon
knew that a third party was occupying a part of the lot subject of the sale. Ricardo de Leon ought to
have known that he was buying a property with the distinct possibility of not being able to possess and
own the land due to the occupancy of another person on the same. So there had to be an understanding
between him and the petitioner for the latter to eject the occupant, something which, by the facts then
obtaining and the law relevant thereto, would make the ejectment more speculative than certain.
Nonetheless, Ricardo de Leon knowingly assumed the risk when he bought the, land, and was even
called a vendee in bad faith by the Court of Appeals in doing so, clearly not an innocent purchaser in
good faith. If petitioner that it would eject Ramon Rivera, he did so, not knowing that the compromise
agreement would stand on the way, as it had thought, in all good faith, that paragraph 7 of the
compromise agreement excluded the lot in question, having been already sold to Ricardo de Leon
before the agreement was executed in court.

One who purchases real estate with knowledge of a defect or lack of title in his vendor cannot claim that
he has acquired title thereto in good faith, as against the true owner of the land or of an interest
therein; and the same rule must be applied to one who has knowledge of facts which should have put
him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the
title of his vendor. A purchaser cannot close his eyes to facts which should put a reasonable man upon
his guard and then claim that he acted in good faith under the belief that there was no defect in the title
of the vendor.

12. Escaler v. Court of Appeals

Facts:

Spouses Africa V. Reynoso and Jose L, Reynoso sold to petitioners several others, a parcel of land which
Deed of Sale contained a covenant against eviction. On April 21, 1961, the Register of Deeds of Rizal and
A. Doronilla Resources Development, Inc. filed a case before the CFI of Rizal for the cancellation of the
OCT issued in the name of Angelina Reynoso (predecessor-in-interest of private respondents-vendors)
on the ground that the property covered by said title is already previously registered under a TCT issued
in the name of A. Doronilla Development, Inc. In that case, an order was issued declaring the OCT null
and void. Petitioners, spouses Maria de Leon Escaler and Ernesto Escaler and spouses Cecilia J. Roxas
and Pedro Roxas, filed a civil case before the CFI of Rizal against their vendors, herein private
respondents, spouses Jose L. Reynoso and Africa Reynoso for the recovery of the value of the property
sold to them plus damages on the ground that the latter have violated the vendors warranty against
eviction.
The CFI rendered a judgment ordering the return to the plaintiffs Maria Luisa de Leon Escaler and
Ernesto Escaler, Cecilia J. Roxas and Pedro Roxas, the value of the property sold to them at the time of
eviction. The CA reversed this decision and ruled that petitioners as vendees had not given private
respondents-vendors, formal notice of the eviction case as mandated by Arts. 1558 and 1559 of the New
Civil Code.

Issue: WON a vendor’s liability for eviction may be enforced in the case at bar.

Held:

The Court ruled that the petition is devoid of merit. Consequently, it must be dismissed.

Article 1548, in relation to Articles 1558. and 1559 of the New Civil Code reads as follows:

Art. 1548, Eviction shall take place whenever by a final judgment based on a right prior to the
sale or an act imputable to the vendor, the vendee is deprived of the whole or of a part of the
thing purchased.

The vendor shall answer for the eviction even though nothing has been said in the contract on
the subject. The contracting parties, however, may increase, diminish, or suppress this legal
obligation of the vendor.

Xxxx

Art. 1558. The vendor shall not be obliged to make good the proper warranty, unless he is summoned in
the suit for eviction at the instance of the vendee. (emphasis supplied)

Art. 1559. The defendant vendee shall ask, within the time fixed in the Rules of Court for answering the
complaint that the vendor be made as co-defendant In order that a vendor liability for eviction may be
enforced, the following requisites must concur: — a) there must be a final judgment; b) the purchaser
has been deprived of the whole or part of the thing sold; c) said deprivation was by virtue of a right prior
to the sale made by the vendor; and d) the vendor has been summoned and made co-defendant in the
suit for eviction at the instance of the vendee.

In the case at bar, the fourth requisite—that of being summoned in the suit for eviction (Case No. 4252)
at the instance of the vendee—is not present. All that the petitioners did, per their very admission, was
to furnish respondents, by registered mail, with a copy of the opposition they (petitioners filed in the
eviction suit. Decidedly, this is not the kind of notice prescribed by the aforequoted Articles 1558 and
1559 of the New Civil Code. The term “unless he is summoned in the suit for eviction at the instance of
the vendee” means that the respondents as vendor/s should be made parties to the suit at the instance
of petitioners-vendees, either by way of asking that the former be made a co-defendant or by the filing
of a third-party complaint against said vendors. Nothing of that sort appeared to have been done by the
petitioners in the instant case.

13. Moles v. Intermediate Appellate Court

Facts:

Petitioner needed a linotype printing machine for his printing business, The LM Press at Bacolod City,
and applied for an industrial loan with the Development Bank of the Philippines (DBP) for the purchase
thereof. An agent of Smith, Bell and Co. who is a friend of petitioner introduced the latter to private
respondent, owner of the Diolosa Publishing House in Iloilo City, who had two available machines.
Thereafter, petitioner went to Iloilo City to inspect the two machines offered for sale and was informed
that the same were secondhand but functional. On his second visit to the Diolosa Publishing House,
petitioner decided to buy the linotype machine. The transaction was basically verbal in nature but to
facilitate the loan application with the DBP, a pro forma invoice was signed by petitioner with an
addendum that payment had not yet been made but that he promised to pay the full amount upon the
release of his loan from the aforementioned bank on or before the end of the month. The machine was
delivered to petitioners publishing house where it was installed by an employee of respondent Diolosa.
Prior to the release of the loan, a representative from the DBP, Bacolod, supposedly inspected the
machine but he merely looked at it to see that it was there where later on received the DBP check for
P50,000.00. On November 29, 1977, petitioner wrote private respondent that the machine was not
functioning properly as it needed a new distributor bar. In the same letter, petitioner unburdened
himself of his grievances and sentiments in this wise. After their requests to check the machine went
unheeded, petitioner thus finally decided to indorse the matter to his lawyer. An expert witness found
several defects. Having found defects in said machine, the witness informed Sy Brother about his
findings, hence the purchase was aborted. In his opinion, major repairs were needed to put the machine
back in good running condition.

On 17 May 1978, petitioner Jerry T. Moles commenced a suit against private respondent Mariano M.
Diolosa in the aforesaid trial court in Bacolod City, for rescission of contract with damages. Private
respondent moved to dismiss on the ground of improper venue. This was opposed by petitioner who
averred that there is no formal document evidencing the sale which is substantially verbal in character.
In an order dated June 23, 1978, the trial court denied the motion to dismiss, holding that the question
of venue could not be resolved at said stage of the case. The subsequent motion for reconsideration was
likewise denied.

Issues:

1. WON there is an implied warranty of its quality or fitness on a secondhand item;

2. WON the hidden defects in the machine is sufficient to warrant a rescission of the

contract between the parties.

Held:

As to the first issue, the Court ruled that there is no implied warranty as to the condition, adaptation,
fitness, or suitability for the purpose for which made, or the quality, of an article sold as and for a
secondhand article.

The respondent court cited the ruling in Sison vs. Ago, et al. to the effect that unless goods are sold as to
raise an implied warranty, as a general rule there is no implied warranty in the sale of secondhand
articles.

Said general rule, however, is not without exceptions. Article 1562 of our Civil Code, which was taken
from the Uniform Sales Act, provides:
 Art. 1562. In a sale of goods, there is an implied warranty or condition as to the quality or fitness
of the goods, as follows:

1) Where the buyer, expressly or by implication, makes known to the seller the particular
purpose for which the goods are acquired, and it appears that the buyer relies on the sellers skill
or judgment (whether he be the grower or manufacturer or not), there is an implied warranty
that the goods shall be reasonably fit for such purpose;

In the present case, a certification to the effect that the linotype machine bought by petitioner was in A-
1 condition was issued by private respondent in favor of the former. This cannot but be considered as an
express warranty. However, it is private respondents submission that the same is not binding on him,
not being a part of the contract of sale between them. This contention is bereft of substance.

It must be remembered that the certification was a condition sine qua non for the release of petitioners
loan which was to be used as payment for the purchase price of the machine. Private respondent failed
to refute this material fact. Neither does he explain why he made that express warranty on the
condition of the machine if he had not intended to be bound by it. In fact, the respondent court, in
declaring that petitioner should have availed of the remedy of requiring repairs as provided for in said
certification, thereby considered the same as part and parcel of the verbal contract between the parties.

On the basis of the foregoing circumstances, the inescapable conclusion is that private respondent is
indeed bound by the express warranty he executed in favor of herein petitioner.

As to the second issue, the Court considered the rule on redhibitory defects contemplated in Article
1561 of the Civil Code. A redhibitory defect must be an imperfection or defect of such nature as to
engender a certain degree of importance. An imperfection or defect of little consequence does not
come within the category of being redhibitory.