G.R. No. 123672 December 14, 2005 2. That the sum of P210, 000.

00 shall be paid, as it is
hereby paid by the VENDEE to the VENDOR, receipt
FERNANDO CARRASCOSO, JR., Petitioner, of which amount is hereby acknowledged by the
vs. VENDOR.
THE HONORABLE COURT OF APPEALS, LAURO
LEVISTE, as Director and Minority Stockholder and 3. The remaining balance of P1, 300,000.00 plus
On Behalf of Other Stockholders of El Dorado interest thereon at the rate of 10% per annum shall be
Plantation, Inc. and EL DORADO PLANTATION, paid by the VENDEE to the VENDOR within a period
INC., represented by one of its minority of three (3) years, as follows:
stockholders, Lauro P. Leviste, Respondents
(A) One (1) year from the date of the signing of this
x---------------------------------------x agreement, the VENDEE shall pay to the VENDOR the
sum of FIVE HUNDRED NINETEEN THOUSAND
G.R. No. 164489 EIGHT HUNDRED THIRTY THREE & 33/100 (P519,
833.33) PESOS.
PHILIPPINE LONG DISTANCE TELEPHONE
COMPANY, Petitioner, (b) Two (2) years from the date of signing of this
vs. agreement, the VENDEE shall pay to the VENDOR the
LAURO LEVISTE, as Director and Minority sum of FIVE HUNDRED NINETTEN (sic) THOUSAND
Stockholder and On Behalf of Other Stockholders EIGHT HUNDRED AND THIRTY-THREE & 33/100
of El Dorado Plantation, Inc., EL DORADO (P519,833.33) PESOS.
PLANTATION, INC., represented by Minority
Stockholder, Lauro P. Leviste, and FERNANDO (C) Three (3) years from the date of signing of this
CARRASCOSO, JR., Respondents. agreement, the VENDEE shall pay to the VENDOR the
sum of FIVE Hundred NINETEEN THOUSAND EIGHT
DECISION HUNDRED AND THIRTY-THREE & 33/100 (P519,
833.33) PESOS.
CARPIO MORALES, J.:
4. The title of the property, subject of this agreement,
shall pass and be transferred to the VENDEE who
El Dorado Plantation, Inc. (El Dorado) was the
shall have full authority to register the same and obtain
registered owner of a parcel of land (the property) with
the corresponding transfer certificate of title in his
an area of approximately 1,825 hectares covered by
name.
Transfer Certificate of Title (TCT) No. T-931 situated in
Sablayan, Occidental Mindoro.
Xxx
On February 15, 1972, at a special meeting of El
Dorado’s Board of Directors, a Resolution2 was passed 6. THE VENDOR certifies and warrants that the
authorizing Feliciano Leviste, then President of El property above-described is not being cultivated by
Dorado, to negotiate the sale of the property and sign any tenant and is therefore not covered by the
all documents and contracts bearing thereon. provisions of the Land Reform Code. If, therefore, the
VENDEE becomes liable under the said law, the
VENDOR shall reimburse the VENDEE for all
On March 23, 1972, by a Deed of Sale of Real
expenses and damages he may incur
Property, 3 El Dorado, through Feliciano Leviste, sold
thereon.4 (Underscoring supplied)
the property to Fernando O. Carrascoso, Jr.
(Carrascoso).
From the above-quoted provisions of the Deed of Sale,
Carrascoso was to pay the full amount of the purchase
The pertinent provisions of the Deed of Sale read:
price on March 23, 1975.
NOW, THEREFORE, for and in consideration of the
On even date, the Board of Directors of El Dorado
sum of ONE MILLION EIGHT HUNDRED THOUSAND
passed a Resolution reading:
(1,800,000.00) PESOS, Philippine Currency, the
Vendor hereby sells, cedes, and transfer (sic) unto the
herein VENDEE, his heirs, successors and assigns, "RESOLVED that by reason of the sale of that parcel
the above-described property subject to the following of land covered by TCT No. T-93 to Dr. FERNANDO
terms and conditions (sic): O. CARRASCOSO, JR., the corporation interposes
no objection to the property being mortgage (sic)
by Dr. FERNANDO O. CARRASCOSO, JR. to any
1. Of the said sum of P1, 800,000.00 which constitutes
bank of his choice as long as the balance on the
the full consideration of this sale, P290, 000.00 shall
Deed of Sale shall be recognized by Dr.
be paid, as it is hereby paid, to the Philippines (sic)
FERNANDO O. CARRASCOSO, JR.;
National Bank, thereby affecting the release and
cancellation of (sic) the present mortgage over the
above-described property. "RESOLVED, FURTHER, that the corporation
authorizes the preferred (sic) claim on the property to
be subordinated to any mortgage that may be
constituted by Dr. FERNANDO O. CARRASCOSO, Mortgage was also annotated on TCT No. T-6055 as
JR.; Entry No. 15486 on May 24, 1972.13

"RESOLVED, FINALLY, that in case of any mortgage The 3-year period for Carrascoso to fully pay for the
on the property, the corporation waives the preference property on March 23, 1975 passed without him having
of any vendor’s lien on the property." 5 (Emphasis and complied therewith.
underscoring supplied)
In the meantime, on July 11, 1975, Carrascoso and the
Feliciano Leviste also executed the following affidavit Philippine Long Distance Telephone Company (PLDT),
on the same day: through its President Ramon Cojuangco, executed an
Agreement to buy and Sell14 whereby the former
1. That by reason of the sale of that parcel of land agreed to sell 1,000 hectares of the property to the
covered by Transfer Certificate of Title T-93 as latter at a consideration of ₱3,000.00 per hectare or a
evidenced by the Deed of Sale attached hereto as total of ₱3,000,000.00.
Annex "A" and made an integral part hereof, the El
Dorado Plantation, Inc. has no objection to the The July 11, 1975 Agreement to Buy and Sell was not
aforementioned property being mortgaged by Dr. registered and annotated on Carrascoso’s TCT No. T-
Fernando O. Carrascoso, Jr. to any bank of his 6055.
choice, as long as the payment of the balance due
the El Dorado Plantation, Inc. under the Deed of Lauro Leviste (Lauro), a stockholder and member of
Sale, Annex "A" hereof, shall be recognized by the the Board of Directors of El Dorado, through his
vendee therein, Dr. Fernando O. Carrascoso, counsel, Atty. Benjamin Aquino, by letter15 dated
Jr. though subordinated to the preferred claim of the December 27, 1976, called the attention of the Board
mortgage bank. to Carrascoso’s failure to pay the balance of the
purchase price of the property amounting to
2. That in case of any mortgage on the property, the ₱1,300,000.00. And Lauro’s lawyer manifested that:
vendor hereby waives the preference of any vendor’s
lien on the property, subject matter of the deed of sale. Because of the default for a long time of Mr.
Carrascoso to pay the balance of the consideration of
3. That this affidavit is being executed to avoid any the sale, Don Lauro Leviste, in his behalf and in behalf
question on the authority of Dr. Fernando O. of the other shareholders similarly situated like him,
Carrascoso, Jr. to mortgage the property subject of the want a rescission of the sale made by the El Dorado
Deed of Sale, Annex "A" hereof, where the purchase Plantation, Inc. to Mr. Carrascoso. He desires that the
price provided therein has not been fully paid. Board of Directors take the corresponding action for
rescission.16
4. That this affidavit has been executed pursuant to a
board resolution of El Dorado Plantation, Lauro’s desire to rescind the sale was reiterated in two
Inc.6 (Emphasis and underscoring supplied) other letters17 addressed to the Board dated January
20, 1977 and March 3, 1977.
On the following day, March 24, 1972, Carrascoso and
his wife Marlene executed a Real Estate Jose P. Leviste, as President of El Dorado, later sent a
Mortgage7 over the property in favor of Home Savings letter of February 21, 197718 to Carrascoso informing
Bank (HSB) to secure a loan in the amount of him that in view of his failure to pay the balance of the
₱1,000,000.00. Of this amount, ₱290,000.00 was paid purchase price of the property, El Dorado was seeking
to Philippine National Bank to release the mortgage the rescission of the March 23, 1972 Deed of Sale of
priory constituted on the property and ₱210,000.00 Real Property.
was paid to El Dorado pursuant to above-quoted
paragraph Nos. 1 and 2 of the terms and conditions of The pertinent portions of the letter read:
the Deed of Sale.8
xxx
The March 23, 1972 Deed of Sale of Real Property
was registered and annotated on El Dorado’s TCT No. I regret to inform you that the balance of
T-93 as Entry No. 152409 on April 5, 1972. On even P1,300,000.00 and the interest thereon have long
date, TCT No. T-93 covering the property was been due and payable, although you have mortgaged
cancelled and TCT No. T-605510 was in its stead said property with the Home Savings Bank for
issued by the Registry of Deeds of Occidental Mindoro P1,000,000.00 on March 24, 1972, which was
in the name of Carrascoso on which the real estate subsequently increased to P1,070,000.00 on May 18,
mortgage in favor of HSB was annotated as Entry No. 1972.
15242.11
You very well know that the El Dorado Plantation, Inc.,
On May 18, 1972, the real estate mortgage in favor of is a close family corporation, owned exclusively by the
HSB was amended to include an additional three year members of the Leviste family and I am one of the co-
loan of ₱70,000.00 as requested by the spouses owners of the land. As nothing appears to have been
Carrascoso.12 The Amendment of Real Estate done on your part after our numerous requests for
payment of the said amount of P1, 300,000.00 and the THOUSAND PESOS P120,000.00 have (sic) already
interest of 10% per annum due thereon, please be been received by the VENDOR, the VENDOR hereby
advised that we would like to rescind the contract of sells, transfers and conveys unto the VENDEE one
sale of the land.19 (Underscoring supplied) thousand hectares (1,000 has.) of his parcel of land
covered by T.C.T. No. T-6055 of the Registry of Deeds
Jose Leviste, by letter20 dated March 10, 1977, of Mindoro, delineated as Lot No. 3-B-1 in the
informed Lauro’s counsel Atty. Aquino of his (Jose’s) subdivision survey plan xxx
February 21, 1977 letter to Carrascoso, he lamenting
that "Carrascoso has not deemed it fit to give [his] 2. The VENDEE shall pay to the VENDOR upon the
letter the courtesy of a reply" and advise[ing] that some signing of this agreement, the sum of TWO MILLION
of the Directors of [El Dorado] could not see their way FIVE HUNDRED THOUSAND PESOS (P2,
clear in complying with the demands of your client 500,000.00) in the following manner:
[Lauro] and have failed to reach a consensus to bring
the corresponding action for rescission of the contract a) The sum of TWO MILLION THREE HUNDRED
against . . . Carrascoso."21 THOUSAND PESOS (P2, 300,000.00) to Home
Savings Bank in full payment of the VENDOR’s
Lauro and El Dorado finally filed on March 15, 1977 a mortgaged obligation therewith;
complaint22 for rescission of the March 23, 1972 Deed
of Sale of Real Property between El Dorado and b) The sum of TWO HUNDRED THOUSAND PESOS
Carrascoso with damages before the Court of First (P200, 000.00) to VENDOR;
Instance (CFI) of Occidental Mindoro, docketed as
Civil Case No. R-226. The remaining balance of the purchase price in the
sum of THREE HUNDRED EIGHTY THOUSAND
Lauro and El Dorado also sought the cancellation of PESOS (P380, 000.00), less such expenses which
TCT No. T-6055 in the name of Carrascoso and the may be advanced by the VENDEE but which are for
revival of TCT No. T-93 in the name of El Dorado, free the account of the VENDOR under Paragraph 6 of the
from any liens and encumbrances. Furthermore, the Agreement to Buy and Sell, shall be paid by the
two prayed for the issuance of an order for Carrascoso VENDEE to the VENDOR upon issuance of title to the
to: (1) recovery the property to El Dorado upon return VENDEE.26 (Underscoring supplied)
to him of ₱500,000.00, (2) secure a discharge of the
real estate mortgage constituted on the property from In turn, PLDT, by Deed of Absolute Sale 27 dated May
HSB, (3) submit an accounting of the fruits of the 30, 1977, conveyed the aforesaid 1,000 hectare
property from March 23, 1972 up to the return of portion of the property to its subsidiary, PLDT
possession of the land to El Dorado, (4) turnover said Agricultural Corporation (PLDTAC), for a consideration
fruits or the equivalent value thereof to El Dorado and of ₱3,000,000.00, the amount of ₱2,620,000.00 of
(5) pay the amount of ₱100,000.00 for attorney’s fees which was payable to PLDT upon signing of said
and other damages.23 Deed, and ₱380,000.00 to Carrascoso upon issuance
of title to PLDTAC.
Also on March 15, 1977, Lauro and El Dorado caused
to be annotated on TCT No. T-6055 a Notice of Lis In the meantime, on October 19, 1977, the El Dorado
Pendens, inscribed as Entry No. 39737.24 Board of Directors, by a special meeting, 28 adopted
and approved a Resolution ratifying and conferring
In the meantime, Carrascoso, as vendor and PLDT, as "the prosecution of Civil Case No. R-226 of the Court
vendee forged on April 6, 1977 a Deed of Absolute of First Instance of Occidental Mindoro, entitled ‘Lauro
Sale25 over the 1,000 hectare portion of the property P. Leviste vs. Fernando Carascoso (sic), etc.’ initiated
subject of their July 11, 1975 Agreement to Buy and by stockholder Mr. Lauro P. Leviste."29
Sell. The pertinent portions of the Deed are as follows:
In his Answer with Compulsory
WHEREAS, the VENDOR and the VENDEE entered Counterclaim,30 Carrascoso alleged that: (1) he had not
into an agreement To Buy and Sell on July 11, 1975, paid his remaining ₱1,300,000.00 obligation under the
which is made a part hereof by reference; March 23, 1972 Deed of Sale of Real Property in view
of the extensions of time to comply therewith granted
WHEREAS, the VENDOR and the VENDEE are now him by El Dorado; (2) the complaint suffered from fatal
decided to execute the Deed of Absolute Sale referred defects, there being no showing of compliance with the
to in the aforementioned agreement to Buy and Sell; condition precedent of exhaustion of intra-corporate
remedies and the requirement that a derivative suit
WHEREFORE, for and in consideration of the instituted by a complaining stockholder be verified
foregoing premises and the terms hereunder stated, under oath; (3) El Dorado committed a gross
the VENDOR and the VENDEE have agreed as misrepresentation when it warranted that the property
follows: was not being cultivated by any tenant to take it out of
the coverage of the Land Reform Code; and (4) he
suffered damages due to the premature filing of the
1. For and in consideration of the sum of THREE
complaint for which Lauro and El Dorado must be held
MILLION PESOS (P3,000,000.00), Philippine
liable.
currency, of which ONE HUNDRED TWENTY
On February 21, 1978, the April 6, 1977 and May 30, By Decision42 of January 31, 1996, the appellate court
1977 Deeds of Absolute Sale and the respective reversed the decision of the trial court, disposing as
Articles of Incorporation of PLDT and PLDTAC were follows, quoted verbatim:
annotated on TCT No. T-6055 as Entry Nos. 24770,
31 
42774, 32 4276933 and 24772, 34 respectively. On even WHEREFORE, not being meritorious,
date, Carrascoso’s TCT No. T-6055 was cancelled and PLDT’s/PLDTAC’s appeal is hereby DISMISSED and
TCT No. T-1248035 covering the 1,000 hectare portion finding El Dorado’s appeal to be impressed with merit,
of the property was issued in the name of PLDTAC. We REVERSE the appealed Decision and render the
The March 15, 1977 Notice of Lis Pendens was carried following judgment:
over to TCT No. T-12480.
1. The Deed of Sale of Real Property (Exhibit C) is
On July 31, 1978, PLDT and PLDTAC filed an Urgent hereby rescinded and TCT No. T-12480 (Exhibit Q) is
Motion for Intervention36 which was granted by the trial cancelled while TCT No. T-93 (Exhibit A) is
court by Order37 of September 7, 1978. reactivated.

PLDT and PLDTAC thereupon filed their Answer In 2. Fernando Carrascoso, Jr. is commanded to:
Intervention with Compulsory Counterclaim and
Crossclaim38 against Carrascoso on November 13, 2.1. Return the possession of the 825 [hectare-]
1978, alleging that: (1) when Carrascoso executed the remaining portion of the land to El Dorado Plantation,
April 6, 1977 Deed of Absolute Sale in favor of PLDT, Inc. without prejudice to the landholdings of legitimate
PLDT was not aware of any litigation involving the tenants thereon;
1,000 hectare portion of the property or of any flaw in
his title, (2) PLDT is a purchaser in good faith and for
value; (3) when PLDT executed the May 30, 1977 2.2. return the net fruits of the land to El Dorado
Deed of Absolute Sale in favor of PLDTAC, they had Plantation, Inc. from March 23, 1972 to July 11, 1975,
no knowledge of any pending litigation over the and of the 825-hectare-remaining portion minus the
property and neither were they aware that a notice tenants’ landholdings, from July 11, 1975 up to its
of lis pendens had been annotated on Carrascoso’s delivery to El Dorado Plantation, Inc. including
title; and (4) Lauro and El Dorado knew of the sale by whatever he may have received from the tenants if any
Carrascoso to PLDT and PLDT’s actual possession of by way of compensation under the Operation Land
the 1,000 hectare portion of the property since June Transfer or under any other pertinent agrarian law;
30, 1975 and of its exercise of exclusive rights of
ownership thereon through agricultural development.39 2.3 Pay El Dorado Plantation, Inc. an attorney’s fee of
P20, 000.00 and litigation expenses of P30, 000.00;
By Decision40 of January 28, 1991, Branch 45 of the
San Jose Occidental Mindoro Regional Trial Court to 2.4 Return to Philippine Long Distance Telephone
which the CFI has been renamed, dismissed the Company/PLDT Agricultural Corporation P3,
complaint on the ground of prematurity, disposing as 000,000.00 plus legal interest from April 6, 1977 until
follows, quoted verbatim: fully paid;

WHEREFORE, in view of all the foregoing 3. PLDT Agricultural Corporation is ordered to

considerations, judgment is hereby rendered: surrender the possession of the 1000-hectare Farm to
El Dorado Plantation, Inc.;
1. Dismissing the plaintiffs’ complaint against the
defendant on the ground of prematurity; 4. El Dorado Plantation, Inc. is directed to return the
P500, 000.00 to Fernando Carrascoso, Jr. plus legal
2. Ordering the plaintiffs to pay to the defendant the interest from March 23, 1972 until fully paid. The
sum of P2,980,000.00 as actual and compensatory performance of this obligation will however await the
damages, as well as the sum of P100,000.00 as and full compliance by Fernando Carrascoso, Jr. of his
for attorneys fees; provided, however, that the obligation to account for and deliver the net fruits of the
aforesaid amounts must first be set off from the latter’s land mentioned above to El Dorado Plantation, Inc.
unpaid balance to the former;
5. To comply with paragraph 2.2 herein, Carrascoso is
3. Dismissing the defendants-intervenors’ counterclaim directed to submit in (sic) the court a quo a full
and cross-claim; and accounting of the fruits of the land during the period
mentioned above for the latter’s approval, after which
the net fruits shall be delivered to El Dorado,
4. Ordering the plaintiffs to pay to (sic) the costs of Plantation, Inc.
suit.
6. El Dorado Plantation, Inc. should inform Philippine
SO ORDERED.41 (Underscoring supplied) Long Distance Telephone Co. and PLDT Agricultural
Corporation in writing within ten (10) days after finality
Carrascoso, PLDT and PLDTAC filed their respective of this decision regarding the exercise of its option
appeals to the Court of Appeals. under Art. 448 of the Civil Code.
SO ORDERED.43 (Underscoring supplied) January 31, 1996 Decision and the July 8, 2004
Resolution of the appellate court. It prayed that
PLDT and PLDTAC filed on February 22, 1996, a judgment be rendered upholding its right, interest and
Motion for Reconsideration44 of the January 31, 1996 title to the 1,000 hectare portion of the property and
CA Decision, while Carrascoso went up this Court by that it and its successors-in-interest are declared
filing on March 25, 1996 a petition for owners and legal possessors thereof, together with all
review,45 docketed as G.R. No. 123672, assailing the improvements built, sown and planted thereon.
January 31, 1996 CA Decision and seeking the
reinstatement of the January 28, 1991 Decision of the By Resolution56 of August 25, 2004, G.R. No. 164489
trial court except with respect to its finding that the was consolidated with G.R. No. 123672.
acquisition of PLDT and PLDTAC of the 1,000 hectare
portion of the property was subject to the notice In his petition, Carrascoso faults the CA as follows:
of lis pendens.
I
Lauro, in the meantime, died, hence, on April 16, 1996,
a Motion for Substitution of Party46 was filed praying THE COURT OF APPEALS ACTED WITH GRAVE
that his heirs, represented by Conrad C. Leviste, be ABUSE OF DISCRETION AND COMMITTED
substituted as respondents. The Motion was granted A MISTAKE OF LAW IN NOT DECLARING THAT
by Resolution47 of July 10, 1996. THE ACTION FOR RESCISSION WAS
PREMATURELY FILED.
PLDT and PLDTAC filed their Comment48 to
Carrascoso’s petition and prayed that judgment be II
rendered finding them to be purchasers in good faith to
thus entitle them to possession and ownership of the
1,000 hectare portion of the property, together with all THE COURT OF APPEALS ACTED WITH GRAVE
the improvements they built thereon. Reiterating that ABUSE OF DISCRETION AND COMMITTED
they were not purchaser’s pendente lite, they averred A MISTAKE OF LAW IN DISREGARDING THE
that El Dorado and Lauro had actual knowledge of CRUCIAL SIGNIFICANCE OF THE WARRANTY OF
their interests in the said portion of the property prior to NON-TENANCY EXPRESSLY STIPULATED IN THE
the annotation of the notice of lis pendens to thereby CONTRACT OF SALE.
render said notice ineffective.
III
El Dorado and the heirs of Lauro, both represented by
Conrad C. Leviste, also filed their Comment49 to THE COURT OF APPEALS ACTED WITH GRAVE
Carrascoso’s petition, praying that it be dismissed for ABUSE OF DISCRETION IN REVERSING THE
lack of merit and that paragraph 6 of the dispositive DECISION OF THE TRIAL COURT.57 (Underscoring
portion of the January 31, 1996 CA Decision be supplied)
modified to read as follows:
PLDT, on the other hand, faults the CA as follows:
6. El Dorado Plantation, Inc. should inform Philippine
Long Distance Telephone Co. and PLDT Agricultural I
Corporation in writing within ten (10) days after finality
of this decision regarding the exercise of its option THE COURT OF APPEALS COMMITTED A
under Arts. 449 and 450 of the Civil Code, without right REVERSIBLE ERROR IN HOLDING THAT
to indemnity on the part of the latter should the former PETITIONER AND PLTAC (sic) TOOK THEIR RIGHT,
decide to keep the improvements under Article INTEREST AND TITLE TO THE FARM SUBJECT TO
449.50 (Underscoring supplied) THE NOTICE OF LIS PENDENS, THE SAME IN
DISREGARD OF THE PROTECTION ACCORDED
Carrascoso filed on November 13, 1996 his Reply51 to THEM UNDER ARTICLES 1181 AND 1187 OF THE
the Comment of El Dorado and the heirs of Lauro. NEW CIVIL CODE.

In the meantime, as the February 22, 1996 Motion for II

Reconsideration filed by PLDT and PLDTAC of the CA
decision had remained unresolved, this Court, by THE COURT OF APPEALS COMMITTED A
Resolution52 of June 30, 2003, directed the appellate REVERSIBLE ERROR IN HOLDING THAT
court to resolve the same. PETITIONER AND PLDTAC TOOK THEIR RIGHT,
INTEREST AND TITLE TO THE FARM SUBJECT TO
By Resolution53 of July 8, 2004, the CA denied PLDT THE NOTICE OF LIS PENDENS, THE SAME IN
and PLDTAC’s Motion for Reconsideration for lack of DISREGARD OF THE LEGAL PRINCIPLE THAT
merit. RESPONDENTS EL DORADO ET AL.’s PRIOR,
ACTUAL KNOWLEDGE OF PETITIONER PLDT’S
PLDT54 thereupon filed on September 2, 2004 a AGREEMENT TO BUY AND SELL WITH
petition for review55 before this Court, docketed as G.R. RESPONDENT CARRASCOSO RESULTING IN THE
No. 164489, seeking to reverse and set aside the DELIVERY TO, AND POSSESSION, OCCUPATION
AND DEVELOPMENT BY, SAID PETITIONER OF
THE FARM, IS EQUIVALENT TO REGISTRATION OF buyer is a resolutory condition which extinguishes the
SUCH RIGHT, INTEREST AND TITLE AND, transaction that for a time existed, and discharges the
THEREFORE, A PRIOR REGISTRATION NOT obligations created thereunder.64 Such failure to pay
AFFECTED BY THE LATER NOTICE OF LIS the price in the manner prescribed by the contract of
PENDENS.58 (Underscoring supplied) sale entitles the unpaid seller to sue for collection or to
rescind the contract.65
Carrascoso posits that in the El Dorado Board
Resolution and the Affidavit of Feliciano Leviste, both In the case at bar, El Dorado already performed its
dated March 23, 1972, no objection was interposed to obligation through the execution of the March 23, 1972
his mortgaging of the property to any bank provided Deed of Sale of Real Property which effectively
that the balance of the purchase price of the property transferred ownership of the property to Carrascoso.
under the March 23, 1972 Deed of Sale of Real The latter, on the other hand, failed to perform his
Property is recognized, hence, El Dorado could collect correlative obligation of paying in full the contract price
the unpaid balance of ₱1,300,000.00 only after the in the manner and within the period agreed upon.
mortgage in favor of HSB is paid in full; and the filing of
the complaint for rescission with damages on March The terms of the Deed are clear and unequivocal:
15, 1977 was premature as he fully paid his obligation Carrascoso was to pay the balance of the purchase
to HSB only on April 5, 1977 as evidenced by the price of the property amounting to ₱1,300,000.00 plus
Cancellation of Mortgage59 signed by HSB President interest thereon at the rate of 10% per annum within a
Gregorio B. Licaros. period of three (3) years from the signing of the
contract on March 23, 1972. When Jose Leviste
Carrascoso further posits that extensions of the period informed him that El Dorado was seeking rescission of
to pay El Dorado were verbally accorded him by El the contract by letter of February 21, 1977, the period
Dorado’s directors and officers, particularly Jose and given to him within which to fully satisfy his obligation
Angel Leviste. had long lapsed.

Article 1191 of the Civil Code provides: The El Dorado Board Resolution and the Affidavit of
Jose Leviste interposing no objection to Carrascoso’s
Art. 1191. The power to rescind obligations is implied mortgaging of the property to any bank did not have
in reciprocal ones, in case one of the obligors should the effect of suspending the period to fully pay the
not comply with what is incumbent upon him. purchase price, as expressly stipulated in the Deed,
pending full payment of any mortgage obligation of
Carrascoso.
The injured party may choose between the fulfilment
and the rescission of the obligation, with the payment
of damages in either case. He may also seek As the CA correctly found:
rescission, even after he has chosen fulfilment, if the
latter should become impossible. The adverted resolution (Exhibit 2) does not say that
the obligation of Carrascoso to pay the balance was
The court shall decree the rescission claimed, unless extended. Neither can we see in it anything that can
there be just cause authorizing the fixing of a period. logically infer said accommodation.

This is understood to be without prejudice to the rights A partially unpaid seller can agree to the buyer’s
of third persons who have acquired the thing, in mortgaging the subject of the sale without changing
accordance with Articles 1385 and 1388 and the the time fixed for the payment of the balance of the
Mortgage Law. price. The two agreements are not incompatible with
each other such that when one is to be implemented,
the other has to be suspended. In the case at bench,
Reciprocal obligations are those which arise from the
there was no impediment for Carrascoso to pay the
same cause, and in which each party is a debtor and a
balance of the price after mortgaging the land.
creditor of the other, such that the obligation of one is
dependent upon the obligation of the other.60 They are
to be performed simultaneously such that the Also, El Dorado’s subordinating its "preferred claim" or
performance of one is conditioned upon the waiving its superior "vendor’s lien" over the land in
simultaneous fulfilment of the other.61 favor of the mortgagee of said property only means
that in a situation where the unpaid price of the Land
and loan secured by the mortgage over the Land both
The right of rescission of a party to an obligation under
become due and demandable, the mortgagee shall
Article 1191 is predicated on a breach of faith by the
have precedence in going after the Land for the
other party who violates the reciprocity between
satisfaction of the loan. Such accommodations do not
them.62
necessarily imply the modification of the period fixed in
the contract of sale for the payment by Carrascoso of
A contract of sale is a reciprocal obligation. The seller the balance.
obligates it to transfer the ownership of and deliver a
determinate thing, and the buyer obligates it to pay
The palpable purpose of El Dorado in not raising any
therefore a price certain inn money or its
objection to Carrascoso’s mortgaging the land was to
equivalent.63 The non-payment of the price by the
eliminate any legal impediment to such a contract.
That was so succinctly expressed in the Affidavit Carrascoso goes on to argue that the appellate court
(Exhibit 2-A) of President Feleciano (sic) Leviste. El erred in ignoring the import of the warranty of non-
Dorado’s yielding its "superior lien" over the land in tenancy expressly stipulated in the March 23, 1972
favor of the mortgagee was plainly intended to Deed of Sale of Real Property. He alleges that on
overcome the natural reluctance of lending institutions March 8, 1972 or two weeks prior to the execution of
to accept a land whose price has not yet been fully the Deed of Sale, he discovered, while inspecting the
paid as collateral of a loan.66 (Underscoring supplied) property on board a helicopter, that there were people
and cattle in the area; when he confronted El Dorado
Respecting Carrascoso’s insistence that he was about it, he was told that the occupants were
granted verbal extensions within which to pay the caretakers of cattle who would soon leave;69 four
balance of the purchase price of the property by El months after the execution of the Deed of Sale, upon
Dorado’s directors and officers Jose and Angel inquiry with the Bureau of Lands and the Bureau of
Leviste, this Court finds the same unsubstantiated by Soils, he was informed that there were people claiming
the evidence on record. to be tenants in certain portions of the property; 70 and
he thus brought the matter again to El Dorado which
informed him that the occupants were not tenants but
It bears recalling that Jose Leviste wrote Carrascoso,
squatters.71
by letter of February 21, 1977, calling his attention to
his failure to comply, despite "numerous" requests,
with his obligation to pay the amount of ₱1,300,000.00 Carrascoso now alleges that as a result of what he
and 10% annual interest thereon, and advising him concludes to be a breach of the warranty of non-
that "we would like to rescind the contract of sale." tenancy committed by El Dorado, he incurred
This letter reiterated the term of payment agreed upon expenses in the amount of ₱2,890,000.00 for which he
in the March 23, 1972 Deed of Sale of Real Property should be reimbursed, his unpaid obligation to El
and Carrascosos’s non-compliance therewith. Dorado amounting to ₱1,300,000.00 to be deducted
therefrom.72
Carrascoso, harping on Jose Leviste’s March 10, 1977
letter to Lauro’s counsel wherein he (Jose Leviste) The breach of an express warranty makes the seller
stated that "some of the Directors of the corporation liable for damages.73 The following requisites must be
could not see their way clear in complying with the established in order that there be an express warranty
demands of [Lauro] and have failed to reach a in a contract of sale: (1) the express warranty must be
consensus to bring the corresponding action for an affirmation of fact or any promise by the seller
rescission of the contract against Dr. Fernando relating to the subject matter of the sale; (2) the natural
Carrascoso," argues that the extensions priory given to tendency of such affirmation or promise is to induce
him "no doubt lead to the logical conclusion on some the buyer to purchase the thing; and (3) the buyer
of the directors’ inability to file suit against him."67 purchases the thing relying on such affirmation or
promise thereon.74
The argument is specious. As the CA found, even if
some officers of El Dorado were initially reluctant to file Under the March 23, 1972 Deed of Sale of Real
suit against him, the same should not be interpreted to Property, El Dorado warranted that the property was
mean that this was brought about by a prior extension not being cultivated by any tenant and was, and
of the period to pay the balance of the purchase price therefore, not covered by the provisions of the Land
of the property as such reluctance could have been Reform Code. If Carrascoso would become liable
due to a myriad of reasons totally unrelated to the under the said law, he would be reimbursed for all
period of payment of the balance. expenses and damages incurred thereon.

The bottom-line however is, if El Dorado really Carrascoso claims to have incurred expenses in
intended to extend the period of payment of the relocating persons found on the property four months
balance there was absolutely no reason why it did not after the execution of the Deed of Sale. Apart from
do it in writing in clear and unmistakable terms. That such bare claim, the records are bereft of any proof
there is no such writing negates all the speculations of that those persons were indeed tenants.75 The fact of
the court a quo and pretensions of Carrascoso. tenancy76 not having been prioryestablished, 77 El
Dorado may not be held liable for actual damages.
xxx
Carrascoso further argues that both the trial and
appellate courts erred in holding that the sale of the
The unalterable fact here remains that on March 23,
1,000 hectare portion of the property to PLDT, as well
1973, with or without demand, the obligation of
as its subsequent sale to PLDTAC, is subject to the
Carrascoso to pay P519, 933.33 became due. The
March 15, 1977 Notice of Lis Pendens.
same was true on March 23, 1974 and on March 23,
1975 for equal amounts. Since he did not perform his
obligation under the contract of sale, he, therefore, PLDT additionally argues that the CA incorrectly
breached it. Having breached the contract, El Dorado’s ignored the Agreement to Buy and Sell which it
cause of action for rescission of that contract entered into with Carrascoso on July 11, 1975, positing
arose.68 (Underscoring supplied) that the efficacy of its purchase from Carrascoso, upon
his fulfilment of the condition it imposed resulting in its
decision to formalize their transaction and execute the
April 6, 1977 Deed of Sale, retroacted to July 11, 1975 xxx
or before the annotation of the Notice of Lis Pendens.78
7. The VENDOR agrees that, during the existence of
The pertinent portions of the July 11, 1975 Agreement this Agreement and without the previous written
to Buy and Sell between PLDT and Carrascoso read: permission from the VENDEE, he shall not sell, cede,
assign and/or transfer the parcel of land subject of this
2. That the VENDOR hereby agrees to sell to the Agreement.79
VENDEE and the latter hereby agrees to purchase
from the former, 1,000 hectares of the above- A notice of lis pendens is an announcement to the
described parcel of land as shown in the map hereto whole world that a particular real property is in
attached as Annex "A" and made an integral part litigation, and serves as a warning that one who
hereof and as hereafter to be more particularly acquires an interest over said property does so at his
determined by the survey to be conducted by Certeza own risk, or that he gambles on the result of the
& Co., at the purchase price of P3,000.00 per hectare litigation over said property.80
or for a total consideration of Three Million Pesos
(P3,000,000.00) payable in cash. Once a notice of lis pendens has been duly registered,
any cancellation or issuance of title over the land
3. That this contract shall be considered rescinded and involved as well as any subsequent transaction
cancelled and of no further force and effect, upon affecting the same would have to be subject to the
failure of the VENDOR to clear the aforementioned outcome of the suit. In other words, a purchaser who
1,000 hectares of land of all the occupants therein buys registered land with full notice of the fact that it is
located, within a period of one (1) year from the date of in litigation between the vendor and a third party
execution of this Agreement. However, the VENDEE stands in the shoes of his vendor and his title is
shall have the option to extend the life of this subject to the incidents and result of the pending
Agreement by another six months, during which period litigation.81
the VENDEE shall definitely inform the VENDOR of its
decision on whether or not to finalize the deed of x x x Notice of lis pendens has been conceived and,
absolute sale for the aforementioned 1,000 hectares of more often than not, availed of, to protect the real
land. rights of the registrant while the case involving such
rights is pending resolution or decision. With the notice
The VENDOR agrees that the amount of P500.00 per of lis pendens duly recorded, and while it remains
family within the aforementioned 1,000 hectares of uncancelled, the registrant could rest secure that he
land shall be spent by him for relocation purposes, would not lose the property or any part of it during the
which amount however shall be advanced by the litigation.
VENDEE and which shall not exceed the total amount
of P120, 000.00, the same to be thereafter deducted The filing of a notice of lis pendens in effect (1) keeps
by the VENDEE from the aforementioned purchase the subject matter of litigation within the power of the
price of P3, 000,000.00. court until the entry of the final judgment so as to
prevent the defeat of the latter by successive
The aforementioned advance of P120, 000.00 shall be alienations; and (2) binds a purchaser of the land
remitted by the VENDEE to the VENDOR upon the subject of the litigation to the judgment or decree that
signing of this Agreement. will be promulgated thereon whether such a purchaser
is a bona fide purchaser or not; but (3) does not create
xxx a non-existent right or lien.

It is likewise further agreed that the VENDEE shall The doctrine of lis pendens is founded upon reason of
have the right to enter into any part of the public policy and necessity, the purpose of which is to
aforementioned 1,000 hectares at any time within the keep the subject matter of the litigation within the
period of this Agreement for purposes of commencing power of the court until the judgment or decree shall
the development of the same. have been entered; otherwise by successive
alienations pending the litigation, its judgment or
decree shall be rendered abortive and impossible of
xxx
execution. The doctrine of lis pendens is based on
considerations of public policy and convenience, which
5. Title to the aforementioned land shall also be forbid a litigant to give rights to others, pending the
cleared of all liens or encumbrances and if there are litigation, so as to affect the proceedings of the court
any unpaid taxes, existing mortgages, liens and then progressing to enforce those rights, the rule being
encumbrances on the land, the payments to be made necessary to the administration of justice in order that
by the VENDEE to the VENDOR of the purchase price decisions in pending suits may be binding and may be
shall first be applied to liquidate said mortgages, liens given full effect, by keeping the subject matter in
and/or encumbrances, such that said payments shall controversy within the power of the court until final
be made directly to the corresponding creditors. Thus, adjudication, that there may be an end to litigation, and
the balance of the purchase price will be paid to the to preserve the property that the purpose of the
VENDOR after the title to the land is cleared of all such pending suit may not be defeated by successive
liens and encumbrances.
alienations and transfers of title.82 (Italics in the PLDT argues that the July 11, 1975 Agreement to Buy
original) and Sell is a conditional contract of sale, thus calling
for the application of Articles 118187 and 118788 of the
In ruling against PLDT and PLDTAC, the appellate Civil Code as held in Coronel v. Court of Appeals.89
court held:
The Court is not persuaded.
PLDT and PLDTAC argue that in reality the Farm was
bought by the former on July 11, 1975 when For in a conditional contract of sale, if the suspensive
Carrascoso and it entered into the Agreement to Buy condition is fulfilled, the contract of sale is thereby
and Sell (Exhibit 15). How can an agreement to buy perfected, such that if there had already been previous
and sell which is a preparatory contract be the same delivery of the property subject of the sale to the buyer,
as a contract of sale which is a principal contract? If ownership thereto automatically transfers to the buyer
PLDT’s contention is correct that it bought the Farm on by operation of law without any further act having to be
July 11, 1975, why did it buy the same property again performed by the seller.90 Whereas in a contract to sell,
on April 6, 1977? There is simply no way PLDT and upon fulfilment of the suspensive condition, ownership
PLDTAC can extricate themselves from the effects of will not automatically transfer to the buyer although the
said Notice of Lis Pendens. It is admitted that PLDT property may have been previously delivered to him.
took possession of the Farm on July 11, 1975 after the The prospective seller still has to convey title to the
execution of the Agreement to Buy and Sell but it did prospective buyer by entering into a contract of
so not as owner but as prospective buyer of the absolute sale.91
property. As prospective buyer which had actual on
(sic) constructive notice of the lis pendens, why did it A perusal of the contract92 adverted to
pursue and go through with the sale if it had not been in Coronel reveals marked differences from the
willing to gamble with the result of this case? Agreement to Buy and Sell in the case at bar. In
83 
(Underscoring supplied) the Coronel contract, there was a clear intent on the
part of the therein petitioners-sellers to transfer title to
Further, in its July 8, 2004 Resolution, the CA held: the therein respondent-buyer. In the July 11, 1975
Agreement to Buy and Sell, PLDT still had to "definitely
PLDT cannot shield itself from the notice of lis inform Carrascoso of its decision on whether or not to
pendens because all that it had at the time of its finalize the deed of absolute sale for the 1,000 hectare
inscription was an Agreement to Buy and Sell with portion of the property," such that in the April 6, 1977
CARRASCOSO, which in effect is a mere contract to Deed of Absolute Sale subsequently executed, the
sell that did not pass to it the ownership of the parties declared that they "are now decided to
property. execute" such deed, indicating that the Agreement to
Buy and Sell was, as the appellate court held, merely a
preparatory contract in the nature of a contract to sell.
xxx
In fact, the parties even had to stipulate in the said
Agreement to Buy and Sell that Carrascoso, "during
Ownership was retained by CARRASCOSO which EL the existence of the Agreement, shall not sell, cede,
DORADO may very well recover through its action for assign and/or transfer the parcel of land," which
rescission. provision this Court has held to be a typical
characteristic of a contract to sell.93
xxx
Being a contract to sell, what was vested by the July
PLDT’s possession at the time the notice of lis 11, 1975 Agreement to Buy and Sell to PLDT was
pendens was registered not being a legal possession merely the beneficial title to the 1,000 hectare portion
based on ownership but a mere possession in fact and of the property.
the Agreement to Buy and Sell under which it
supposedly took possession not being registered, it is The right of Daniel Jovellanos to the property under
not protected from an adverse judgment that may be the contract [to sell] with Philamlife was merely
rendered in the case subject of the notice of lis an inchoate and expectant right which would ripen into
pendens.84 (Underscoring supplied) a vested right only upon his acquisition of
ownership which, as aforestated, was contingent upon
In a contract of sale, the title passes to the vendee his full payment of the rentals and compliance with all
upon the delivery of the thing sold; whereas in a his contractual obligations there under. A vested right
contract to sell, ownership is not transferred upon is an immediate fixed right of present and future
delivery of the property but upon full payment of the enjoyment. It is to be distinguished from a right that is
purchase price.85 In the former, the vendor has lost and expectant or contingent. It is a right which is fixed,
cannot recover ownership until and unless the contract unalterable, absolute, complete and unconditional to
is resolved or rescinded; whereas in the latter, title is the exercise of which no obstacle exists, and which is
retained by the vendor until the full payment of the perfect in itself and not dependent upon a contingency.
price, such payment being a positive suspensive Thus, for a property right to be vested, there must be a
condition and failure of which is not a breach but an transition from the potential or contingent to the actual,
event that prevents the obligation of the vendor to and the proprietary interest must have attached to a
convey title from becoming effective.86 thing; it must have become fixed or established and is
no longer open to doubt or by final judgment in Civil Case No. 6365, but against
controversy.94 (Underscoring supplied) ROMERO who was found to have had no right to
dispose of the land.97 (Underscoring supplied)
In the case at bar, the July 11, 1975 Agreement to Buy
and Sell was not registered, which act of registration is PLDT further argues that El Dorado’s prior, actual
the operative act to convey and affect the land. knowledge of the July 11, 1975 Agreement to Buy and
Sell is equivalent to prior registration not affected by
An agreement to sell is a voluntary instrument as it is a the Notice of Lis Pendens. As such, it concludes that it
wilful act of the registered owner. As such voluntary was neither a purchaser pendente lite nor a purchaser
instrument, Section 50 of Act No. 496 [now Section 51 in bad faith.
of PD 1529] expressly provides that the act of
registration shall be the operative act to convey and PLDT anchors its argument on the testimony of Lauro
affect the land. And Section 55 of the same Act [now and El Dorado’s Counsel Atty. Aquino from which it
Section 53 of PD 1529] requires the presentation of infers that Atty. Aquino filed the complaint for
the owner’s duplicate certificate of title for the rescission and caused the notice of lis pendens to be
registration of any deed or voluntary instrument. As the annotated on Carrascoso’s title only after reading
agreement to sell involves an interest less than an newspaper reports on the sale to PLDT of the 1,000
estate in fee simple, the same should have been hectare portion of the property.
registered by filing it with the Register of Deeds who, in
turn, makes a brief memorandum thereof upon the The pertinent portions of Atty. Aquino’s testimony are
original and owner’s duplicate certificate of title. The reproduced hereunder:
reason for requiring the production of the owner’s
duplicate certificate in the registration of a voluntary Q: Do you know, Atty. Aquino, what you did after the
instrument is that, being a wilful act of the registered filing of the complaint in the instant case of Dr.
owner, it is to be presumed that he is interested in
Carrascoso?
registering the instrument and would willingly
surrender, present or produce his duplicate certificate
of title to the Register of Deeds in order to accomplish A: Yes, I asked my associates to go to Mamburao and
such registration. However, where the owner refuses had the notice of Lis Pendens covering the property as
to surrender the duplicate certificate for the annotation a result of the filing of the instant complaint.
of the voluntary instrument, the grantee may file with
the Register of Deeds a statement setting forth his Q: Do you know the notice of Lis Pendens?
adverse claim, as provided for in Section 110 of Act
No. 496. xxx95 (Underscoring supplied) A: Yes, it is evidenced by a [Transfer] Certificate Copy
of Title of Dr. Carrascoso entitled "Notice of Lis
In Valley Golf Club, Inc. v. Salas, 96 where a Deed of Pendens".
Absolute Sale covering a parcel of land was
executed prior to the annotation of a notice of lis Q: As a consequence of the filing of the complaint
pendens by the original owner thereof but which Deed which was annotated, you have known that?
was registered after such annotation, this Court held:
A: Yes.
The advance payment of P15, 000.00 by the CLUB on
October 18, 1960 to ROMERO, and the additional xxx
payment by the CLUB of P54, 887.50 as full payment
of the purchase price on October 26, 1960, also to
Q: After the annotation of the notice of Lis Pendens, do
ROMERO, cannot be held to be the dates of sale such
you know, if any further transaction was held on the
as to precede the annotation of the adverse claim by
property?
the SISTERS on October 25, 1960 and the lis
pendens on October 27, 1960. It is basic that it is the
act of registration of the sale that is the operative act to A: As we have read in the newspaper, that Dr.
convey and affect the land. That registration was not Carrascoso had sold the property in favor of the PLDT,
affected by the CLUB until December 4, 1963, or three Co.
(3) years after it had made full payment to ROMERO.
xxx Q: And what did you do?

xxx A: We verified the portion of the property having

recorded under entry No. 24770 xxx and we also
As matters stand, therefore, in view of the prior discovered that the articles incorporated (sic) and
annotations of the adverse claim and lis pendens, the other corporate matters had been organized and
CLUB must be legally held to have been aware of the established of the PLDT, Co., and had been
flaws in the title. By virtue of the lis pendens, its annotated.
acquisition of the property was subject to whatever
judgment was to be rendered in Civil Case No. 6365. xxx
xxx The CLUB’s cause of action lies, not against the
SISTERS, to whom the property had been adjudged Q: Do you know what happened to the property?
A: It was sold by the PLDT to its sub-PLDT Agitating xxx
(sic) Co. when at that time there was already notice of
Lis Pendens. Q: What is the position of Mrs. Trinidad Andaya
Leviste with the plaintiff-corporation?
xxx
A: One of the stockholders and director of the plaintiff-
Q: In your testimony, you mentioned that you had corporation, sir.
come cross- (sic) reading the sale of the subject
litigation (sic) between Dr. Fernando Carrascoso, the Q: Will you please tell us the other officers?
defendant herein and the PLDT, one of defendants-
intervenors, may I say when? A: Expedito Leviste, sir.

A: I cannot remember now, but it was in the A: Will you tell the position of Expedito Leviste?
newspaper where it was informed or mentioned of the
sold property to PLDT.
A: He was the corporate secretary, sir.
xxx
Q: If you know, was Dr. Jose Leviste also a director at
that time?
Q: Will you tell to the Honorable Court what newspaper
was that?
A: Yes, sir.99
A: Well, I cannot remember what that newspaper is.
That is only a means of [confirming] the transaction. On the other hand, El Dorado asserts that it had no
What was [confirmed] to us is whether there was really knowledge of the July 11, 1975 Agreement to Buy and
transaction (sic) and we found out that there was in the Sell prior to the filing of the complaint for rescission
Register of Deeds and that was the reason why we against Carrascoso and the annotation of the notice
obtained the case. of lis pendens on his title. It further asserts that it
always acted in good faith:
Q: Well, may I say, is there any reason, the answer is
immaterial. The question is as regard the matter of Xxx the contract to sell between the Petitioner
time when counsel is being able (sic) to read the [Carrascoso] and PLDT were executed in July 11,
newspaper allegedly (interrupted) 1975. There is no evidence that El Dorado was notified
of this contract. The property is located in Mindoro, El
Dorado is based in Manila. The land was planted to
xxx rice. This was not an unusual activity on the land, thus
it could have been the Petitioner who was using the
Q: The idea of the question, your Honor, is to establish land. Not having been notified of this sale, El Dorado
and ask further the notice of [lis pendens] with regards could not have stopped PLDT from developing the
(sic) to the transfer of property to PLDT, would have land.
been accorded prior to the pendency of the case.
The absolute sale of the land to PLDT took place on
xxx April 6, 1977, or AFTER the filing of this case on
March 15, 1977 and the annotation of a notice of lis
A: I cannot remember.98 pendens on March 16, 1977. In spite of the notice of lis
pendens, PLDT then PLDTAC persisted not only in
PLDT also relies on the following testimony of buying the land but also in putting up improvements on
Carrascoso: the property such as buildings, roads, irrigation
systems and drainage. This was done during the
pendency of this case, where PLDT and PLDTAC
Q: You mentioned Doctor a while ago that you
actively participated as intervenors. They were not
mentioned to the late Governor Feliciano Leviste
innocent bystanders. Xxx100
regarding your transaction with the PLDT in relation to
the subject property you allegedly mention (sic) your
intention to sell with the PLDT? This Court finds the above-quoted testimony of Atty.
Aquino to be susceptible of conflicting interpretations.
As such, it cannot be the basis for inferring that El
A: It was Dr. Jose Leviste and Dr. Angel Leviste that
Dorado knew of the July 11, 1975 Agreement to Buy
was constantly in touched (sic) with me with respect to
and Sell prior to the annotation of the notice of lis
my transaction with the PLDT, sir.
pendens on Carrascoso’s title.
Q: Any other officer of the corporation who knows with
Respecting Carrascoso’s allegation that some of the
instruction aside from Dr. Angel Leviste and Dr. Jose
directors and officers of El Dorado had knowledge of
Leviste?
his dealings with PLDT, it is true that knowledge of
facts acquired or possessed by an officer or agent of a
A: Yes, sir. It was Trinidad Andaya Leviste and corporation in the course of his employment, and in
Assemblyman Expedito Leviste. relation to matters within the scope of his authority, is
notice to the corporation, whether he communicates the right to appropriate as his own the works, sowing
such knowledge or not.101 In the case at bar, however, or planting, after payment of the indemnity provided for
apart from Carrascoso’s claim that he in fact notified in Articles 546 and 548, or to oblige the one who built
several of the directors about his intention to sell the or planted to pay the price of the land, and the one
1,000 hectare portion of the property to PLDT, no who sowed, the proper rent. However, the builder or
evidence was presented to substantiate his claim. planter cannot be obliged to buy the land if its value is
Such self-serving, uncorroborated assertion is considerably more than that of the building or trees. In
indubitably inadequate to prove that El Dorado had such a case, he shall pay reasonable rent, if the owner
notice of the July 11, 1975 Agreement to Buy and Sell of the land does not choose to appropriate the building
before the annotation of the notice of lis pendens on or trees after the proper indemnity. The parties shall
his title. agree upon the terms of the lease and in case of
disagreement, the court shall fix the terms thereof.
PLDT is, of course, not without recourse. As held by
the CA: The above provision covers cases in which the
builders, sowers or planters believe themselves to be
Between Carrascoso and PLDT/PLDTAC, the former owners of the land or, at least, to have a claim of title
acted in bad faith while the latter acted in good faith. thereto.104 Good faith is thus identified by the belief that
This is so because it was Carrascoso’s refusal to pay the land is owned; or that by some title one has the
his just debt to El Dorado that caused PLDT/PLDTAC right to build, plant, or sow thereon.105
to suffer pecuniary losses. Therefore, Carrascoso
should return to PLDT/PLDTAC the P3, 000,000.00 The owner of the land on which anything has been
price of the farm plus legal interest from receipt thereof built, sown or planted in good faith shall have the right
until paid.102 (Underscoring supplied) to appropriate as his own the building, planting or
sowing, after payment to the builder, planter or sower
The appellate court’s decision ordering the rescission of the necessary and useful expenses,106 and in the
of the March 23, 1972 Deed of Sale of Real Property proper case, expenses for pure luxury or mere
between El Dorado and Carrascoso being in order, pleasure.107
mutual restitution follows to put back the parties to
their original situation prior to the consummation of the The owner of the land may also oblige the builder,
contract. planter or sower to purchase and pay the price of the
land.
The exercise of the power to rescind extinguishes the
obligatory relation as if it had never been created, the If the owner chooses to sell his land, the builder,
extinction having a retroactive effect. The rescission is planter or sower must purchase the land; otherwise the
equivalent to invalidating and unmaking the juridical owner may remove the improvements thereon. The
tie, leaving things in their status before the celebration builder, planter or sower, however, is not obliged to
of the contract. purchase the land if its value is considerably more than
the building, planting or sowing. In such case, the
Where a contract is rescinded, it is the duty of the builder, planter or sower must pay rent to the owner of
court to require both parties to surrender that which the land.
they have respectively received and to place each
other as far as practicable in his original situation, the If the parties cannot come to terms over the conditions
rescission has the effect of abrogating the contract in of the lease, the court must fix the terms thereof.
all parts.103 (Underscoring supplied)
The right to choose between appropriating the
The April 6, 1977 and May 30, 1977 Deeds of Absolute improvement and selling the land, on which the
Sale being subject to the notice of lis pendens, and as improvement of the builder, planter or sower stands, is
the Court affirms the declaration by the appellate court given to the owner of the land.108
of the rescission of the Deed of Sale executed by El
Dorado in favor of Carrascoso, possession of the On the other hand, when a person builds in bad faith
1,000 hectare portion of the property should be turned on the land of another, Articles 449 and 450 govern:
over by PLDT to El Dorado.
Art. 449. He who builds, plants or sows in bad faith on
As regards the improvements introduced by PLDT on the land of another, loses what is built, planted or sown
the 1,000 hectare portion of the property, a distinction without right to indemnity.
should be made between those which it built prior to
the annotation of the notice of lis pendens and those Art. 450. The owner of the land on which anything has
which it introduced subsequent thereto. been built, planted or sown in bad faith may demand
the demolition of the work, or that the planting or
When a person builds in good faith on the land of sowing be removed, in order to replace things in their
another, Article 448 of the Civil Code governs: former condition at the expense of the person who
built, planted or sowed; or he may compel the builder
Art. 448. The owner of the land on which anything has or planter to pay the price of the land, and the sower
been built, sown or planted in good faith, shall have the proper rent.
In the case at bar, it is undisputed that PLDT purchase price of the 1,000 hectare portion is made by
commenced construction of improvements on the PLDT in favor of El Dorado in case the latter opts for
1,000 hectare portion of the property immediately after its compulsory sale.
the execution of the July 11, 1975 Agreement to Buy
and Sell with the full consent of Carrascoso. 109 Thus, Costs against petitioners.
until March 15, 1977 when the Notice of Lis
Pendens was annotated on Carrascoso’s TCT No. T- SO ORDERED.
6055, PLDT is deemed to have been in good faith in
introducing improvements on the 1,000 hectare portion
of the property. CONCHITA CARPIO MORALES.

After March 15, 1977, however, PLDT could no longer ___________________________________________

invoke the rights of a builder in good faith.
DIGEST:
Should El Dorado then opt to appropriate the
improvements made by PLDT on the 1,000 hectare
portion of the property, it should only be made to pay
for those improvements at the time good faith existed G.R. No. 123672 December 14, 2005
on the part of PLDT or until March 15, 1977, 110 to be FERNANDO CARRASCOSO, JR., Petitioner,
pegged at its current fair market value.111 vs.
THE HONORABLE COURT OF APPEALS
The commencement of PLDT’s payment of reasonable
rent should start on March 15, 1977 as well, to be paid FACTS:
until such time that the possession of the 1,000
hectare portion is delivered to El Dorado, subject to the In March 1972, El Dorado Plantation, Inc. (El Dorado),
reimbursement of expenses as aforestated, that is, if through its board member LauroLeviste, executed a
El Dorado opts to appropriate the improvements.112 Deed of Sale with Fernando Carrascoso, Jr. The
subject of the sale was a 1,825 hectare of land. It was
If El Dorado opts for compulsory sale, however, the agreed that Carrascoso was to pay P1.8M. that P290,
payment of rent should continue up to the actual 000.00 would be paid by Carrascoso to PNB to settle
transfer of ownership.113 the mortgage upon the said land. P210, 000.00 would
be paid directly to Leviste. The balance of P1.3M plus
10% interest would be paid over the next 3 years at
WHEREFORE, the petitions are DENIED. The P519k every 25th of March.
Decision dated January 13, 1996 and Resolution dated
July 8, 2004 of the Court of Appeals Subsequently, Carrascoso obtained a total of P1.07M
are AFFIRMED with MODIFICATION in that as mortgage and he used the same to pay the down
payment agreed upon in the contract. Carrascoso
1) The Regional Trial Court of San Jose, Occidental defaulted from his obligation which was supposed to
Mindoro, and Branch 45 are further directed to: be settled on March 25, 1975. Leviste then sent him
letters to make good his end of the contract; otherwise,
A. determines the present fair price of the 1,000 he will be litigated. Meanwhile, El Dorado filed a civil
hectare portion of the property and the amount of the case against Carrascoso. The Regional Trial Court
expenses actually spent by PLDT for the (RTC) ruled in favor of Carrascoso. The Court of
improvements thereon as of March 15, 1977; Appeals (CA), however, reversed the RTC ruling.

b. include for determination the increase in value ("plus ISSUE:

value") which the 1,000 hectare portion may have
acquired by reason of the existence of the Whether or not the contract entered into by the parties
improvements built by PLDT before March 15, 1977 is a contract of sale.
and the current fair market value of said
improvements; RULING:

YES. The Court held that the contract executed

2. El Dorado is ordered to exercise its option under the
between El Dorado and Carrascoso was a contract of
law, whether to appropriate the improvements, or to
sale. It was perfected by their meeting of the minds
oblige PLDT to pay the price of the land, and
and was consummated by the delivery of the property
to Carrascoso. However, El Dorado has the right to
3) PLDT shall pay El Dorado the amount of Two rescind the contract by reason of CarrascosO'Ss
Thousand Pesos (₱2,000.00) per month as reasonable failure to perform his obligation. A contract of sale is a
compensation for its occupancy of the 1,000 hectare reciprocal obligation. 
portion of the property from the time that its good faith
ceased to exist until such time that possession of the The seller obligates it to transfer the ownership of and
same is delivered to El Dorado, subject to the deliver a determinate thing, and the buyer obligates it
reimbursement of the aforesaid expenses in favor of to pay therefore a price certain in money or its
PLDT or until such time that the payment of the equivalent. The non-payment of the price by the buyer
is a resolutory condition which extinguishes the
transaction that for a time existed, and discharges the
obligations created there under. Also, such failure to
pay the price in the manner prescribed by the contract
of sale entitles the unpaid seller to sue for collection or
to rescind the contract.