Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 85733 February 23, 1990 Sp . ENR!

"UE a#$ CONSUE%O %!M, petitioners, vs. T&E &ONOR'(%E COURT OF 'PPE'%S, Sp . TERES!T' a#$ OSC'R GUE)'RR', Sp . M'RCOS a#$ 'N!T' OR%!NO, Sp . ROMU%O a#$ CONSUE%O OR%!NO a#$ Sp . FE%!* a#$ +O%ORES OR%!NO, respondents. Salonga, Andres, Hernandez & Allado for petitioners. Ocampo, Dizon & Domingo for private respondent Pacific Banking Corporation. CRU,, J.: The sub ect of this controvers! is a parcel of land consistin" of #,#$# s%uare &eters and located in Dili&an, 'ue(on )it!. It *as ori"inall! o*ned b! Feli+, Manuel and Maria )oncepcion Orlino, *ho &ort"a"ed it to the Pro"ressive )o&&ercial ,an- as securit! for a P#$$,$$$.$$ loan on .ul! #, #/01. The loan not havin" been paid, the &ort"a"e *as foreclosed and the ban- ac%uired the propert! as the hi"hest bidder at the auction sale on March 23, #/0/. The &ort"a"ee thereafter transferred all its assets, includin" the said land, to the Pacific ,an-in" )orporation 4P,)5. On Ma! 22, #/61, the Orlinos, and their respective spouses 4hereinafter referred to as the private respondents5, *ho had re&ained in possession of the land, &ade a *ritten offer to P,) to repurchase the propert!. In response, the ban-, throu"h its 7ssistant Vice8President, sent the follo*in" letter dated Nove&ber /, #/66, to the private respondents9 counsel: This *ill confir& our a"ree&ent concernin" the repurchase b! !our clients, Mr. and Mrs. Oscar ). ;uevarra of that certain propert! situated at 20 .ose 7bad Santos, <eroes <ills, 'ue(on )it! *ith an area of #,# $# s%uare &eters, &ore or less, under the follo*in" ter&s and conditions: a5 The cash consideration shall be P#0$,$$$.$$ pa!able in full upon si"nin" of the Deed of 7bsolute Sale= b5 The additional consideration shall consist of !our client9s conve!ance to us of their share of 2,/$#.#1 s%uare &eters on the propert! situated at )a&arin, )aloocan )it!. >e understand that !our clients *ill be appl!in" for a loan *ith a ban-. In this connection, *e are enclosin" a +ero+ cop!

of the Transfer )ertificate of Title No. 2#300# 'ue(on )it!, Ta+ Declaration No. ?$/2 and Official Receipt No. @8A$A62? coverin" pa!&ent of real estate ta+es for #/66. Bindl! re%uest !our clients to e+pedite the loan so that *e can consu&&ate the transaction as soon as possible. Please re%uest !our clients to si"n their confor&it! belo* and return the duplicate thereof for our files. 1 Oscar ). ;uevarra, one of the private respondents, indicated the re%uired confor&it!. One !ear later, on Nove&ber 2, #/63, P,) advised the private respondents that if the transaction *as not finali(ed *ithin ?$ da!s, it *ould consider the offer of other bu!ers. 2 The record does not sho* an! further develop&ent until .une 3, #/6/, *hen the private respondents re%uested P,) to allo* the& to secure a certified true cop! of its Torrens certificate over the land for purposes of its surve! and partition a&on" the& preparator! to the actual transfer of title to the&. 3 P,) "ranted the re%uest sub ect to the condition that title *ould re&ain *ith it until the e+ecution of the necessar! deed of conve!ance. On 7pril 3, #/3$, or t*o !ears later, P,) re&inded the private respondents of its letter of Nove&ber 2, #/63, but a"ain no action *as ta-en to deliver to it the stipulated consideration for the sale. Finall!, on Ma! #A, #/3$, P,) e+ecuted a deed of sale over the land in favor of the herein petitioners, the spouses @nri%ue and )onsuelo Ci&, for the su& of P?$$,$$$.$$. 5 On Septe&ber ?$, #/3$, the private respondents filed a co&plaint in the Re"ional Trial )ourt of 'ue(on )it! a"ainst the petitioners and P,) for the annul&ent of the deed of sale on the "round that the sub ect land had been earlier sold to the&. In its ud"&ent for the plaintiffs, the court held that both P,) and the spouses Ci& had acted in bad faith *hen the! concluded the sale -no*in" that Dthere *as a cloud in the status of the propert! in %uestion.D . The decision *as affir&ed in toto b! the respondent court, 7 and the petitioners are no* before us, ur"in" reversal. The petitioners clai& the! are purchasers in "ood faith, havin" relied on the assurances of P,) as verified fro& the records in the Re"istr! of Deeds of 'ue(on )it! that the land belon"ed to P,) and *as unencu&bered. The! therefore should have preferential ri"ht to the disputed land, *hich the! had re"istered in their na&e under T)T No. 20302?. For their part, the private respondents insist that as the! had a valid and bindin" earlier deed of sale in their favor, the land could no lon"er be sold b! P,) to the petitioners, *ho *ere a*are of their prior ri"ht.

In support of their position that it *as not incu&bent upon the& to "o be!ond the land records to chec- the real status of the land, the petitioners cite Seo v. ang!"at 8 *here the )ourt said: In order that a purchaser of land *ith a Torrens title &a! be considered as a purchaser in "ood faith, it is enou"h that he e+a&ines the latest certificate of title *hich in this case is that issued in the na&e of the i&&ediate transferor. The purchaser is not bound b! the ori"inal certificate of title but onl! b! the certificate of title of the person fro& *ho& he has purchased the propert!. +++ +++ +++ Thus, *here innocent third persons rel!in" on the correctness of the certificate of title issued, ac%uire ri"hts over the propert!, the court cannot disre"ard such ri"hts and order the total cancellation of the certificate for that *ould i&pair public confidence in the certificate of title= other*ise ever!one dealin" *ith propert! re"istered under the torrens s!ste& *ould have to in%uire in ever! instance as to *hether the title had been re"ularl! or irre"ularl! issued b! the court. Indeed, this is contrar! to the evident purpose of the la*. @ver! person dealin" *ith re"istered land &a! safel! rel! on the correctness of the certificate of title issued therefore and the la* *ill in no *a! obli"e hi& to "o behind the certificate to deter&ine the condition of the propert!. Stated differentl!, an innocent purchaser for value rel!in" on a torrens title issued is protected. 7nd even assu&in" that there *as an earlier valid sale of the propert! to the private respondents, the petitioners add, the! *ould still prevail under 7rticle #1AA of the )ivil )ode, providin" as follo*s: If the sa&e thin" should have been sold to different vendees, the o*nership shall be transferred to the person *ho &a! have first ta-en possession thereof in "ood faith, if it should be &ovable propert!. Should it be i&&ovable propert!, the o*nership shall belon" to the person ac%uirin" it *ho in "ood faith first recorded it in the Re"istr! of Propert!. Should there be no inscription, the o*nership shall pertain to the person *ho in "ood faith *as first in the possession= and, in the absence thereof, to the person *ho presents the oldest title, provided there is "ood faith.

The private respondents, ho*ever, den! that the petitioners had acted in "ood faith, pointin" to the evidence that )onsuelo Ci& had, before the e+ecution of the disputed deed of sale, visited the propert! and been infor&ed of their e+istin" adverse clai& thereto. 9 ,esides, the said deed contained the follo*in" stipulation: That the V@ND@@ is a*are of the fact that the afore&entioned propert! is presentl! occupied b! the for&er o*ners and that clearin" of the propert! of its occupants shall be for the e+clusive responsibilit! and account of the vendee. 7nd, indeed, the )ourt also said in Seno that: The *ell8-no*n rule in this urisdiction is that a person dealin" *ith a re"istered land has a ri"ht to rel! upon the face of the Torrens )ertificate of Title and to dispense *ith the need of in%uirin" further,e#cept $%en t%e part& concerned %as act!al kno$ledge of facts and circ!mstances t%at $o!ld impel a reasona"l& ca!tio!s man to make s!c% in'!ir&. 4@&phasis supplied.5 7s the )ourt sees it, the real issue is not *hether the petitioner acted in "ood faith but *hether there *as in fact a prior sale of the sa&e propert! to the private respondents. Onl! if it is established that there *as indeed a double sale of the propert! *ill it be necessar! to ascertain if 7rticle #1AA is applicable. Stated differentl!, the %uestion is: >as the transaction bet*een private respondents and P,), as e&bodied in the letter of Nove&ber /, #/66, a contract to sell or a contract of saleE It is not enou"h to sa! that the contract of sale bein" consensual, it beca&e effective bet*een the ban- and the private respondents as of Nove&ber /, #/66. There is no %uestion about that= but such a"ree&ent is li-e puttin" the cart before the horse. Precisel!, our purpose is to ascertain to *hat particular underta-in"s the parties have "iven their &utual consent so *e can deter&ine the nature of their a"ree&ent. 7ccordin" to Sing (ee v. Santos:
10

... 7 distinction &ust be &ade bet*een a contract of sale in *hich title passes to the bu!er upon deliver! of the thin" sold and a contract to sell 4or of e+clusive ri"ht and privile"e to purchase as in this case5 *here b! a"ree&ent the o*nership is reserved in the seller and is not to pass until the full pa!&ent of the purchase price is &ade. In the first case, non8 pa!&ent of the price is a ne"ative resolutor! condition= in the

second case, full pa!&ent is a positive suspensive condition. ,ein" contraries, their effect in la* cannot be Identical. In the first case, the vendor has lost and cannot recover the o*nership of the land sold until and unless the contract of sale is itself resolved and set aside. In the second case, ho*ever, the title re&ains in the vendor if the vendee does not co&pl! *ith the condition precedent of &a-in" pa!&ent at the ti&e specified in the contract. 7ppl!in" these distinctions, the )ourt finds that the a"ree&ent bet*een P,) and the private respondents *as onl! a contract to sell, not a contact of sale. 7nd the reasons are obvious. There *as no i&&ediate transfer of title to the private respondents as *ould have happened if there had been a sale at the outset. The supposed sale *as never re"istered and T)T No. 2#300# in favor of P,) *as not replaced *ith another certificate of title in favor of the private respondents. In their letter to P,) on .une 3, #/6/, the! ac-no*led"ed that title to the propert! *ould re&ain *ith the ban- until their transaction shall have been finali(ed. In response, P,) reiterated the sa&e condition. No less i&portant, the consideration a"reed upon b! the parties *as never paid b! the private respondents, to convert the a"ree&ent into a contract of sale. In fact, P,) re&inded the& t*ice F on Nove&ber 2, #/63, and on 7pril 3, #/3$ F to co&pl! *ith their obli"ations. The! did not. Their default *as not, as the respondent court described it, Da sli"ht dela!D but lasted for all of three !ears and in fact continued up to the rendition of the decision in the trial court. 7s pa!&ent of the consideration *as a positive suspensive condition, title to the sub ect propert! never passed to the private respondents. <ence, the propert! *as le"all! unencu&bered and still belon"ed to P,) on Ma! #A, #/3$, *hen it *as sold b! the ban- to the petitioners. It is true that the contract to sell i&poses reciprocal obli"ations and so cannot be ter&inated unilaterall! b! either part!. .udicial rescission is re%uired under 7rticle ##/# of the )ivil )ode. <o*ever, this rule is not absolute. >e have held that in proper cases, a part! &a! ta-e it upon itself to consider the contract rescinded and act accordin"l! albeit sub ect to udicial confir&ation, *hich &a! or &a! not be "iven. It is true that the rescindin" part! ta-es a ris- that its action &a! not be approved b! the court. ,ut as *e said in )niversit& of t%e P%ilippines v. De los Angeles: 11 Of course, it &ust be understood that the act of a part! in treatin" a contract as cancelled or resolved on account of infractions b! the other contractin" part! &ust be &ade -no*n to the other and is al*a!s provisional, bein" ever sub ect to scrutin! and revie* b! the proper court. If the other part! denies that rescission is ustified, it is free to resort to udicial action in its o*n behalf, and brin" the &atter to court. Then, should the court, after due hearin", decide that the resolution of the contract *as not *arranted, the responsible

part! *ill be sentenced to da&a"es= in the contrar! case, the resolution *ill be affir&ed, and the conse%uent inde&nit! a*arded to the part! pre udiced. In other *ords, the part! *ho dee&s the contract violated &a! consider it resolved or rescinded, and act accordin"l!, *ithout previous court action, but it proceeds at its o*n ris-. For it is onl! the final ud"&ent of the correspondin" court that *ill conclusivel! and finall! settle *hether the action ta-en *as or *as not correct in la*. ,ut the la* definitel! does not re%uire that the contractin" part! *ho believes itself in ured &ust first file suit and *ait for a ud"&ent before ta-in" e+tra udicial steps to protect its interest. Other*ise, the part! in ured b! the other9s breach *ill have to passivel! sit and *atch its da&a"es accu&ulate durin" the pendenc! of the suit until final ud"&ent of rescission is rendered *hen the la* itself re%uires that he should e+ercise due dili"ence to &ini&i(e its o*n da&a"es. In the case at bar, the private respondents obli"ated the&selves to deliver to the ban- the su& of P#0$,$$$.$$ and their share of 2,/$#.#1 s%uare &eters on a propert! situated in )aloocan )it!. In the letter of P,) dated Nove&ber /, #/66, the! *ere re%uested to De+pedite the loan 4the! *ere ne"otiatin" for this purpose5 so *e can consu&&ate the transaction as soon as possibleD. That *as in #/66. In #/63, the! *ere re&inded of their obli"ation and as-ed to co&pl! *ithin thirt! da!s. The! did not. On 7pril 3, #/3$, the! *ere re&inded of that letter of Nove&ber 2, #/63, and a"ain as-ed to co&pl!= but a"ain the! did not. Surel!, the ban- could not be re%uired to *ait for the& forever, especiall! so since the! re&ained in possession of the propert! and there is no record that the! *ere pa!in" rentals. Gnder the circu&stances, P,) had the ri"ht to consider the contract to sell bet*een the& ter&inated for non8 pa!&ent of the stipulated consideration. >e hereb! confir& that rescission. <avin" arrived at these conclusions, the )ourt no lon"er finds it necessar! to deter&ine if the petitioners acted in bad faith *hen the! purchased the sub ect propert!. The private respondents lost all le"al interest in the land *hen their contract to sell *as rescinded b! P,) for their non8co&pliance *ith its provisions. 7s that contract *as rito lon"er effective *hen the land *as sold b! P,) to the petitioners, the private respondents had no le"al standin" to assail that subse%uent transaction. The deed of sale bet*een P,) and the petitioners &ust therefore be sustained. ><@R@FOR@, the petition is ;R7NT@D and the challen"ed decision of the )ourt of 7ppeals is R@V@RS@D. T)T No. 20302? in favor of the petitioners is reco"ni(ed as valid and the co&plaint for the annul&ent of the deed of sale dated Ma! #A, #/3$, is hereb! dis&issed. )osts a"ainst the private respondents.

SO ORD@R@D. *arvasa, +anca&co, +rio,A'!ino and edialdea, --., conc!r.

conve!ance. T*o !ears later, P,) re&inded private respondents but no action *as ta-en to deliver to it the stipulated consideration for the sale. Finall!, P,) e+ecuted a deed of sale over the land on favor of herein petitioners, the spouses @nri%ue and )onsuelo Ci&. Private respondents filed a co&plaint in the RT) of 'ue(on )it! a"ainst the petitioners and P,) for the annul&ent of the deed of sale on the "round that the sub ect land had been earlier sold to the&. The court held that both P,) and the spouses Ci& acted in bad faith. The decision *as affir&ed b! the )7. Issue >as the transaction bet*een private respondents and P,) a contract to sell or a contract of saleE

Ci& #32

vs S)R7

)ourt 100

of

7ppeals 4#//$5

Facts: The ori"inal o*ners Feli+, Manuel and Maria )oncepcion Orlino, &ort"a"ed the #,#$# s%uare &eter parcel of land to Pro"ressive )o&&ercial ,an- as securit! for a P#$$,$$$.$$ loan. The loan not havin" been pain, the &ort"a"e *as foreclosed and the banac%uired the propert! as the hi"hest bidder at the auction sale. The &ort"a"ee thereafter transferred all its assets, includin" the said land, to the Pacific ,an-in" )orporation 4P,)5 The Orlino, *ho had re&ained in possession of the land, &ade a *ritten offer to P,) to repurchase the propert!. The banconfir&ed its a"ree&ent concernin" the repurchase b!. Mr. 7nd Mrs. Oscar ;uevarra of that certain propert!, sub ect to the condition that a cash consideration of P#0$,$$.$$ is pa!able in full upon si"nin" of the Deed of 7bsolute Sale. One !ear later, P,) advised the private respondents that if the transaction *as not finali(ed *ithin ?$ da!s, it *ould consider the offer of other bu!ers. Private respondents re%uested P,) to allo* the& to secure a certified true cop! of its Torrens certificate for purposes of its surve! and partition before the actual transfer of title. P,) "ranted the re%uest sub ect to the condition that title *ould re&ain *ith it until the e+ecution of the necessar! deed of

<eld The court finds that the a"ree&ent bet*een P,) and the private respondents *as onl! a contract to sell. The supposed sale *as never re"istered and T)T No. 2#300# *as not replaced *ith another certificate of title in favor of the private respondents. In their letter to P,), the! ac-no*led"ed that title to the propert! *ould re&ain *ith thr ban- until their transaction shall have been finali(ed. No less i&portant, the consideration a"reed upon b! the parties *as never paid b! the private respondents, to convert the a"ree&ent into a contract of sale. Their default *as not Da sli"ht dela!D but lasted for all of three !ears. 7s pa!&ent of consideration *as a positive suspensive condition, title to the sub ect propert! never passed to the private respondents. <ence, the propert! *as le"all! encu&bered and still belon"ed to P,). It is true that the contract to sell i&poses reciprocal obli"ations and so cannot be ter&inated unilaterall! b! either part!. .udicial rescission is re%uired under 7rticle ##/# of the )ivil )ode. <o*ever, this rule is not absolute. 7 part! &a! ta-e it upon itself to consider the contract rescinded and act accordin"l! albeit sub ect to udicial confir&ation, *hich &a! or &a! not be "iven. The private respondents lost all le"al interest in the land *hen their contract to sell *as rescinded b! P,) for their non8

co&pliance

*ith

its

provisions.

Petition is "ranted and the challen"ed decision of the )7 is reversed.