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Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 165831             February 23, 2007

SPS. COL. PEDRO L. LUMBRES and REBECCA ROARING, Petitioners,
vs.
SPS. PEDRO B. TABLADA, JR. and ZENAIDA N. TABLADA, Respondents.

D E C I S I O N

GARCIA, J.:

Assailed and sought to be set aside in this petition for review under Rule 45 of the Rules of Court are the following issuances of the Court of Appeals (CA) in CA-G.R. SP No. 82617, to wit:

1. Decision¹ dated August 31, 2004 reversing and setting aside the appealed Order of the Regional Trial Court (RTC) of Calamba City, Branch 37, and reinstating an earlier decision of the Municipal Trial Court in Cities (MTCC), Calamba City, which dismissed the petitioners' complaint for ejectment against the herein respondents; and

2. Resolution² dated October 27, 2004 denying the petitioners' motion for reconsideration.

From the facts on record, it appears that this is a case of double sale of a lot covered by Transfer Certificate of Title (TCT) No. 473055 with an area of 105 square meters, more particularly identified as Lot 8, Block 3 of the Spring Homes Subdivision, Brgy. Bucal, Calamba City. Both parties to the case present Deeds of Absolute Sale for the same lot from the same seller, Spring Homes Subdivision Company, Inc. (Spring Homes, hereafter).

Reviewed, the records disclose that on January 9, 1995, Spring Homes, former owner of the parcel of land in dispute, entered into a pro forma Contract to Sell³ with the respondent spouses. The prepared typewritten contract, with the blank spaces therein merely filled up, contains the designation of the parcel sold, the price per square meter and the stipulation as to payment, to wit:

1. That the SELLER, for and in consideration of the payments and other terms and conditions hereinafter to be designated, has offered to sell and the BUYER has agreed to buy certain parcel of land more particularly described as follows:

Blk No. P-111	Lot No.	Area Sq. Meter	Price Per Sq. Meter	Total Selling Price
3	8	105	P 1,500
		42	6,000
				P 409,500

2. That in consideration of the foregoing agreement, the BUYER obligates himself to pay to the SELLER the sum of FOUR HUNDRED NINE THOUSAND FIVE HUNDRED PESOS (P409,500), Philippine Currency, payable as follows:

a) As downpayment, the amount of THIRTY NINE THOUSAND FOUR HUNDRED PESOS (P39,400),

b) The amount of TWO HUNDRED THIRTY THOUSAND PESOS (P230,000). To be paid on or before upon the release of Pag-Ibig Loan.

c) The SEVENTY THOUSAND ONE HUNDRED (P70,100) to be paid upon the signing of this contract. Balance of SEVENTY THOUSAND (P70,000) by monthly installments of ELEVEN THOUSAND SIX HUNDRED SIXTY SIX & 70 Cents PESOS (11,666.70) to start on the 30th day of January, 1995 until said balance is fully paid subject to interest at the rate of ___ percent ( ) per annum on the balance outstanding or the prevailing bank interest rate whichever is higher.

xxx xxx xxx

On January 16, 1996, after having been paid the sum total of ₱179,500.00, which the respondents claim to be the full purchase price of the subject lot, Spring Homes executed a Deed of Absolute Sale⁴ in favor of the respondents. In the deed, Lot 8, Block 3 was already made to appear as covered by TCT No. T-284037. Respondents’ accumulated payments totaling ₱179,500.00 consisted of the following: ₱39,400.00 by way of downpayment; ₱70,100.00 paid on signing of the contract; and ₱70,000.00 paid in monthly installments of ₱11,666.70 each. All such payments are evidenced by receipts of the corresponding transactions. Because the anticipated Pag-Ibig loan failed to materialize, the ₱230,000.00, which, under the Contract to Sell, was supposed to be paid upon release of the loan, was left unpaid.

Respondents later declared the subject lot for taxation purposes under Tax Declaration No. 019-1342 and paid the corresponding real property taxes thereon. Using their own funds, they caused the construction thereon of a residential house, which they presently occupy, the costs of which amounted to ₱356,516.50. On June 9, 1996, a Certificate of Occupancy was issued to them by the Office of the Building Official and the house was declared in their names.

With the execution of the aforesaid Deed of Absolute Sale, the respondent spouses sent a demand letter dated May 4, 1996 to Spring Homes for the transfer and release to them of the original or owner's copy of TCT No. T-284037. The acting president/chairperson of Spring Homes, Bertha L. Pasic, promised to deliver the said title and even apologized for the delay. However, to their great dismay, the spouses subsequently learned that TCT No. T-284037 was canceled and a new one issued to the petitioners. On account thereof, the respondent spouses filed with the RTC of Calamba City a civil suit against the petitioners, Spring Homes and the Register of Deeds of Calamba City for nullification of title, reconveyance and damages, docketed as Civil Case No. 3117-2001-C.

It appears, however, that after the filing of Civil Case No. 3117-2001-C, the petitioners filed a civil case before the RTC of Calamba City, Laguna, Branch 37, against Spring Homes, docketed as Civil Case No. 2194-95-C. On November 17, 1996, the petitioners filed with the Register of Deeds of Calamba City a Notice of Lis Pendens over all the properties registered in the name of the said corporation, including Lot 8, Block 3 covered by TCT No. T-284037. On September 3, 1997, the RTC issued an order attaching all of Spring Homes properties, including Lot 8, Block 3. Premiere Development Bank subsequently intervened in Civil Case No. 2194-95-C because all said properties had been mortgaged to it.

On September 21, 1999, the petitioner spouses entered into a Compromise Agreement in Civil Case No. 2194-95-C with Spring Homes and Premiere Development Bank, which was approved by the RTC, Branch 37, on October 28, 1999. In that Compromise Agreement, both Spring Homes and Premiere Development Bank recognized the rights and interests of the petitioner spouses over the parcels of land covered by twenty (20) titles and containing an aggregate area of 2,499 square meters. The subject property (Lot 8, Block 3) was among the properties covered by the aforementioned compromise agreement that were judicially assigned, transferred and conveyed to the petitioners.

Meanwhile, due to the respondents’ alleged failure to pay the ₱230,000.00 unpaid balance as per the Contract to Sell earlier adverted to despite demands, the subject lot was sold by Spring Homes to the petitioners, again by way of a Deed of Absolute Sale executed on December 22, 2000 for and in consideration of the sum of ₱157,500.00. The mortgage on the lot was released by Premiere Development Bank on January 20, 2001. Subsequently, on January 30, 2001, TCT No. T-473055 covering the subject lot was issued in petitioners' favor.

The instant case cropped up when, asserting their ownership of the subject lot on the basis of TCT No. T-473055, the petitioners demanded of the respondents to vacate said lot and to pay them the rentals due thereon. Their demands having come to naught, the petitioner spouses then filed in the MTCC, Calamba City, a complaint for ejectment on October 2, 2001 against respondent Tabladas and all persons claiming rights under them. The complaint was docketed in the MTCC as Civil Case No. 4335-01.

In a decision⁵ dated May 28, 2002, the MTCC dismissed the petitioners' ejectment complaint, its basis being the rule on double sale set out in Article 1544 of the Civil Code. Finding that the petitioners’ registration of their title over the subject lot was done in bad faith, that court ruled for the respondents.

Aggrieved, the petitioners appealed to the RTC. In an Order⁶ dated October 16, 2003, the RTC reversed and set aside the MTCC decision and ordered the respondent spouses to vacate Lot 8, Block 3, to surrender the possession thereof to the petitioners and to pay the latter reasonable rentals from the time of judicial demands until the premises is surrendered to them.

While conceding that there is a double sale in this case, the RTC, in its aforementioned Order, refused to apply the provisions of Article 1544 of the Civil Code in settling the issue of possession. Instead, it went to the extent of determining the validity and due execution of the separate Deeds of Absolute Sale executed by Spring Homes in favor of the herein contending parties.

In holding that the petitioners have superior right on the subject lot over the respondents, the RTC declared that there was no valid deed of absolute sale executed in favor of the respondents for the following reasons:

1. Even if there was a perfected Contract to Sell between respondents and Spring Homes, the former failed to pay the full purchase price in installments that gave Spring Homes the right to cancel the contract; and

2. The execution of the Deed of Absolute Sale in favor of the respondents on January 16, 1996 is not a transfer of ownership but merely to use it as a collateral for a loan of P230,000.00 from the Pag-Ibig Fund which, incidentally, did not materialize.

Applying the provisions of Articles 1350, 1352 and 1409 of the Civil Code, the RTC deemed the Deed of Absolute Sale in favor of the respondents void ab initio for want of valid consideration. With their motion for reconsideration having been denied by the RTC in its subsequent Order of February 12, 2004, the respondent spouses then went to the CA on a petition for review in CA-G.R. SP No. 82617.1awphi1.net

In the herein assailed decision⁷ dated August 31, 2004, the CA granted the respondents' petition, thereby reversing the assailed Orders of the RTC and reinstating the earlier decision of the MTCC. Their motion for reconsideration having been denied by the CA in its equally assailed Resolution⁸ of October 27, 2004, petitioners are now before us via the instant recourse raising the following issues:

1. Whether the CA committed reversible error or grave abuse of discretion when it found the purchase price of the contested lot to be P157,500.00 instead of the stipulated price of P409,500.00 in the Contract to Sell dated January 9, 1995 despite the fact that the existence and validity of said contract was never put in issue;

2. Whether the CA committed reversible error or grave abuse of discretion when it did not find that the sale of the subject lot to the respondents was void due to lack of consideration since it was merely used by the respondents to obtain a loan of P230,000.00 from the PAG-IBIG Fund and despite the fact that said lot was already mortgaged by Spring Homes to the Premiere Development Bank since January 21, 1993 for P4,800,000.00;

3. Whether the CA committed reversible error or grave abuse of discretion when it ruled that the petitioners acquired the lot in question in bad faith despite the judicial assignment of rights and interests to them over the lot in question in RTC Civil Case No. 2194-95-C, and their having had it titled in their names with the Register of Deeds;

4. Whether the CA committed a reversible error or grave abuse of discretion when it did not find the respondents to be bad faith builders and possessors of the property in question; and

5. Whether the CA committed reversible error or grave abuse of discretion when it manifestly misapprehended the relevant facts.

We DENY.

Before proceeding with a discussion of the issues laid out above, it must be stressed that the present case is one for ejectment. As such, our judgment hereon is effective only with respect to possession. It does not bind the title or affect the ownership of the lot in question. Such judgment shall not bar an action between the same parties respecting the title to said property.⁹ The only issue for resolution is who, as between the petitioners and the respondents, is entitled to the physical or material possession of the property involved, independent of their respective claims of ownership thereof.¹⁰

When acting as an ejectment court, the Metropolitan, Municipal and Circuit Trial Courts' jurisdiction is limited to the determination of the issue on possession de facto and not possession de jure.¹¹ By way of exception, however, if the issue of possession depends on the resolution of the issue of ownership, which is sufficiently alleged in the complaint, as here, the MTCC may resolve the issue of ownership although the resulting judgment would be conclusive only with respect to possession but not to the ownership of the property.¹²

In claiming their right of possession over the subject lot, petitioners made much of the judicially approved Compromise Agreement in Civil Case No. 2194-95-C, wherein Spring Homes’ rights and interests over the said lot under its Contract to Sell with the respondents were effectively assigned to them. Petitioners argue that out of the whole ₱409,500.00 purchase price under the respondents Contract to Sell with Spring Homes, the respondents were able to pay only ₱179,500.00, leaving a balance of ₱230,000.00.

Upon scrutiny, however, the CA astutely observed that despite there being no question that the total land area of the subject lot is 105 square meters, the Contract to Sell executed and entered into by Spring Homes and the respondent spouses states:

3. That the SELLER, for and in consideration of the payments and other terms and conditions hereinafter to be designated, has offered to sell and the BUYER has agreed to buy certain parcel of land more particularly described as follows:

Blk No. P-111	Lot No.	Area Sq. Meter	Price Per Sq. Meter	Total Selling Price
3	8	105	P 1,500
		42	6,000
				P 409,500

The two deeds of absolute sale as well as the respondents’ Tax Declaration No. 019-1342 uniformly show that the land area of the property covered by TCT No. T-284037 is 105 square meters. The parties never contested its actual land area.

However, while there is only one parcel of land being sold, which is Lot 8, Blk. 3, paragraph "1" above of the Contract to Sell speaks of two (2) land areas, namely, "105" and "42," and two (2) prices per square meter, to wit: "₱1,500" and "₱6,000." As correctly observed by the CA:

In does not require much imagination to understand why figures "3," "8," "105" and "₱1,500" appear in the paragraph "1" of the Contract to Sell. Certainly "3" stands for "Blk. No.," "8" stands for "Lot No.," "105" stands for the land area and "₱1,500" stands for the price per square meter. However, this Court is perplexed as regards figures "42" and "6,000" as they are not accompanied by any "Blk. No." and/or "Lot No." In other words, while there is only one parcel of land being sold, paragraph "1" of the Contract to Sell contains two land areas and two prices per square meter. There is no reason for the inclusion of land area in the computation when it was established beyond cavil that the total area being sold is only 105 square meters. Likewise, there is no explanation why there is another rate for the additional 42 square meters, which was pegged at ₱6,000 per square meter, while that of 105 square meters was only ₱1,500.00.

The CA could only think of one possible explanation: the Contract to Sell refers only to a single lot with a total land area of 105 square meters. The 42 square meters mentioned in the same contract and therein computed at the rate of ₱6,000 per square meter refer to the cost of the house which would be constructed by the respondents on the subject lot through a Pag-Ibig loan. The land area of the house to be constructed was pegged at 42 square meters because of the following restrictions in the Contract to Sell:

9. The lot(s) subject matter of this contract are subject to the following restrictions:

a) Any building which may be constructed at anytime in said lot(s) must be strong x x x. Said building must not be constructed at a distance of less than (2) meters from any boundaries of the lot(s).

b) The total area to be voted to buildings or structures shall not exceed eighty percent (80%) of the total area of the lot(s).

Looking at the above-quoted portion of the Contract to Sell, the CA found merit in the respondents' contention that the total selling price of ₱409,500 includes not only the price of the lot but also the cost of the house that would be constructed thereon. We are inclined to agree. The CA went on to say:

It could be argued that the contract to sell never mentions the construction of any house or building on the subject property. Had it been the intention of the parties that the total selling price would include the amount of the house that would be taken from a loan to be obtained from Pag-Ibig, they could have specified so. However, one should not lose sight of the fact that the contract to sell is an accomplished form. [Respondents,] trusting Spring Homes, could not be expected to demand that another contract duly reflective of their agreements be utilized instead of the accomplished form. The terms and conditions of the contract may not contemplate the inclusion of the cost of the house in the total selling price, but the entries typewritten thereon sufficiently reveal the intentions of the parties.

The position of the [respondents] finds support in the documents and subsequent actuations of Bertha Pasic, the representative of Spring Homes. [Respondents] undeniably proved that they spent their own hard-earned money to construct a house thereon after their Pag-Ibig loan did not materialize. It is highly unjust for the [respondents] to pay for the amount of the house when the loan did not materialize due to the failure of Spring Homes to deliver the owner's duplicate copy of TCT No. T-284037.

xxx xxx xxx

If the total selling price was indeed P409,500.00, as [petitioners] would like to poster, said amount should have appeared as the consideration in the deed of absolute sale dated January 15, 1996. However, only P157,500.00 was stated. The amount stated in the Deed of Absolute Sale dated January 15, 1996 was not only a portion of the selling price, because the Deed of Sale dated December 22, 2000 also reflected P157,500.00 as consideration. It is not shown that [petitioners] likewise applied for a loan with Pag-Ibig. The reasonable inference is that the consistent amount stated in the two Deeds of Absolute Sale was the true selling price as it perfectly jibed with the computation in the Contract to Sell. [Emphasis supplied] (Words in brackets ours).

We find the CA's reasoning to be sound. At any rate, the execution of the January 16, 1996 Deed of Absolute Sale in favor of the respondents effectively rendered the previous Contract to Sell ineffective and canceled. Furthermore, we find no merit in petitioners' contention that the first sale to the respondents was void for want of consideration. As the CA pointed out in its assailed decision:

Other than the [petitioners'] self-serving assertion that the Deeds of Absolute Sale was executed solely for the purpose of obtaining a Pag-Ibig loan, no other concrete evidence was tendered to justify the execution of the deed of absolute sale. They failed to overcome the clear and convincing evidence of the [respondents] that as early as July 5, 1995 the latter had already paid the total amount of P179,500.00, much bigger than the actual purchase price for the subject land. (Words in brackets ours.)

Having stated that the Deed of Absolute Sale executed in favor of the respondent spouses is valid and with sufficient consideration, the MTCC correctly applied the provisions of Article 1544 of the Civil Code. Article 1544 reads:

Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property.

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

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

Notwithstanding the fact that the petitioners, as the second buyer, registered their Deed of Absolute Sale, in contrast to the Deed of Sale of the respondents which was not registered at all precisely because of Spring Homes’ failure to deliver the owner’s copy of TCT No. T-284037, the respondents’ right could not be deemed defeated as the petitioners are in bad faith. Petitioners cannot claim good faith since at the time of the execution of the Compromise Agreement in Civil Case No. 2194-95-C, they were indisputably and reasonably informed that the subject lot was previously sold to the respondents. In fact, they were already aware that the respondents had constructed a house thereon and are presently in possession of the same.

Knowledge gained by the second buyer of the first sale defeats his rights even if he is the first to register the second sale because such knowledge taints his prior registration with bad faith. For the second buyer to displace the first, he must show that he acted in good faith throughout (i.e. in ignorance of the first sale and of the first buyer's rights) from the time of acquisition until the title is transferred to him by registration.¹³

Consequently, the respondents are the buyers entitled to the physical possession of the subject lot since the prevailing doctrine is that as between the buyer who is in possession of a Torrens title but who has acquired it in bad faith and the first buyer who failed to have his title recorded in the Registry of Property, the first buyer must prevail.¹⁴

Hence, there was nothing to cede or transfer to the petitioners when the Compromise Agreement in Civil Case No. 2194-95-C was entered into on October 28, 1999 insofar as the subject lot is concerned as it was already sold to and fully paid for by the respondents as early as January 16, 1996 when the Absolute Deed of Sale was executed in their favor by Spring Homes. More so that Spring Homes has no more to sell to the petitioners when it executed in the latter’s favor the second deed of absolute sale on December 22, 2000.

One last note, regardless of the actual condition of the title to the property, the party in peaceful, quiet possession thereof shall not be ejected therefrom. Thus, a party who can prove prior possession can recover such possession even against the owner himself. Whatever may be the character of the defendant's prior possession, whether it be legal or illegal, since he had in his favor priority in time, he has the security that entitles him to remain on the property until he is lawfully ejected therefrom by a person having a better right by accion publciana or accion reivindicatoria.¹⁵

The respondents are the current occupants of the subject lot. They had constructed their residential house thereon and are living there at present. The action for ejectment was fashioned to provide a speedy, albeit temporary, remedy to the dispossessed party while the issue of lawful possession or de jure possession is pending or about to be filed. The remedy of ejectment ought to maintain the status quo and prevent the party-litigants from further aggravating the situation and causing further damage.

WHEREFORE, the instant petition is DENIED and the assailed decision and resolution of the CA are AFFIRMED.

Costs against the petitioners.

SO ORDERED.

CANCIO C. GARCIA
Associate Justice

WE CONCUR:

REYNATO S. PUNO
Chief Justice
Chairperson

ANGELINA SANDOVAL-GUTIERREZ Associate Justice

RENATO C. CORONA Asscociate Justice

(ON OFFICIAL LEAVE)
ADOLFO S. AZCUNA
Associate Justice

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

REYNATO S. PUNO
Chief Justice

Footnotes

¹ Penned by Associate Justice Remedios Salazar-Fernando, with Associate Justices Romeo A. Brawner (ret.) and Rosmari D. Carandag, concurring; Rollo, pp. 340-350.

² Id. at 376.

³ Id. at 146-149.

⁴ Id. at 108-109.

⁵ Id. at 181-185.

⁶ Id. at 244-249.

⁷ Supra note 1.

⁸ Supra note 2.

⁹ Feliciano v. Court of Appeals, et al., G.R. No. 123293, March 5, 1998, 287 SCRA 61.

¹⁰ Gener v. De Leon, G.R. No. 130730, October 19, 2001, 367 SCRA 631.

¹¹ Paz v. Reyes, G.R. No. 127439, March 9, 2000, 327 SCRA 605.

¹² Tala Realty Services Corporation v. Banco Filipino Savings and Mortgage Bank, G.R. No. 129887, February 17, 2000, 325 SCRA 768.

¹³ Uraca, et al. v. Court of Appeals, et al., G.R. No. 115158, September 5, 1997, 278 SCRA 702.

¹⁴ Cruz v. Cabana, 129 SCRA 656, 663, June 22, 1984.

¹⁵ Reyes v. Sta. Maria, G.R. No. L-33213, June 29, 1979, 91 SCRA 164; Francisco Realty and Development Corp. v. Court of Appeals, G.R. No. 125055, October 30, 1998, 298 SCRA 349.

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