Cesa vs. Brucelas

A perfected contract of sale exists where the elements of consent, object, and cause are present, and the parties' conduct — delivery of possession, payment of taxes, and introduction of improvements — confirms a consummated transaction, notwithstanding formal infirmities in the deed of sale; a subsequent notarized deed may validly reform and supersede an earlier unnotarized deed to reflect the parties' true intention, and where the same immovable property is sold twice, the first buyer in good faith who was first in possession has a better right over a later registrant who purchased in bad faith.

Lot No. 1799 of Plan A-21 of the Sta. Cruz de Malabon Estate, located at Sahud-Ulan, Tanza, Cavite, with an area of 48,639 square meters, was formerly registered under TCT No. T-8107 in the names of Spouses Andres and Consolacion Montano. Andres died intestate in 1968, and in 1969 his estate was extrajudicially partitioned: the widow Consolacion acquired one-half, and their daughters Elisa and Consuelo divided the remaining half equally. Elisa married David Brucelas, and Consuelo married Lido Quini-quini. Spouses Cesa owned Postema Realty Corporation and operated Tanza Regal Farms, a livestock business. The dispute arose from competing claims over Lot No. 1799, with Spouses Cesa asserting a 1985 purchase from all three Montano heirs and Spouses Del Rosario asserting a 2002 purchase from Elisa (with Consuelo's authority), raising questions of double sale, validity of contract, reformation of instruments, and purchaser good faith under the Torrens system.

Andres Montano and his wife Consolacion were the registered owners of Lot No. 1799, a 48,639-square-meter parcel in Sahud-Ulan, Tanza, Cavite, covered by TCT No. T-8107. Andres died intestate in 1968, and in 1969 his estate was extrajudicially partitioned among his widow Consolacion and their daughters Elisa and Consuelo, each acquiring defined shares. Elisa married David Brucelas, and Consuelo married Lido Quini-quini. Spouses Angel and Feliciana Cesa owned Postema Realty Corporation and operated Tanza Regal Farms, a livestock business.

Sometime between 1984 and 1985, Consolacion sold her share of Lot No. 1799 to Spouses Cesa for PHP 60,000.00, while Elisa and Consuelo sold their respective shares for a total of PHP 340,474.00. The transaction was embodied in an unnotarized Deed of Absolute Sale (1985 DOAS), which named Postema as the buyer and listed only Consolacion and the late Andres as sellers. The signature appearing above Andres's name was that of his sister, Apolonia Montano, who had no authority to sign for him. Because of these infirmities, Spouses Cesa requested Consolacion, Elisa, and Consuelo to execute a corrected deed. Elisa, with authority from Consolacion and Consuelo, executed a notarized Deed of Absolute Sale dated January 4, 1986 (1986 DOAS), naming Spouses Cesa as the buyers.

Upon the 1985 sale, Spouses Cesa immediately took possession of Lot No. 1799 in the concept of owner, paid real property taxes thereon, built a perimeter fence and livestock structures, and secured a Mayor's Permit for Tanza Regal Farms in 1993 — renewed in 1999 by then-Mayor Raymundo Del Rosario. They continued paying taxes until 1996, when the Treasurer's Office of Tanze refused further payments. Feliciana discovered that after Consolacion's death on March 21, 1995, Elisa — with Consuelo's authority — had again sold Lot No. 1799 to Spouses Raymundo and Nelia Del Rosario through a notarized Deed of Absolute Sale dated June 17, 2002 (2002 DOAS), for PHP 1,400,000.00. Spouses Del Rosario registered the property under their names, and TCT No. T-1019104 was issued on September 9, 2002.

According to Raymundo Del Rosario, Spouses Brucelas offered the property between 1992 and 1995. He checked the title's authenticity with the Registry of Deeds, found no lis pendens, and did not conduct an ocular inspection or survey the lot, believing it was vacant. Spouses Brucelas showed him the general area but he did not verify exact boundaries. When he attempted to install fences, Spouses Cesa prevented him, asserting prior ownership. Spouses Brucelas assured him that Spouses Cesa had no right over Lot No. 1799, claiming they had purchased a different parcel — Lot No. 1961. Spouses Del Rosario filed an ejectment suit against Spouses Cesa, which the Municipal Trial Court dismissed; they did not appeal, contemplating an action for recovery of possession instead. David Montano Brucelas, Jr., testifying for his deceased parents, stated that Spouses Cesa purchased Lot No. 1961, not Lot No. 1799, and could not raise money for the latter as they were still paying for the former — though he admitted having no personal knowledge of the transaction.

Spouses Cesa filed a Complaint for Annulment/Rescission of Contract, Cancellation of Title and Specific Performance with Claims for Damages. The RTC found in their favor, declaring the 2002 sale void and Spouses Del Rosario buyers in bad faith. The CA reversed, holding the 1985 DOAS unenforceable under Article 1403(1) because Apolonia signed without authority for the deceased Andres, excluding the 1986 DOAS for absence from the records, and ruling no double sale occurred. The Supreme Court initially dismissed the petition for procedural lapses but later relaxed the rules in the interest of substantial justice.

• Validity of the 1985 Sale: Petitioners maintained that a perfected contract of sale of Lot No. 1799 was consummated in 1985, as shown by the parties' conduct — delivery of possession, payment of real property taxes, and construction of improvements — notwithstanding infirmities in the 1985 DOAS.
• Surplusage of Apolonia's Signature: Petitioners argued that Apolonia Montano's signature on behalf of the deceased Andres was a mere surplusage, because after Andres's death in 1968 and the 1969 extrajudicial partition, ownership of Lot No. 1799 had already vested in Consolacion, Elisa, and Consuelo by succession, rendering Andres's signature unnecessary.
• Reformation via the 1986 DOAS: Petitioners contended that the notarized 1986 DOAS validly reformed and superseded the 1985 DOAS under Articles 1357 and 1359 of the Civil Code, reflecting the parties' true intention that Spouses Cesa — not Postema — were the actual buyers.
• Admissibility of the 1986 DOAS: Petitioners asserted that the 1986 DOAS should not have been excluded by the CA, as it was identified by Feliciana during cross-examination, inspected by opposing counsel, admitted by the RTC in its September 4, 2014 Order, and submitted to the NBI for forensic examination pursuant to the RTC's own directive.
• Double Sale and Bad Faith: Petitioners argued that a double sale occurred and that Spouses Del Rosario were purchasers in bad faith for failing to conduct an ocular inspection that would have revealed Spouses Cesa's prior possession.
• Legal Capacity to Sue: Petitioners contended that they were the real parties-in-interest because the 1986 DOAS reformed the 1985 DOAS to name them as the true vendees, not Postema.

• Unenforceability of the 1985 DOAS: Respondents argued that the 1985 DOAS was unenforceable under Article 1403(1) because Apolonia Montano signed for the deceased Andres without authority, and any such authority would have been extinguished by Andres's death under Article 1919 of the Civil Code.
• Absence of the 1986 DOAS from Records: Respondents contended that the 1986 DOAS could not be considered because no copy was found in the records of the case, and the CA was constrained to rule only on documents actually elevated by the RTC.
• No Double Sale: Respondents maintained that only one valid sale occurred — the 2002 sale to Spouses Del Rosario — making it immaterial whether they acted in good faith.
• Lack of Legal Capacity to Sue: Respondents argued that because Postema was the named vendee in the 1985 DOAS, the suit should have been brought in Postema's name, and absent any authority from Postema, Spouses Cesa lacked legal capacity to sue.
• Good Faith of Spouses Del Rosario: Respondents asserted that they checked the title's authenticity with the Registry of Deeds, found no lis pendens, and had no knowledge of Spouses Cesa's claim; a Mayor's Permit, they argued, is not proof of real estate ownership.
• Different Property Purchased: Through David Brucelas, Jr., respondents claimed that Spouses Cesa actually purchased Lot No. 1961, not Lot No. 1799.

• Validity of the 1985 DOAS: Whether the CA committed reversible error in holding that the 1985 DOAS cannot be considered proof of a perfected contract of sale between Spouses Cesa and Consolacion, Elisa, and Consuelo.
• Double Sale: Whether the CA erred in concluding that no double sale took place, such that only one sale of Lot No. 1799 transpired and it was immaterial whether Spouses Del Rosario were in good faith.

• Validity of the 1985 DOAS: Yes, the CA erred. The 1985 DOAS evidenced a perfected contract of sale, as the elements of consent, object, and cause were present and the parties' conduct confirmed a consummated transaction; Apolonia's signature for the deceased Andres was a mere surplusage that did not render the contract unenforceable.
• Double Sale: Yes, the CA erred. A double sale occurred because the same property was validly sold first to Spouses Cesa in 1985 and then to Spouses Del Rosario in 2002; the latter were purchasers in bad faith for failing to inspect the occupied property, so the first buyer in good faith who was first in possession — Spouses Cesa — has the better right under Article 1544.

• Validity of the 1985 DOAS: Upon Andres's death in 1968 and the 1969 extrajudicial partition, ownership of Lot No. 1799 vested in Consolacion, Elisa, and Consuelo by succession under Articles 774 and 777 of the Civil Code. Their signatures on the 1985 DOAS were sufficient to convey their respective shares. Apolonia's signature on behalf of the deceased Andres was immaterial — a mere surplusage — because Andres no longer owned any share; his signature was not needed. The CA's reliance on Article 1403(1) was misplaced, as that provision applies to one who signs for another without authority, but here the person whose name was signed was already deceased and had no ownership interest to convey. The CA's invocation of Article 1919 (extinguishment of agency by death) was likewise inapposite, since no agency between Apolonia and Andres was relevant to the transaction. Under Article 1315, contracts are perfected by mere consent, and the elements of consent, object, and cause were present. The parties' conduct — Consolacion, Elisa, and Consuelo delivering possession to Spouses Cesa, the latter paying real property taxes, building fences and structures, and operating a livestock farm on the land for years without objection — was indicative of a consummated sale, consistent with Estate of Bueno vs. Estate of Atty. Peralta and Heirs of Simplicia Santiago vs. Heirs of Mariano E. Santiago. David Brucelas, Jr.'s testimony that Spouses Cesa bought Lot No. 1961 instead was hearsay, as he admitted having no personal knowledge of the transaction, and he presented no documentary proof supporting that claim. The 1986 notarized DOAS validly reformed the 1985 DOAS under Articles 1357 and 1359, as a perfected contract existed and the true intention of the parties — that Spouses Cesa were the buyers — was not expressed in the 1985 instrument due to mistake or inequitable conduct. The 1986 DOAS superseded the 1985 DOAS and established Spouses Cesa as the real vendees, conferring upon them legal capacity to sue. The CA erred in excluding the 1986 DOAS from the records: Feliciana identified it during cross-examination, opposing counsel inspected and cross-examined her on it, the RTC admitted it in its September 4, 2014 Order, and the original was submitted to the NBI for forensic examination pursuant to the RTC's own directive. Under the relaxed rules on formal offer of evidence, as articulated in Platinum Group Metals Corp. vs. Mercantile Insurance Co., Inc., evidence duly identified by testimony and incorporated in the records may be admitted even if not formally offered, and the absence of the original from the records was not within Spouses Cesa's control.

• Double Sale: Article 1544 of the Civil Code governs double sales of immovable property, requiring that the two sales pertain to the same subject matter, both be valid, the buyers represent conflicting interests, and both bought from the same seller. All requisites were present: Elisa, with authority from co-owners Consolacion and Consuelo, first sold Lot No. 1799 to Spouses Cesa in 1985, then sold the same property to Spouses Del Rosario in 2002. Although Spouses Del Rosario were first to register under TCT No. T-1019104, the RTC correctly found them to be purchasers in bad faith. Persons dealing with registered land may rely on the certificate of title, but when circumstances should prompt inquiry — such as occupants on the property or the seller not being in possession — the buyer is expected to investigate. Spouses Cesa were already in open, public, and peaceful possession of Lot No. 1799 when Spouses Del Rosario purchased it in 2002. Spouses Del Rosario admitted they did not inspect the property, survey the lot, or verify its exact boundaries, relying solely on a clean title and the sellers' assurances. Their failure to conduct an ocular inspection — which would not have been difficult given that they resided in the same municipality and were former friends of Spouses Cesa — constituted negligence precluding a claim of good faith. Under Article 1544, where the later registrant lacks good faith, the first buyer in good faith who was first in possession has the better right. Spouses Del Rosario could not invoke the indefeasibility of their title. Moral damages of PHP 50,000.00 were warranted under Article 2217 for the anxiety and sleepless nights caused by the fraudulent double sale. Exemplary damages of PHP 50,000.00 were proper under Article 2229 given the bad faith and deceit of Elisa and Consuelo, and the negligence of Spouses Del Rosario. Attorney's fees of PHP 200,000.00 were justified under Article 2208(1) because exemplary damages were awarded. The estate of Elisa, together with Spouses Del Rosario, was held liable for the monetary awards, with legal interest at 6% per annum from the date of finality until full satisfaction.

• Perfection of Contracts by Mere Consent (Article 1315, Civil Code) — Contracts are perfected by mere consent, and from that moment the parties are bound to the fulfillment of what has been stipulated and to all consequences in keeping with good faith, usage, and law. The Court applied this by holding that the elements of consent, object, and cause were present in the 1985 transaction, and the parties' conduct — delivery of possession, payment of taxes, construction of improvements — confirmed a perfected sale despite formal defects in the deed.

• Succession as Mode of Acquisition (Articles 774 and 777, Civil Code) — Succession transmits property, rights, and obligations through death; rights to succession are transmitted from the moment of the decedent's death. The Court relied on this to hold that upon Andres's death in 1968, ownership of Lot No. 1799 vested in his heirs, making Andres's signature on the 1985 DOAS unnecessary and Apolonia's signature a mere surplusage.

• Unenforceable Contracts — Unauthorized Agency (Article 1403(1), Civil Code) — Contracts entered into in the name of another by one without authority or legal representation are unenforceable unless ratified. The Court distinguished this provision, holding it inapplicable because the person whose name was signed (Andres) was already deceased and had no ownership to convey; thus, the unauthorized signature did not affect the validity of the sale by the true owners.

• Reformation of Instruments (Articles 1357 and 1359, Civil Code) — Where a perfected contract exists but the true intention of the parties is not expressed in the instrument due to mistake, fraud, inequitable conduct, or accident, one party may seek reformation. The Court applied this to hold that the 1986 notarized DOAS validly reformed the 1985 DOAS to reflect that Spouses Cesa — not Postema — were the actual buyers.

• Double Sale of Immovable Property (Article 1544, Civil Code) — Where the same immovable is sold to different vendees, ownership belongs to the person who in good faith first recorded it; if no inscription, to the person who in good faith was first in possession; if neither, to the person with the oldest title, provided there is good faith. The requisites are: (a) the sales pertain to the same subject matter and are valid; (b) the buyers represent conflicting interests; and (c) each bought from the same seller. The Court found all requisites present and held that because Spouses Del Rosario registered in bad faith, the first buyer in good faith first in possession — Spouses Cesa — had the better right.

• Purchaser in Good Faith — Duty to Inspect — A person dealing with registered land need not go beyond the certificate of title, but where circumstances such as the presence of occupants or the seller's lack of possession should prompt inquiry, the buyer is expected to investigate. Failure to conduct an ocular inspection precludes a claim of good faith. The Court applied this to hold Spouses Del Rosario in bad faith for purchasing an occupied property without inspection.

• Relaxed Rules on Formal Offer of Evidence — Evidence not formally offered may still be admitted if (a) it was duly identified by testimony and (b) incorporated in the records. The Court applied this to admit the 1986 DOAS despite its physical absence from the records, as it had been identified during cross-examination, admitted by the RTC, and submitted to the NBI per the RTC's own order.

• Hearsay Rule (Section 37, A.M. No. 19-08-15-SC) — A witness may testify only on facts of personal knowledge; testimony based on what the witness learned from others is hearsay and inadmissible. The Court applied this to exclude David Brucelas, Jr.'s testimony that Spouses Cesa purchased Lot No. 1961, as he admitted having no personal knowledge of the transaction.

• "The signature of Apolonia in the 1985 DOAS was a mere surplusage, and thus, had no effect whatsoever and did not render the contract unenforceable" — This passage articulates the ratio decidendi on the validity of the 1985 sale: because ownership had already vested in the heirs by succession, the deceased Andres's signature was unnecessary, and Apolonia's unauthorized signature could not invalidate the contract.

• "From the time of the purported sale in 1978, respondent peacefully possessed the property and had in her custody OCT No. F-16558. Further, she had been the one paying the real property taxes and not Alido. Possession of the property, making improvements therein and paying its real property taxes may serve as indicators that an oral sale of a piece of land had been performed or executed." — Quoted from Estate of Bueno vs. Estate of Atty. Peralta, this passage establishes the doctrinal basis for inferring a perfected sale from the parties' conduct, which the Court applied to the 1985 transaction.

• "To buy real property while having only a general idea of where it is and without knowing the actual condition and identity of the metes and bounds of the land to be bought, is negligent and careless." — This passage defines the standard of diligence required of real property purchasers and supports the finding that Spouses Del Rosario were buyers in bad faith.

• "the registration of a later sale must be done in good faith to entitle the registrant to priority in ownership over the vendee in an earlier sale." — Quoted from Spouses Vallido vs. Spouses Pono, this passage states the controlling principle under Article 1544: good faith at the time of registration is essential for the later registrant to prevail over the first buyer.

• Estate of Bueno vs. Estate of Atty. Peralta, 883 Phil. 55 (2020) — Followed. The Court relied on this case for the proposition that possession, payment of real property taxes, and introduction of improvements may serve as indicators of a perfected sale transaction, applying the same reasoning to the 1985 sale to Spouses Cesa.

• Heirs of Simplicia Santiago vs. Heirs of Mariano E. Santiago — Followed. Cited for the principle that tax declarations and realty tax payments, while not conclusive proof of ownership, are good indicia of possession in the concept of owner.

• Medina vs. People, G.R. No. 255632, July 25, 2023 — Followed. Cited for the hearsay rule: a witness may testify only on facts of personal knowledge, and testimony based on what was learned from others is inadmissible. Applied to exclude David Brucelas, Jr.'s testimony.

• Platinum Group Metals Corp. vs. Mercantile Insurance Co., Inc., G.R. No. 253716, July 10, 2023 — Followed. Cited for the relaxed rule on formal offer of evidence: evidence not formally offered may be admitted if duly identified by testimony and incorporated in the records. Applied to admit the 1986 DOAS despite its physical absence from the records.

• Spouses Vallido vs. Spouses Pono, 709 Phil. 371 (2013) — Followed. Cited for the duty of a purchaser to inspect occupied property and the principle that registration of a later sale must be done in good faith to prevail over an earlier vendee.

• Cheng vs. Genato, 360 Phil. 891 (1998) — Followed. Cited for the three requisites of double sale under Article 1544 of the Civil Code.

• Pagtakhan vs. People, G.R. No. 257702, February 7, 2024 — Followed. Cited for the exception to the rule that Rule 45 petitions cover only questions of law: the Court may reevaluate evidence when the CA and RTC findings are contradictory or when the CA's findings are premised on absence of evidence contradicted by the record.

• Article 1315, Civil Code — Contracts are perfected by mere consent. Applied to hold that the 1985 sale was perfected because the elements of consent, object, and cause were present.

• Articles 774 and 777, Civil Code — Succession as a mode of acquisition; rights to succession are transmitted from the moment of the decedent's death. Applied to establish that ownership of Lot No. 1799 vested in Consolacion, Elisa, and Consuelo upon Andres's death, rendering his signature on the 1985 DOAS unnecessary.

• Article 1403(1), Civil Code — Contracts entered into by one without authority for another are unenforceable. Distinguished and held inapplicable, as the person whose name was signed (Andres) was deceased and had no ownership to convey.

• Article 1919, Civil Code — Agency is extinguished by the death of the principal. Distinguished and held inapplicable, as no agency relevant to the transaction existed between Apolonia and Andres.

• Articles 1357 and 1359, Civil Code — Parties may compel each other to observe the required form once a contract is perfected; reformation of instruments to express true intention. Applied to hold that the 1986 notarized DOAS validly reformed the 1985 DOAS.

• Article 1544, Civil Code — Double sale of immovable property; priority of ownership among competing vendees. Applied to hold that Spouses Cesa, as first buyers in good faith first in possession, had a better right than Spouses Del Rosario, who registered in bad faith.

• Article 2217, Civil Code — Moral damages compensate for mental anguish, serious anxiety, and similar injuries. Applied to award PHP 50,000.00 in moral damages to Spouses Cesa.

• Article 2229, Civil Code — Exemplary or corrective damages imposed by way of example or correction for the public good. Applied to award PHP 50,000.00 in exemplary damages.

• Article 2208(1), Civil Code — Attorney's fees may be recovered when exemplary damages are awarded. Applied to award PHP 200,000.00 in attorney's fees.

• Section 37, A.M. No. 19-08-15-SC (2019 Amendments to the Rules on Evidence) — Defines hearsay and its inadmissibility. Applied to exclude David Brucelas, Jr.'s testimony as hearsay.

• Rule 45, Section 4(b), Rules of Court — Requires stating the material date of receipt of the assailed decision. Initially cited as ground for dismissal, later relaxed in the interest of substantial justice.

• Rule II, Sections 6 and 12, 2004 Rules on Notarial Practice — Require the affiant to exhibit competent evidence of identity before the notary public. Initially cited as ground for dismissal, later relaxed.

Caguioa (Chairperson), Hernando, Gaerlan, and Dimaampao, JJ., concurred. (Dimaampao, J., designated additional Member vice J. Singh, per Raffle dated March 8, 2023.)