Dichoso vs. Roxas

Article 1544 of the Civil Code on double sale does not apply where one instrument is a sale of the property itself and the other is, at most, an assignment of the vendor's right to repurchase the same property under a pacto de retro sale, because the two conveyances do not involve the same subject matter. A deed of absolute sale executed by the vendor a retro in favor of the vendee a retro, superseding the original pacto de retro sale, extinguishes the right of repurchase and renders any prior assignment of that right unenforceable against the vendee a retro who had no knowledge of the assignment.

The dispute centers on a parcel of unregistered coconut land (16,965 square meters with 393 coconut trees) in Barrio San Diego, San Pablo, Laguna. Laura A. Roxas was the original owner who sold the property to the spouses Celso Borja and Nelia Alanguilan under a pacto de retro arrangement. The spouses Welgo Dichoso and Emilia Hernandez were prospective buyers who dealt with Roxas to acquire the same property, with Welgo Dichoso having served as the agent who facilitated the original pacto de retro sale and being a first cousin of Celso Borja. The case involves competing claims over the same unregistered land arising from separate private instruments executed by Roxas in favor of the two sets of spouses.

On December 13, 1954, Laura A. Roxas sold to the spouses Celso Borja and Nelia Alanguilan a parcel of unregistered coconut land with an area of 16,965 square meters and 393 coconut trees, situated in Barrio San Diego, San Pablo, Laguna, for the sum of P850.00. The sale was evidenced by a public document and was subject to the condition that Roxas could repurchase the property for the same amount within five years, but not earlier than three years, from the date of the sale. The transaction was a conventional pacto de retro sale.

Between November 26, 1955 and July 5, 1957, Roxas received from the spouses Welgo Dichoso and Emilia Hernandez several sums of money totaling P770.00. The parties agreed that after December 13, 1957, Roxas would sell the same property to the Dichoso spouses by absolute sale for the total sum of P2,000.00, with the P770.00 already received to be considered as initial or advance payment. Of the remaining balance of P1,230.00, the Dichoso spouses intended to use P850.00 to repurchase the property from the Borja spouses after December 13, 1954 but within the five-year period stipulated for Roxas's right to repurchase. On July 5, 1957, Roxas executed a private document (Exhibit "I") in Tagalog acknowledging receipt of the P770.00 and stating that upon payment of the total P2,000.00 — which included the P850.00 repurchase price to be paid to the Borja spouses — Roxas would execute a deed of absolute sale in favor of the Dichoso spouses. This document was not notarized and was witnessed only by one Cosme Punto.

On October 22, 1957, pursuant to Roxas's request made on July 23, 1957, the Dichoso spouses sent Roxas a check for P320.00 described as "in full payment of the P2,000.00 consideration for the deed of absolute sale." On November 29, 1957, Roxas returned the check with the request that the Dichoso spouses endorse it to the Borja spouses when they made the repurchase, because Roxas had received additional sums from the Borja spouses beyond the original P850.00 consideration.

On December 8, 1957, Roxas executed a private deed of absolute sale (Exhibit "7") in favor of the Borja spouses, superseding the pacto de retro sale for a total consideration of P1,684.00, of which the P850.00 originally paid was considered part. The genuineness and execution of this deed on that date were undisputed. Five days later, on December 13, 1957, the Dichoso spouses attempted for the first time to repurchase the property from the Borja spouses, tendering the required sum. The Borja spouses refused to allow the repurchase because Roxas was not with them. It was on this occasion that the Borja spouses first became aware of the Dichoso spouses' claim to the property.

The Dichoso spouses then consigned the repurchase amount with the Clerk of the CFI of Laguna and filed the complaint seeking to compel Roxas to execute a deed of absolute sale in their favor and the Borja spouses to execute a deed of resale. After the Borja spouses' motion to dismiss was initially granted for lack of a written contract of assignment, the Dichoso spouses filed an amended complaint alleging that Roxas had ceded her right to repurchase to them on July 5, 1957. The lower court admitted the amended complaint and, after trial, rendered judgment applying Article 1544 of the Civil Code on double sale, holding that the earlier document (Exhibit "I") in favor of the Dichoso spouses should prevail over the later deed of absolute sale (Exhibit "7") in favor of the Borja spouses. The lower court ordered Roxas to transfer her rights to the Dichoso spouses upon their deposit of P320.00, and ordered the Borja spouses to execute a deed of resale, while considering the Borja spouses as possessors in good faith not required to account for fruits received.

• Nature of Exhibit "I": Appellants argued that the alleged transfer of the right to repurchase supposedly executed by Roxas in favor of the Dichoso spouses was not in any manner a transfer of the right to repurchase but at most a receipt of indebtedness.
• Extinguishment of Repurchase Right: Appellants maintained that even assuming there was a transfer of the right to repurchase, said right could not be exercised because before December 13, 1957 arrived, the land had already become the absolute and exclusive property of the answering defendants.
• Effect on Third Persons: Appellants contended that whatever agreement was entered into between the Dichoso spouses and Roxas could not affect third persons like the Borja spouses unless the same was in a public document.
• Justified Refusal: Appellants asserted that they had all reasons to refuse acceptance of the repurchase price because before December 13, 1957, they were already the absolute and exclusive owners of the land, subject to no other conditions.
• Res Judicata: Appellants invoked the plea of res judicata, arguing that the prior dismissal of the complaint should bar the amended complaint.
• Counterclaim: Appellants alleged that Welgo Dichoso, who was their first cousin and had acted as agent in the original sale, knew the property was already absolutely owned by them; they sought P500.00 as exemplary damages, P500.00 as actual damages, and P1,000.00 as attorney's fees for the unjustified filing of the case.

• Timeliness of Repurchase: Appellees argued that when they offered to repurchase the property from appellants on behalf of Roxas, appellants had not yet become absolute and exclusive owners of the property.
• Bad Faith Possession: Appellees contended that after the offer to repurchase on December 13, 1957, appellants became possessors in bad faith and were duty-bound to account for the fruits of the property.
• Binding Nature of Agreement: Appellees maintained that although the agreement between them and Roxas was not contained in a public instrument, appellants were bound by it because they knew of the agreement.
• Increased Damages: Appellees filed a supplementary complaint claiming that after July 23, 1958, the price of coconuts had considerably gone up, warranting an increase in the damages sought.

• Applicability of Article 1544: Whether Article 1544 of the Civil Code on double sale applies where one instrument is a sale of the property and the other is, at most, an assignment of the right to repurchase the same property.
• Nature of Exhibit "I": Whether Exhibit "I," dated July 5, 1957, constitutes a deed of sale of the land or a mere promise to sell/assignment of the right to repurchase.
• Effect of Deed of Absolute Sale: Whether the deed of absolute sale (Exhibit "7") executed on December 8, 1957 superseded the pacto de retro sale and extinguished Roxas's right to repurchase.
• Binding Effect on Third Parties: Whether the Borja spouses, as third parties, were bound by the private agreement between Roxas and the Dichoso spouses.

• Applicability of Article 1544: No. Article 1544 does not apply because the two documents conveyed different subject matters — one was a sale of the property itself, while the other was at most an assignment of the right to repurchase the same property.
• Nature of Exhibit "I": Exhibit "I" was not a deed of sale of the land but a mere promise to sell on the part of Roxas, or at most an assignment of her right to repurchase the property from the Borja spouses.
• Effect of Deed of Absolute Sale: Yes. The deed of absolute sale (Exhibit "7") executed on December 8, 1957 superseded the pacto de retro sale and extinguished Roxas's right to repurchase, rendering any prior assignment of that right unenforceable against the Borja spouses.
• Binding Effect on Third Parties: No. The Borja spouses were not bound by the private agreement between Roxas and the Dichoso spouses because they had no knowledge of it until December 13, 1957, after the deed of absolute sale had already been executed.

• Applicability of Article 1544: The lower court applied paragraph 3 of Article 1544, which governs double sales of immovable property, holding that the earlier document (Exhibit "I") should prevail over the later deed of absolute sale (Exhibit "7"). This was error. Article 1544 presupposes that the same thing has been sold to different vendees. Here, the sale in favor of the Borja spouses (Exhibit "7") was of the property itself, while the instrument in favor of the Dichoso spouses (Exhibit "I") was, at most, an assignment of Roxas's right to repurchase the same property from the Borja spouses. Because the two instruments conveyed different subject matters, the situation did not constitute a double sale, and Article 1544 was inapplicable.

• Nature of Exhibit "I: The phraseology of Exhibit "I" showed that the contract was a mere promise to sell, because Roxas merely promised to execute a deed of absolute sale upon the Dichoso spouses' payment of the total sum of P2,000.00, of which the P850.00 repurchase price would be an integral part. The repurchase had not yet been made when Exhibit "I" was executed on July 5, 1957. On that date, all that Roxas could possibly sell or convey in relation to the property was her right to repurchase it from the Borja spouses. The best construction that could be given to Exhibit "I" was that it was an assignment by Roxas to the Dichoso spouses of her right to repurchase, of which the Borja spouses had no knowledge until December 13, 1957.

• Effect of Deed of Absolute Sale: The deed of absolute sale (Exhibit "7") executed by Roxas in favor of the Borja spouses on December 8, 1957 was a perfectly valid contract between the parties, superseding the pacto de retro sale for a total consideration of P1,684.00. Its genuineness and execution on that date were undisputed. After December 8, 1957, the Borja spouses' rights were no longer based on the superseded pacto de retro sale but on the deed of absolute sale. Consequently, Roxas no longer had any right to repurchase the property after that date, and the Dichoso spouses' attempt to exercise the repurchase right on December 13, 1957 came five days too late.

• Binding Effect on Third Parties: The Dichoso spouses' contention that the Borja spouses were aware of their agreement with Roxas was not sufficiently substantiated. The Dichoso spouses' own evidence showed that the Borja spouses became aware of their claim only when they tried to exercise the right to repurchase on December 13, 1957 — five days after the deed of absolute sale had already been executed. The deed of confirmation (Exhibit "8") executed by Roxas in favor of the Borja spouses on September 5, 1958 could not prejudice the rights of the Dichoso spouses because it was executed more than nine months after the case was filed, but it also proved the joint efforts of all parties concerning Exhibit "I." The Dichoso spouses' remedy, if any, lay exclusively against Roxas to recover what they paid as consideration for Exhibit "I."

• Article 1544 (Double Sale) — Same Subject Matter Requirement — Article 1544 of the Civil Code governs situations where the same thing has been sold to different vendees. For immovable property, ownership pertains to the person who first inscribes it in good faith in the Registry of Property; absent inscription, to the person who first possesses it in good faith; absent possession, to the person with the oldest title in good faith. The Court held that this article applies only when the same subject matter has been sold to different vendees. Where one instrument is a sale of the property itself and the other is merely an assignment of the right to repurchase, Article 1544 does not apply because the two conveyances involve different subject matters.

• Pacto de Retro Sale — Effect of Superseding Absolute Sale — A pacto de retro sale gives the vendor a retro the right to repurchase the property within the stipulated period. When the vendor a retro executes a deed of absolute sale in favor of the vendee a retro before the repurchase period expires, superseding the original pacto de retro sale, the right to repurchase is extinguished. Any prior assignment of that right to repurchase becomes unenforceable against the vendee a retro who had no knowledge of the assignment.

• Assignment of Rights — Binding Effect on Third Parties — An assignment of the right to repurchase under a pacto de retro sale, contained in a private document, does not bind the vendee a retro who has no knowledge of the assignment. Third parties are not affected by private agreements to which they are strangers unless they had knowledge thereof.

• "Such being its condition, it could not possibly give rise to the case of one and the same property having been sold to two different purchasers. The sale in favor of appellants was of the property itself, while the one in favor of appellees, if not a mere promise to assign, was at most an actual assignment of the right to repurchase the same property. The provisions of paragraph 3, Article 1544 of the Civil Code of the Philippines do not, therefore, apply." — This passage states the ratio decidendi: Article 1544 on double sale is inapplicable where the two instruments convey different subject matters — one a sale of the property, the other an assignment of the right to repurchase.

• "After December 8, 1957, appellants' rights were no longer based on the superseded pacto de retro sale but on the aforesaid deed of absolute sale — which was a perfectly valid contract as between the parties. In plain words, after that date Laura A. Roxas no longer had any right to repurchase the property." — This passage establishes that the deed of absolute sale superseded the pacto de retro sale and extinguished the right of repurchase, a critical finding that defeated the Dichoso spouses' claim.

• "In the first place, the phraseology employed therein shows that the contract between the parties was a mere promise to sell, on the part of Roxas, because the latter merely promised to execute a deed of absolute sale upon appellees completing payment to her of the total sum of P2,000.00, of which the P850.00 to be paid to appellants for the repurchase of the property would be an integral part." — This passage defines the nature of Exhibit "I" as a promise to sell rather than a completed sale, which was essential to the Court's conclusion that Article 1544 did not apply.

• Nisce vs. Milo, G.R. No. 42546, January 1936 — Cited by the lower court for the proposition that with reference to unregistered lands, an earlier instrument, whether a sale or mortgage, prevails over a later one, and registration is immaterial. The Supreme Court did not disturb this principle but held it inapplicable because the two instruments here conveyed different subject matters.
• Nota vs. Concepcion, 56 Phil. 712 — Cited alongside Nisce vs. Milo in the lower court's reasoning regarding priority of instruments over unregistered land, as referenced in Noblejas, Land Titles and Deeds, 1955 ed., p. 207. The Supreme Court's reversal rendered the application of this precedent erroneous in the context of the case.

• Article 1544, Civil Code of the Philippines — Governs double sales. Paragraph 3 provides that if the same immovable property is sold to different vendees, ownership is transferred to the person who first inscribes the sale in good faith in the Registry of Property; absent inscription, to the person who first possesses in good faith; absent possession, to the person with the oldest title in good faith. The Court held this provision inapplicable because the two instruments did not involve a sale of the same thing to different vendees.

Bengzon, C.J., Bautista Angelo, Labrador, Concepcion, Barrera, Paredes, Regala, and Makalintal, JJ., concurred. Padilla, J., took no part.