SPECIAL THIRD DIVISION
[G.R. No. 96306. August 20, 1993]
LORENZO BERICO and VISITACION SANCHEZ, petitioners, vs. THE HONORABLE COURT OF APPEALS (Former Ninth Division), CIRIACO FLORES and FELISA BAREJA, respondents.
D E C I S I O N
DAVIDE, JR., J.:
In the double sale of an immovable property under Article 1544 of the Civil Code, does prescription bar an action by the first vendees, who are in possession of the said property, against the second vendee for the annulment of a transfer certificate of title over the property procured by the latter who has knowledge of the first sale and who recognizes the first vendees' possession?
This is the core issue in the instant case.
Both the trial court and the public respondent resolved the issue in favor of the first vendees -- the herein private respondents.
From the pleadings of the parties and the decisions of the trial court and public respondent, the following uncontroverted facts have been established.
A certain Jose de los Santos owned a 98,254 square-meter parcel of land designated as Lot No. 785, PLs-32 located at Balo-Andang, San Ramon, San Pascual (now Claveria), Masbate; the property is specifically described in Original Certificate of Title (OCT) No. P-671 issued on 31 May 1956. On 31 October 1961, Jose sold, in a private document (Exhibit "C"), a 2¼ hectare portion thereof to the private respondents. On 26 November 1963, however, he executed another deed of sale which he acknowledged before a notary public (Exhibit "B"). Private respondents took possession of the portion sold to them immediately after the 1961 sale and declared the same for taxation purposes in the name of private respondent Ciriaco Flores (Exhibit "D"); private respondents likewise paid the taxes thereon (Exhibits "E" to "E-20," inclusive).
On 3 January 1963, Jose de los Santos sold one-half of Lot No. 785 to petitioner Lorenzo Berico (Exhibit "1"). Thereafter, or on 30 March 1963, Jose's minor children sold to the same petitioner the remaining half (Exhibit "1-A"). Jose de los Santos represented his children in this transaction.
Petitioner Berico was aware of the 1961 sale of a portion of the lot to the private respondents and of the latter's possession thereof. On this point, the trial court made the following factual findings which the public respondent adopted:
"When Berico bought the land from Jose delos Santos covered by Original Certificate of Title No. P-671 in two (2) separate instruments on January 3, 1963 and March 30, 1963, he had prior knowledge that a portion thereof had been sold to plaintiffs Ciriaco Flores and Felisa Bareja in 1961. Such knowledge was established by the fact that when Lorenzo Berico went to the disputed land in 1963, plaintiff confronted him concerning the boundaries of the area (t.s.n., p. 41, March 1, 1988), and in fact, pointed to him the boundary of the property he bought from Jose delos Santos in the presence of his wife and the former owner, Jose delos Santos. They even traced out the boundary through a tie line. In fact, Flores planted coconut trees along the boundary of his property and Berico also planted coconut trees along the boundary of his property. (t.s.n., p. 41, March 1, 1988) These facts were not denied by Berico. Thus, Lorenzo Berico was aware that the area plaintiffs bought from Jose delos Santos was within, or part of, the whole area covered by Original Certificate of Title No. p-671.
At the time of the confrontation concerning the boundaries of the properties of plaintiffs and defendants, Flores had already constructed a house occupied by one of his tenants. (t.s.n., p. 41, March 1, 1988) He possessed his property since 1961. He planted around 400 coconut trees.
Berico had knowledge of the plaintiffs' possession and occupation of their disputed property when he caused the cancellation of Original Certificate of Title No. P-671 and secured in lieu thereof, Transfer Certificate of Title No. T-1346 on June 5, 1968 and when, on the same date, he registered the deeds of sale with the Register of Deeds conveying to him the entire property. These facts undoubtedly show Lorenzo Berico's evident bad faith."
Despite such knowledge and recognition of the sale in favor of and the possession of the property by the private respondents, petitioner Berico registered on 5 June 1968 the two deeds of sale in his favor and caused the cancellation of OCT No. P-671; the latter also secured the issuance in his name of Transfer Certificate of Title (TCT) No. T-1346. He paid the appropriate taxes thereon only from 1973 to 1986 (Exhibit "8"). It appears, however, that he declared the property for taxation purposes in his wife's name in 1968 (Exhibit "7").
On the other hand, it was only on 8 November 1978 that the private respondents registered the deed of sale in their favor after discovering the cancellation of OCT No. P-671 and issuance in favor of petitioner Berico of TCT No. T-1346.
On 14 December 1978, private respondents filed against the petitioners a complaint for "Annulment of Title" with the then Court of First Instance (now Regional Trial Court) of Masbate. Docketed as Civil Case No. 2828, the case was raffled off to Branch 46 thereof. In their complaint, the private respondents prayed, inter alia, that judgment be issued:
"2. Annuling (sic) Transfer Certificate of Title No. T-1346 in the name of defendant Lorenzo Berico insofar as it includes or affects plaintiffs' property described in paragraph 2 above of this complaint;
3. Ordering the defendants to respect and recognize plaintiffs' superior right of and possession of the said property;"
After trial, the lower court handed down a decision in favor of the private respondents. Its adjudicatory portion reads as follows:
“WHEREFORE, judgment is hereby rendered annulling Transfer Certificate of Title No. T-1346 in the name of Lorenzo Berico, and ordering the Register of Deeds for the Province of Masbate to cancel said transfer certificate of title and in lieu thereof, issue a new transfer certificate of title in the name of Lorenzo Berico and Vecitacion (sic) Sanchez of San Ramon, Claveria, Masbate to contain an area of 9.8254 hectares less 2.2500 hectares which is described in paragraph 2 of the complaint and hereby adjudged as owned by Ciriaco Flores and Felisa Bareja of Pasig, Claveria, Masbate. Defendants are ordered to pay plaintiffs attorney's fee (sic) of P3,000.00 and litigation expenses of P2,000.00; and pay the costs.
The verdict is based on the trial court's findings that:
"Lorenzo Berico's act in causing the cancellation of Original Certificate of Title No. P-671 and securing a new Transfer Certificate of Title No. T-1346, knowing that his transfer certificate included a property not his but belonging to plaintiff Flores makes him a holder in bad faith of a certificate and is not to be accorded the protection of the law."
The said court ruled that since the registration by the petitioner of his deed of sale was done in bad faith, the same was ineffective and inoperative by virtue of Article 1544 of the Civil Code. It stressed that the fundamental premise of this codal provision is good faith. Berico's registration did not then confer upon him any right; it was as if there had been no registration at all. Therefore, the private respondents who first took possession of the portion sold to them in good faith, should be preferred. The trial court further expressed the view that since the petitioners knew of the 1961 sale in favor of the private respondents, such knowledge amounted to an "automatic registration" of such sale since actual knowledge is equivalent to registration.
Petitioners appealed the adverse decision to the public respondent and, in their Appellants' Brief, raised two main issues, viz.: (1) whether or not the action of the private respondents is barred by prescription and (b) whether or not the acquisition by the petitioners of Jose de los Santos' land was tainted with bad faith.
Anent the first issue, petitioners insist that an "action founded on fraud prescribed in four (4) years or one based on constructive trust is barred after the lapse of ten (10) years because the issuance of title is constructive notice to the public, including the petitioner [Jaramil vs. Court of Appeals, G.R. No. L-31858, August 31, 1977; Dela Cerna vs. Dela Cerna, G.R. No. 28938 (sic), August 31, 1976; Pons Realty Corp. vs. Court of Appeals, G.R. No. L-48074, December 14, 1978]." They aver that TCT No. T-1346 was issued in petitioner Lorenzo Berico's name on 5 June 1968, and it was only on 14 December 1978 -- or after the lapse of "10 years, 6 months and 9 days" -- that the private respondents filed the complaint for annulment of title. Hence, the same was filed after the expiration of the proper prescriptive period. As to the second issue, petitioners maintain that at the time they purchased the property, the certificate of title "was clean"; it did not show that any portion thereof had been sold to the private respondents.
In its decision promulgated on 31 August 1990, the respondent Court upheld the trial court, but amended the dispositive portion of the appealed decision thus:
"WHEREFORE, the judgment appealed from herein is AMENDED to the effect that instead of annulling Transfer Certificate of Title No. T-1346 in the name of defendant-appellant Lorenzo Berico, said appellant is ordered to execute a deed of reconveyance of 2.25 has. out of the land titled in his name in favor of plaintiffs, which deed of reconveyance shall be annotated in appellants' TCT No. T-1346, until such time as the corresponding partition and subdivision of the land covered by said title is effected between the parties herein.
The rest of the judgment herein appealed from is AFFIRMED, with costs against defendants-appellants."
On the issue of prescription, the respondent Court ruled that the registration of the questioned land's sale in favor of the petitioners and the issuance of the corresponding certificate of title to them were fraudulent and vitiated by bad faith; hence, the same did not operate as constructive notice thereof to the whole world. It added that the four-year prescriptive period for the filing of the private respondents' action against the petitioners must be counted or computed from the former’s discovery of the fraud committed against them by the latter which, in this case, was on 8 November 1978 -- the day they came to know for the first time that petitioner Lorenzo Berico had caused the cancellation of OCT No. P-671 and the issuance of TCT No. T-1346. As regards the second issue, the public respondent enumerated the instances which prove the petitioners' knowledge of the prior sale in favor of the private respondents.
Furthermore, the public respondent reiterated the rule that the rights conferred by law upon one of the two purchasers of the same real property who has registered his title in the registry of deeds, do not come into being if the registration is not made in good faith. "Mere registration of the sale is not enough; good faith must concur with registration, for bad faith renders the registration futile." Their motion to reconsider the said decision having been denied in the public respondent's Resolution of 6 November 1990, the petitioners filed the instant petition.
In the Resolution of 3 June 1991, this Court gave due course to the petition and required the parties to submit their respective memoranda, which the petitioners and private respondents did on 8 August 1991 and 8 October 1991, respectively.
We do not find the action initiated by the private respondents in Civil Case No. 2828 before the trial court as one for the reconveyance of property based on fraud or for the enforcement of an implied or constructive trust as the petitioners strongly suggest.
The action is denominated as one for the annulment of TCT No. T-1346 insofar as the same affects that portion of Lot No. 785 which was sold to the private respondents. Such annulment is premised on the argument that the said portion's inclusion in the title is null and void since the sale thereof by vendor Jose de los Santos to the petitioners clearly fails to meet the requisite in Article 1544 of the Civil Code of prior registration in good faith; it has been proven that the latter knew of the previous sale to, and possession of the said property by, the private respondents.
As already adverted to, the action is governed by Article 1544 of the Civil Code which prescribes the rules in determining the rights of the vendees in the double sale of property. The said provision 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. (1473)."
It is clear that in the double sale of an immovable, as obtains in this case, the ownership of the property shall belong to the vendee who, in good faith, first recorded the sale in the Registry of Property. The term "good faith" in the second paragraph is not found in the corresponding paragraph of Article 1473 of the old Civil Code from which Article 1544 of the new Civil Code was taken. However, in the 1918 case of Leung Yee vs. F.L. Strong Machinery Co. and Williamson, this Court ruled that the force and effect accorded by law to an inscription in a public registry presupposes good faith on the part of the person who enters such inscription. Thus:
"It has been suggested that since the provisions of article 1473 of the Civil Code require 'good faith,' in express terms, in relation to 'possession' and 'title,' but contain no express requirement as to 'good faith' in relation to the 'inscription' of the property in the registry, it must be presumed that good faith is not an essential requisite of registration in order that it may have the effect contemplated in this article. We cannot agree with this contention. It could not have been the intention of the legislator to base the preferential right secured under this article of the code upon an inscription of title in bad faith. Such an interpretation placed upon the language of this section would open wide the door to fraud and collusion. The public records cannot be converted into instruments of fraud and oppression by one who secures an inscription therein in bad faith. The force and effect given by law to an inscription in a public record presupposes the good faith of him who enters such inscription; and rights created by statute, which are predicated upon an inscription in a public registry, do not and cannot accrue under an inscription 'in bad faith,' to the benefit of the person who thus makes the inscription."
As this Court stated in Palanca vs. Director of Lands, the record to which Article 1473 of the Civil Code refers is that made in good faith, for the law will not protect anything done in bad faith.
It therefore goes without saying that the rights conferred by Article 1473 of the old Civil Code, now Article 1544 of the new Civil Code, "upon one of the two purchasers of the same real property who has registered his title in the registry of deeds, do not come into being if the registration is not made in good faith." Otherwise stated, in order that a purchaser of realty may merit the protection of the second paragraph of Article 1544, the said purchaser must act in good faith in registering his deed of sale. Verily, good faith is the fundamental premise of the preferential rights established in the said Article. Hence, mere registration is not enough; good faith must concur with it.
Since the petitioners had prior knowledge of the sale of the questioned portion to the private respondents and even recognized and respected the latter's possession thereof, they acted with gross and evident bad faith in registering the deed of sale and in obtaining TCT No. T-1346 in their favor. Thus, the registration of the deed of sale was ineffectual and vested upon them no preferential rights to the property in derogation of the rights of the private respondents. The subsequent issuance of TCT No. T-1346, to the extent that it affects the latter's property, conferred no better right than the registration which was the source of the authority to issue the said title. The spring cannot rise higher than its source. Considering, therefore, that as of that time the private respondents had not as yet registered the sale in their favor, the third paragraph of Article 1544 should then apply. Accordingly, since it has been proven that the private respondents were the anterior possessors in good faith, ownership of the questioned portion vested in them by the sheer force of the said third paragraph. Besides, the private respondents subsequently registered the deed of sale in their favor on 8 November 1978. For all legal intents and purposes, they were the first to register the deed of conveyance. There can be no question that since they were the first vendees, their registration enjoyed the presumption of good faith.
Petitioners cannot seek refuge in the theory of implied or constructive trust and its corresponding rule on prescription. No trust, be it express or implied, is involved in the instant case. It cannot be inferred, as the petitioners suggest, from the fraudulent inclusion of the private respondents' property in TCT No. T-1346. Such a position probably stems from the petitioners' erroneous reading of Article 1456 of the new Civil Code which provides:
"ART. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes."
It is to be emphasized that the private respondents never parted with the ownership and possession of that portion of Lot No. 785 which they had purchased from Jose de los Santos; nor did the petitioners ever enter into possession thereof. As earlier stated, the issuance of TCT No. T-1346 did not operate to vest upon the latter ownership over the private respondents' property. That act has never been recognized as a mode of acquiring ownership. As a matter of fact, even the original registration of immovable property does not vest title thereto; it is merely evidence of such title over a particular property. The Torrens system of land registration should not be used as a means to perpetrate fraud against the rightful owner of real property. Registration, to be effective, must be made in good faith.
Since the private respondents did not part with their ownership and possession of that portion of Lot No. 785 which they had purchased from Jose de los Santos in 1961, and since the petitioners had prior knowledge of such acquisition and possession, it cannot be said that the latter "acquired" the same through fraud. The fraud mentioned in Article 1544 is understood to be either actual or constructive fraud. Actual fraud is intentional fraud; it consists in deception, intentionally practiced to induce another to part with property or to surrender some legal right, and which accomplishes the end designed. Constructive fraud, on the other hand, is a breach of legal or equitable duty which, irrespective of the moral guilt of the fraud feasor, the law declares fraudulent because of its tendency to deceive others, to violate public or private confidence, or to injure public interests. The latter usually proceeds from a breach of duty arising out of a fiduciary or confidential relationship. In the instant case, none of the elements of both kinds of fraud exists. Petitioners practiced no deception on the private respondents to induce the latter to part with the ownership or deliver the possession of the property to them. Moreover, no fiduciary relations existed between the two parties.
In a more real sense, and insofar as prescription is concerned, petitioners may only acquire ownership of the questioned property -- assuming that they did not register the deed of sale in their favor -- through extraordinary acquisitive prescription under Article 1137 of the Civil Code, and not by ordinary acquisitive prescription since they cannot claim just title or good faith.
Finally, the complaint for annulment of title filed by the private respondents is substantially one for the quieting of title -- to quiet their title against a cloud cast by the claim of the petitioners. It is settled that an action to quiet title does not prescribe.
WHEREFORE, for lack of merit, the instant petition is DENIED, with costs against the petitioners.
SO ORDERED.
Feliciano, (Chairman), and Bidin, JJ., concur.
Romero, J., see separate concurring opinion.
Melo, J., see dissenting opinion.
Annex "C" of Petition; Rollo, 33-40.
Annex "E" of Petition; Id., 41-52. Per Judge Jaime D. Discaya.
Citing Bernas vs. Bolo, 81 Phil. 16 [1948].
Citing Salvoro vs. Tañega, 87 SCRA 349 [1978].
Annex "A" of Petition; Id., 18-31. Per Associate Justice Alicia V. Sempio-Diy, concurred in by Associate Justices Fidel P. Purisima and Venancio D. Aldecoa, Jr.
Citing Cardente vs. Intermediate Appellate Court, 155 SCRA 685 [1987]; Caram vs. Laureta, 103 SCRA 7 [1981]; Salvoro vs. Tañega, supra.
Id., 28, citing Bergado vs. Court of Appeals, 173 SCRA 497 [1989]; Cardente vs. Intermediate Appellate Court, supra.
Arcenas vs. Del Rosario, 67 Phil. 238, 243 [1939], citations omitted; Bergado vs. Court of Appeals, supra.
Carbonell vs. Court of Appeals, 69 SCRA 99 [1976].
Cardente vs. Intermediate Appellate Court, supra.; Concepcion vs. Court of Appeals, 193 SCRA 586 [1991]; Vda. de Jomoc vs. Court of Appeals, 200 SCRA 74 [1991].
Solid State Multi-Products Corp. vs. Court of Appeals, 196 SCRA 630 [1991], citing De Guzman vs. Court of Appeals, 156 SCRA 701 [1987]; Cruz vs. Cabana, 129 SCRA 656 [1984].
Bornales vs. Intermediate Appellate Court, 166 SCRA 519 [1988], citing Palanca vs. Director of Lands, supra.
Caragay-Layno vs. Court of Appeals, 133 SCRA 718 [1984]; Coronel vs. Intermediate Appellate Court, 155 SCRA 270 [1987]; Solid State Multi-Products Corp. vs. Court of Appeals, supra.; Mendoza vs. Navarette, 214 SCRA 337 [1992].
THIRD DIVISION
[G.R. No. 142403. March 26, 2003]
ALEJANDRO GABRIEL and ALFREDO GABRIEL, petitioners, vs. SPOUSES PABLO MABANTA and ESCOLASTICA COLOBONG, DEVELOPMENT BANK OF THE PHILIPPINES (Isabela Branch) and ZENAIDA TAN-REYES, respondents.
D E C I S I O N
SANDOVAL-GUTIERREZ, J.:
Born of the need to protect our land registration system from being converted into an instrument of fraud, this Court has consistently adhered to the principle that “a mere registration of title in case of double sale is not enough, good faith must concur with the registration.”
In this petition for review on certiorari, Alejandro Gabriel and Alfredo Gabriel assailed the Decision dated March 30, 1999 of the Court of Appeals in CA-G.R. CV No. 33941 modifying the Decision dated April 12, 1991 of the Regional Trial Court, Branch 21, Santiago, Isabela in Civil Case No. 0399 for specific performance, reconveyance and damages with application for preliminary injunction.
The facts are as follows:
Spouses Pablo and Escolastica Mabanta were the registered owners of two lots located in Patul and Capaltitan, Santiago, Isabela, with an area of 512 and 15,000 square meters, covered by Transfer Certificates of Title (TCT) Nos. 72705 and 72707, respectively. On October 25, 1975, they mortgaged both lots with the Development Bank of the Philippines (DBP) as collateral for a loan of P14,000.00.
Five years thereafter or on September 1, 1980, spouses Mabanta sold the lots to Susana Soriano by way of a “Deed of Sale of Parcels of Land With Assumption of Mortgage.” Included in the Deed is an agreement that they could repurchase the lots within a period of two (2) years.
Spouses Mabanta failed to repurchase the lots. But sometime in 1984, they were able to convince Alejandro Gabriel to purchase the lots from Susana Soriano. As consideration, Alejandro delivered to Susana a 500-square meter residential lot with an actual value of P40,000.00 and paid spouses Mabanta the sum of P5,000.00. On May 15, 1984, spouses Mabanta executed a “Deed of Sale with Assumption of Mortgage” in favor of Alejandro. For her part, Susana executed a document entitled “Cancellation of Contract” whereby she transferred to Alejandro all her rights over the two lots.
Alejandro and his son Alfredo cultivated the lots. They also caused the restructuring of spouses Mabanta’s loan with the DBP. However, when they were ready to pay the entire loan, they found that spouses Benito and Pura Tan had paid it and that the mortgage was already cancelled.
On August 18, 1985, Benito Tan and Alejandro Tridanio, a barangay official, approached Alejandro to refund to him the P5,000.00 he paid to spouses Mabanta. Alejandro refused because Tan was unwilling to return the former’s 500-square meter lot delivered to Susana as purchase price for the lots. Thereafter, spouses Tan tried to eject Alejandro from the lot covered by TCT No. 72707.
On September 17, 1985, Alejandro and Alfredo filed with the Regional Trial Court, Branch 21, Santiago, Isabela a complaint (involving the lot covered by TCT No. 72707) for specific performance, reconveyance and damages with an application for a preliminary injunction against spouses Mabanta, spouses Tan, the DBP and barangay officials Dominador Maylem and Alejandro Tridanio. In due time, these defendants filed their respective answers.
During the proceedings, it turned out that it was spouses Tan’s daughter, Zenaida Tan-Reyes who bought one of the lots (covered by TCT No. 72707) from spouses Mabanta on August 21, 1985. Not having been impleaded as a party-defendant, she filed an answer-in-intervention alleging that she is the registered owner of the lot covered by TCT No. 72707; that she purchased it from spouses Mabanta “in good faith and for value”; that she paid their loan with the DBP in the amounts of P17,580.88 and P16,845.17 per Official Receipts Nos. 1749539 and 1749540, respectively; that the mortgage with the DBP was cancelled and spouses Mabanta executed a “Deed of Absolute Sale” in her favor; and that TCT No. T-72707 was cancelled and in lieu thereof, TCT No. T-160391 was issued in her name.
On April 12, 1991, the trial court rendered its Decision sustaining the right of Alejandro and Alfredo Gabriel over the lot covered by TCT No. 72707 (now TCT No. T-160391), thus:
“WHEREFORE, in the light of the foregoing considerations judgment is hereby rendered:
1. DECLARING Exhibit “A”, the deed of sale with assumption of mortgage executed by the spouses Pablo Mabanta and Escolastica Colobong (in favor of Alejandro and Alfredo Gabriel) valid and subsisting.
2. ORDERING the plaintiff Alejandro Gabriel to pay to the spouses Pablo Mabanta and Escolastica Colobong the sums of P5,000.00 plus P34,426.05 (representing the loan with the DBP which plaintiff assumed) within 30 days from receipt hereof.
3. DECLARING the deed of sale executed by the spouses Pablo Mabanta and Escolastica Colobong in favor of Zenaida Tan Reyes as null and void.
4. ORDERING the intervenor Zenaida Tan-Reyes to reconvey the land covered by T.C.T. No. T-160391 in favor of Alejandro Gabriel.
“SO ORDERED.”
In declaring null and void the “Deed of Absolute Sale” (or second sale) of the lot covered by TCT No. 72707 between spouses Mabanta and Zenaida Tan-Reyes, the trial court ratiocinated as follows:
“But Zenaida (Tan) Reyes professes that she is a buyer in good faith and for value. In her testimony she said that the spouses Mabanta offered to sell the land to her on August 19, 1985. She was informed that the land was mortgaged in the DBP. She readily agreed to buy the land on that same day. She did not inquire further into the status of the land. She did not go and see the land first. What she did was to immediately go to the DBP the following day and paid the mortgage obligation in the amount of P16,845.17 and P17,580.88 (Exhibits “1” and “2”). The following day August 21, a deed of sale in her favor was prepared and on October 17, 1985 she secured a certificate of title (Exhibit “5”). Under the above circumstances, it cannot be said that she is a purchaser in good faith. She should have first made a thorough investigation of the status of the land. Had she inquired, she should have been informed that the land was previously sold to at least two persons Susana Soriano and Alejandro Gabriel. She should also have first visited the land she was buying. Had she done so she should have discovered that the land was being cultivated by the Gabriels who would have informed her that they already bought the land from the Mabantas. The reason why she did not do this is because she already was appraised of the status of the land by her father Benito Tan. For reasons known only to her, she decided to buy the land just the same.
x x x x x x
“Zenaida Tan therefore is not a purchaser in good faith and she cannot seek refuge behind her certificate of title. True, Article 1544 of the Civil Code provides that should immovable property be sold to different vendees, the ownership shall belong to the person who in good faith first recorded it in the registry of property. Unfortunately, the registration made by Zenaida (Tan) Reyes of her deed of sale was not in good faith. For this reason in accordance with the same Article 1544, the land shall pertain to the person who in good faith was first in possession. There is no question that it is the Gabriels who are in possession of the land.”
Unsatisfied, spouses Mabanta and Zenaida Tan-Reyes interposed an appeal to the Court of Appeals.
On March 30, 1999, the Court of Appeals rendered a Decision modifying the trial court’s Decision, declaring as valid the second sale of the lot covered by TCT No. 72707 between spouses Mabanta and Zenaida Tan-Reyes on the ground that a person dealing with registered land may simply rely on the correctness of the certificate of title and, in the absence of anything to engender suspicion, he is under no obligation to look beyond it. The dispositive portion of the Appellate Court’s Decision reads:
“Wherefore the appealed judgment is AFFIRMED with the following modification:
1. DECLARING Exhibit “A”, the deed of sale with assumption of mortgage executed by the defendants-appellants spouses Pablo Mabanta and Escolastica Colobong over lots covered by TCT Nos. T-72705 and T-72707 valid and subsisting;
2. Ordering spouses Pablo Mabanta and Escolastica Colobong to surrender TCT No. 72705 to plaintiff-appellee Alejandro Gabriel;
3. Declaring the deed of sale executed over lot with TCT No. 72707 (now T-160391) by spouses Pablo Mabanta and Escolastica Colobong in favor of intervenor-appellant Zenaida Tan Reyes as valid;
4. Ordering plaintiffs-appellees and any all persons claiming rights under them to vacate Lot 3651-A now covered by TCT No. T-160391 and to deliver to intervenor-appellant Zenaida Tan-Reyes the possession thereof;
5. Dismissing the case against defendants-appellants Benito Tan and Purita Masa;
6. No pronouncement as to costs.
“SO ORDERED.”
In the instant petition for review on certiorari, petitioners Alejandro and Alfredo Gabriel raise this lone issue:
WHETHER OR NOT THE COURT OF APPEALS ERRED IN DECLARING THE SECOND SALE OF THE DISPUTED LOT EXECUTED BY SPOUSES MABANTA IN FAVOR OF ZENAIDA TAN-REYES VALID UNDER ARTICLE 1544 OF THE CIVIL CODE.
Petitioners contend that respondent Reyes is not a purchaser in good faith since she bought the disputed lot with the knowledge that petitioner Alejandro is claiming it in a previous sale.
In her comment on the petition, respondent Reyes maintains that the Court of Appeals’ factual finding that she is a purchaser in good faith and for value is final and conclusive. Meeting the issue head on, she claims that there is no evidence that prior to August 21, 1985, when she purchased the lot from respondent spouses Mabanta, she had knowledge of any previous lien or encumbrance on the property.
For its part, respondent DBP avers that it acted in utmost good faith in releasing the mortgaged lots to respondent spouses Mabanta who had the loan restructured and paid the same. Also, it did not transact business with spouses Tan.
With respect to respondent spouses Mabanta, this Court’s Resolution dated June 14, 2000 requiring them to file comment on the present petition was returned unserved. Thus, in its Resolution dated January 22, 2001, this Court resolved to consider the Resolution of June 14, 2000 “deemed served” upon them.
The petition is impressed with merit.
The issue for our resolution is whether or not respondent Zenaida Tan-Reyes acted in good faith when she purchased the subject lot and had the sale registered.
Settled is the principle that this Court is not a trier of facts. In the exercise of its power of review, the findings of fact of the Court of Appeals are conclusive and binding and consequently, it is not our function to analyze or weigh evidence all over again. This rule, however, is not an iron-clad rule. In Floro vs. Llenado, we enumerated the various exceptions and one which finds application to the present case is when the findings of the Court of Appeals are contrary to those of the trial court.
We start first with the applicable law.
Article 1544 of the Civil Code provides:
“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 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 possession; and, in the absence thereof; to the person who presents the oldest title, provided there is good faith.”
Otherwise stated, where it is an immovable property that is the subject of a double sale, ownership shall be transferred (1) to the person acquiring it who in good faith first recorded it in the Registry of Property; (2) in default thereof, to the person who in good faith was first in possession; and (3) in default thereof, to the person who presents the oldest title, provided there is good faith. The requirement of the law then is two-fold: acquisition in good faith and registration in good faith. The rationale behind this is well-expounded in Uraca vs. Court of Appeals, where this Court held:
“Under the foregoing, the prior registration of the disputed property by the second buyer does not by itself confer ownership or a better right over the property. Article 1544 requires that such registration must be coupled with good faith. Jurisprudence teaches us that “(t)he governing principle is primus tempore, potior jure (first in time, stronger in right). Knowledge gained by the first buyer of the second sale cannot defeat the first buyer’s right except where the second buyer registers in good faith the second sale ahead of the first, as provided by the Civil Code. Such knowledge of the first buyer does not bar her from availing of her rights under the law, among them, to register first her purchase as against the second buyer. But in converso, knowledge gained by the second buyer of the first sale defeats his right even if he is first to register the second sale, since such knowledge taints his prior registration with bad faith. This is the price exacted by Article 1544 of the Civil Code for the second buyer being able to displace the first buyer, that before the second buyer can obtain priority over 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 right) – from the time of acquisition until the title is transferred to him by registration or failing registration, by delivery of possession.” (Emphasis supplied)
In the case at bar, certain pieces of evidence, put together, would prove that respondent Reyes is not a buyer in good faith. The records show that on August 18, 1985, spouses Mabanta offered to her for sale the disputed lot. They told her it was mortgaged with respondent DBP and that she had to pay the loan if she wanted to buy it. She readily agreed to such a condition. The following day, her father Benito Tan, accompanied by barangay official Tridanio, went to petitioner Alejandro’s house offering to return to him the P5,000.00 he had paid to spouses Mabanta. Tan did not suggest to return the 500-square meter lot petitioner delivered to Susana Soriano. For this reason, petitioner refused Tan’s offer and even prohibited him from going to respondent DBP. We quote the following testimony of petitioner who, despite his blindness as shown by the records, testified to assert his right, thus:
“ATTY. CHANGALE:
Q What can you say to that statement?
A That is their mistake, sir.
Q Why do you say that is their mistake?
A Because her husband and Tridanio went at home offering to return the money but I did not accept, sir.
Q Who is this Benito Tan you are referring to?
A The husband of Pura Masa, sir.
Q What is the relationship with the intervenor Zenaida Tan?
A The daughter, sir.
Q When did Benito Tan together with Councilman Tridanio came?
A Before they went to the Development Bank of the Philippines they came at home and I prohibit them, sir.
Q How did you prohibit them?
A No, I said please I am just waiting for the Bank to inspect then I will pay my obligation.
x x x x x x
Q You stated earlier that you will just pay the payments. What are those payments you are referring to?
A The payment I have given to Colobong and to the Bank, sir. They do not want to return the payment I have given to Susana Soriano and that is the beginning of our quarrel.”
We are thus convinced that respondent Reyes had knowledge that petitioner previously bought the disputed lot from respondent spouses Mabanta. Why should her father approach petitioner and offer to return to him the money he paid spouses Mabanta? Obviously, aware of the previous sale to petitioner, respondent Reyes informed her father about it. At this juncture, it is reasonable to conclude that what prompted him to go to petitioner’s house was his desire to facilitate his daughter’s acquisition of the lot, i.e., to prevent petitioner Alejandro from contesting it. He did not foresee then that petitioner would insist he has a prior right over the lot.
Now respondent Reyes claims that she is a purchaser in good faith. This is preposterous. Good faith is something internal. Actually, it is a question of intention. In ascertaining one’s intention, this Court must rely on the evidence of one’s conduct and outward acts. From her actuations as specified above, respondent Reyes cannot be considered to be in good faith when she bought the lot.
Moreover, it bears noting that on September 16, 1985, both petitioners filed with the trial court their complaint involving the lot in question against respondents. After a month, or on October 17, 1985, respondent Reyes had the “Deed of Absolute Sale” registered with the Registry of Property. Evidently, she wanted to be the first one to effect its registration to the prejudice of petitioners who, although in possession, have not registered the same. This is another indicum of bad faith.
We have consistently held that “in cases of double sale of immovables, what finds relevance and materiality is not whether or not the second buyer was a buyer in good faith but whether or not said second buyer registers such second sale in good faith, that is, without knowledge of any defect in the title of the property sold.” In Salvoro vs. Tanega, we had the occasion to rule that:
“If a vendee in a double sale registers the sale after he has acquired knowledge that there was a previous sale of the same property to a third party or that another person claims said property in a previous sale, the registration will constitute a registration in bad faith and will not confer upon him any right.”
Mere registration of title is not enough, good faith must concur with the registration. To be entitled to priority, the second purchaser must not only establish prior recording of his deed, but must have acted in good faith, without knowledge of the existence of another alienation by the vendor to the other. In the old case of Leung Yee vs. F. L. Strong Machinery, Co. and Williamson, this Court ruled:
“One who purchases a real estate with knowledge of a defect of title in his vendor cannot claim that he has acquired title thereto in good faith as against the true owner of the land or of an interest therein; and the same rule must be applied to one who has knowledge of facts which should have put him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the title of his vendor. A purchaser cannot close his eyes to facts which should put a reasonable man upon his guard, and then claim that he acted in good faith under the belief that there was no defect in the title of the vendor. His mere refusal to believe that such a defect exists, or his willful closing of his eyes to the possibility of the existence of a defect in his vendor’s title will not make him an innocent purchaser for value, if it afterwards develops that the title was in fact defective, and it appears that he had such notice of the defect as would have led to its discovery had he acted with that measure of precaution which may reasonably be required of a prudent man in a like situation. x x x ”
In fine, we hold that respondent Zenaida Tan-Reyes did not act in good faith when she bought the lot and had the sale registered.
WHEREFORE, the assailed Decision of the Court of Appeals is REVERSED and SET ASIDE. The Decision of the trial court is hereby reinstated.
SO ORDERED.
Puno, (Chairman), Panganiban, Corona, and Carpio-Morales, JJ., concur.
Rollo, at 118-134, penned by Justice Ruben T. Reyes and concurred in by Justice Salome A. Montoya (retired) and Justice Eloy R. Bello, Jr.
Rollo at 59-78, penned by Judge Fe Albano Madrid.
Records at 46.
Exhibit “B”, Folder of Exhibits.
Records at 6.
Exhibit “D”, Folder of Exhibits.
TSN, August 26, 1987, at 57. See also Exhibits “E”; “E-1”; E-2” and “F”, id.
Exhibit “3”, id.
Rollo at 47.
Id. at 190.
Alipoon vs. Court of Appeals, G.R. No. 127523, March 22, 1999, 305 SCRA 118.
Borlongan vs. Madrideo, G.R. No. 120267, January 25, 2000, 323 SCRA 248.
G.R. No. 75723, June 2, 1995, 244 SCRA 713, citing Remalante vs. Tibe, G.R. No. L-59514, February 25, 1988,158 SCRA 138; Banaag vs. Bartolome, G.R. No. 76245, December 20, 1991, 204 SCRA 924; Tongson vs. Court of Appeals, G.R. No. 77104, November 6, 1992, 215 SCRA 426; Geronimo vs. Court of Appeals, G.R. No. 105540, July 3, 1993, 224 SCRA 494.
Balatbat vs. Court of Appeals, G.R. No. 109410, August 28, 1996, 261 SCRA 128, 141; Radiowealth Finance Co. vs. Palileo, G.R. No. 83432, May 20, 1991, 197 SCRA 245, 246.
Martinez vs. Court of Appeals, G.R. No. 123547, May 21, 2001, 358 SCRA 38.
G.R. No. 115158, September 5, 1997, 278 SCRA 702.
TSN, July 6, 1989, at 17-18.
TSN, December 14, 1990, at 27-30.
Id. at 28-29.
Bayoca vs. Nogales, G.R. No. 138201, September 12, 2000, 340 SCRA 154, 166; Coronel vs. Court of Appeals, G.R. No. 103577, October 7, 1996, 263 SCRA 15, 38.
G.R. No. L-32988, December 29, 1978, 87 SCRA 349.
Martinez vs. Court of Appeals, supra; Bautista vs. Court of Appeals, G.R. No. 106042, February 28, 1994, 230 SCRA 446.
37 Phil. 644 (1918).
SECOND DIVISION
[G.R. No. 73651. November 27, 1987]
IGNACIO CARDENTE and ANASTACIA T. CARDENTE, petitioners, vs. THE INTERMEDIATE APPELLATE COURT and SPOUSES RUPERTO RUBIN and PRIMITIVA C. RUBIN, respondents.
D E C I S I O N
SARMIENTO, J.:
This is a simple case of a double sale of an immovable property. The trial court decided in favor of the first vendee although the sale was by a private document. The then Intermediate Appellate Court reversed and set aside the decision of the lower court. The public respondent appellate court ruled in favor of the second buyers, who registered their deed of sale. Hence, the present petition for review by certiorari.
The facts of the case are as simple as the central issue.
Sometime in 1956, Francisca Cardente, for and on behalf of her grandson, petitioner Ignacio Cardente, who was then a minor, and now married to his co-petitioner, purchased from Isidro Palanay one hectare of land. The property purchased is a part of a 9.2656-hectare parcel of land covered by Original Certificate of Title (O.C.T., for short) No. P-1380 in Palanay's name. Immediately after the purchase, the Cardentes took possession of the land and planted various crops and trees thereon. They have been in continuous possession ever since, adverse to the whole world. Unfortunately, however, the private document evidencing the sale of the one-hectare lot to petitioner Ignacio Cardente was lost and never found despite diligent efforts exerted to locate the same.
Some four years later, on August 18, 1960, Isidro Palanay sold the entire property covered by O.C.T. No. P-1380, including the one-hectare portion already sold to Cardente, this time to the private respondents, Ruperto Rubin and his wife. The deed of sale was registered and a new title, Transfer Certificate of Title (T.C.T., for short) No. 1173, was issued in favor of the Rubin spouses. Notwithstanding the second sale, or because of it, Isidro Palanay, with the written conforme of his wife, Josepha de Palanay, on December 9, 1972, executed a public document in favor of petitioner Ignacio Cardente confirming the sale to him (Cardente) in 1956 of the one hectare portion. The deed of confirmation likewise states that the subsequent vendee, respondent Ruperto Rubin, was informed by Palanay of the first sale of the one-hectare portion to Cardente.
On February 18, 1977, the house of the petitioners was burned. As a consequence thereof, they lodged a complaint for arson with the P.C.-Integrated National Police at Malaybalay, Bukidnon, against Ruperto Rubin, whom they suspected of having committed the crime. Apparently, in retaliation, on March 31, 1977, seventeen long years after their purchase, the private respondents filed a complaint with the then Court of First Instance of Bukidnon for quieting of title with damages, against the petitioners, claiming ownership over the whole property previously covered by O.C.T. No. P-1380, now registered in their names under T.C.T. No. 1173.
On July 9, 1979, the trial court dismissed the complaint of the Rubins and ordered them to "reconvey the one hectare in question to defendant (Cardente) at the expense of the latter."
The Rubin spouses appealed to the respondent court, which rendered the decision under review. The assailed decision decreed:
xxx xxx xxx
WHEREFORE, the decision appealed from is hereby set aside and judgment is rendered (1) declaring plaintiffs the absolute owners of subject property covered by Transfer Certificate of Title No. 1173; (2) ordering the defendants to vacate the one-hectare portion in controversy, and to restore plaintiffs in possession thereof; (3) quieting the title of plaintiffs over the one (1) hectare portion of land in controversy; and (4) ordering the defendants to pay the costs.
SO ORDERED.
xxx xxx xxx
Now before us, the petitioners impute bad faith on the private respondents when the latter purchased the entire property and when they subsequently registered their title thereto. By reason of such bad faith, the petitioners' claim that insofar as the controverted one-hectare parcel of land is concerned the private respondents' title thereto is null and void.
We agree with the petitioners. We grant the petition.
Admittedly, this case involves a double sale. While the private respondents allegedly bought from Isidro Palanay on August 18, 1960 the entire property comprising 9.2656 hectares and covered by O.C.T. No. P-1380, the petitioners, on the other hand, lay claim to one hectare thereof which they undeniably purchased from the same vendor earlier, in 1956. The conflict, therefore, falls under, and can be resolved by, Article 1544 of the Civil Code which sets the rules on double sales.
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.
It is undisputed that the private respondents, the second vendees, registered the sale in their favor whereas the petitioners, the first buyers, did not. But mere registration of the sale is not enough. Good faith must concur with the registration. Bad faith renders the registration nothing but an exercise in futility. The law and jurisprudence are very clear on this score.
The heart of the problem is whether or not the private respondents acted in good faith when they registered the deed of sale dated August 18, 1960 more than six months later, on March 7, 1961. Inextricably, the inquiry must be directed on the knowledge, or lack of it, of the previous sale of the one-hectare portion on the part of the second buyers at the time of registration. The trial court found that the second vendees had such knowledge.
It is true that good faith is always presumed while bad faith must be proven by the party alleging it. In this case, however, viewed in the light of the circumstances obtaining, we have no doubt that the private respondents' presumed good faith has been sufficiently overcome and their bad faith amply established.
The "Confirmation Of A Deed Of Absolute Sale Of A Portion Of A Registered Agricultural Land" executed by the late Ignacio Palanay on December 9, 1972 and which was exhibited in the trial court below, admitted the sale of the one hectare portion to the petitioners sometime in 1956. The same deed likewise explicitly stated that the "fact of the previous sale, was well known and acknowledged by Mr. Ruperto Rubin (the private respondent)." These recitals were further buttressed by Concepcion Salubo, a daughter of Isidro Palanay, who testified that she knew of the previous sale of the one-hectare portion to petitioner Ignacio Cardente and that private respondent Ruperto Rubin was properly informed of the said sale. On this regard, no ill-motive had been attributed to the vendor Isidro Palanay and to his daughter Concepcion Salubo for testifying the way they did -- against the private respondents. They were disinterested persons who stood to gain nothing except, perhaps, the satisfaction of setting the record straight, or, in the words of the seller, "for the purpose of giving efficacy to the Deed of Sale I made to Ignacio Cardente which was made in a private document x x x."
Further, the notorious and continuous possession and full enjoyment by petitioners of the disputed one-hectare property long (four years) before the private respondents purchased the same from Palanay bolsters the petitioners' position. That possession would have been enough to arouse the suspicion of the private respondents as to the ownership of the entire area which they were about to purchase. Their failure to inquire and to investigate the basis of the petitioners' actual occupation of the land forming a substantial part of what they were buying militates against their posited lack of knowledge of the first sale. "A purchaser cannot close his eyes to facts which should put a reasonable man upon his guard and then claim that he acted in good faith under the belief that there was no defect in the title of the vendor." We have warned time and again that a buyer of real property which is in the possession of persons other than the seller must be wary and should investigate the rights of those in possession. Otherwise, without such inquiry, the buyer can hardly be regarded as a buyer in good faith.
The private respondents' avowals that they had never known of the prior sale until the issues were joined at the trial court, for, before that, they merely tolerated the continued presence of the original occupants, Francisca and Eugenia Cardente, and Ignacio, in the premises, out of simple pity for the two old women, is too pat to be believed. For if these were so, the reason why the private respondents' continued to tolerate the occupation by the petitioners of the contested property even after the demise of the two old women escapes us. Rubin's allegation that this was because they were still in good terms with the petitioners is too lame an excuse to deserve even a scant consideration. The private respondents' total lack of action against the actual occupants of a good portion of the land described in their torrens title can only be construed as acceptance on their part of the existence of the prior sale and their resignation to the fact that they did not own the one-hectare portion occupied by the petitioners. Present these facts, the foisted ignorance of the respondents as to the first sale is an empty pretense. Their seventeen years of inaction and silence eloquently depict a realization of lack of right.
WHEREFORE, the Decision dated November 19, 1985 and the Resolution dated January 10, 1986 of the former Intermediate Appellate Court are hereby REVERSED and SET ASIDE and the Decision dated July 9, 1979 of the Court of First Instance of Bukidnon in Civil Case No. 860, is hereby REINSTATED. Costs against the private respondents.
SO ORDERED.
Yap, (Chairman), Melencio-Herrera, Paras, and Padilla, JJ., concur.
Penned by Judge Emerito C. Ocaya, Court of First Instance of Bukidnon, Malaybalay, Civil Case No. 860.
Justice Jose C. Campos, ponente, with the concurrence of Justices Crisolito Pascual, Serafin E. Camilon, and Desiderio P. Jurado of the Second Civil Cases Division, G.R. No. CV-66115, entitled, Rubin, et al. vs. Cardente, et al.
Rollo, 14-15.
Annex "E" of Petition, 4; Rollo, 31.
Petitioners’ Brief/Memorandum, 1.
Art. 1544, 2nd par., Civil Code of the Philippines; Salvoro vs. Tañega, No. L-32988, December 29, 1978, 87 SCRA 349 (1978); Caram, Jr., vs. Laureta, No. L-28740, February 24, 1981, 103 SCRA 7 (1981).
Santiago vs. Cruz, 19 Phil. 145 (1911); J.M. Tuason & Co., Inc. vs. Court of Appeals, No. L-41233, November 21, 1979, 94 SCRA 413 (1979); Duran vs. Intermediate Appellate Court, No. L-64159, September 10, 1985, 138 SCRA 489 (1985).
Annex "A" of Petition, Rollo, 10.
Rollo, 14.
Rollo, 10.
J.M. Tuason & Co., Inc. vs. Court of Appeals, supra.
Republic vs. Hon. Court of Appeals, No. L-42856, January 27, 1981, 102 SCRA 331 (1981).
Decision of the Court of First Instance, Annex "B" of the Petition, 3; Rollo, 14.
Rollo, 24.
THIRD DIVISION
[G.R. No. 147072. May 7, 2002]
FRANCISCO H. LU, petitioner, vs. Spouses ORLANDO and ROSITA MANIPON, respondents.
D E C I S I O N
PANGANIBAN, J.:
The registration of a sale of real estate will not protect a buyer in bad faith, for the law cannot be used as a shield for fraud. On the other hand, the preferential right of a first registrant in a double sale is always qualified by good faith.
The Case
Before us is a Petition for Review on Certiorari challenging the October 25, 2000 Decision and the February 9, 2001 Resolution of the Court of Appeals (CA) in CA-GR CV No. 55149. The assailed Decision disposed as follows:
"WHEREFORE, premises considered, the appealed Decision is hereby AFFIRMED with MODIFICATION in the sense that [petitioner] is directed to convey Lot 5582-B-7-D covered by TCT No. 171497 to [respondent] Rosita C. Manipon without being entitled to any payment from the latter."
The assailed Resolution denied the Motion for Reconsideration.
The Facts
The facts of the case are summarized in the assailed Decision as follows:
“On May 9, 1981, Juan Peralta executed a [D]eed of [S]ale by installment in favor of spouses Orlando and Rosita Manipon [herein respondents]. Therein, Juan Peralta agreed to sell by installment to the said spouses 350 square meters of the 2,078 square-meter lot he owned, covered by Transfer Certificate of Title (TCT) No. 137911 and located at Barrio Dilan, Urdaneta, Pangasinan. The said [D]eed was not registered with the Registry of Deeds.
“On June 10, 1981, Juan Peralta mortgaged the aforesaid lot to Thrift Savings and Loan Association, Inc. (TSLAI). He however failed to pay the loan he obtained for which the mortgage was constituted and so the same was judicially foreclosed and sold to TSLAI for P62,789.18 which was the highest bidder. The latter in turn sold the same on July 15, 1988 in the amount of P80,000.00 to the [petitioner]. Thereafter, on August 30, 1989, [petitioner] caused the subdivision of the said lot into five (5) lots, one of which is Lot 5582-B-7-D, with an area of 339 square meters covering the lot which was earlier sold by installment to [respondents]. The said lot is now covered by TCT No. 171497. In the interim, or on July 30, 1983, Juan Peralta executed a [D]eed of [S]ale in favor of [respondents] after the couple paid a total amount of P8,000.00 for the subject lot. The aforesaid [D]eed was however also not registered.
“On January 22, 1990, [petitioner] through counsel wrote the [respondents] regarding the presence of the latter’s house, which was also being occupied by them, on the lot in question. Efforts were apparently made by both parties to settle the brewing dispute but to [no] avail. Hence, on February 26, 1990, [petitioner] filed the present action alleging therein that he is the owner of the lot in question including that which was being occupied by [respondents. Petitioner] further claims that his ownership was confirmed by the Regional Trial Court of Urdaneta, Pangasinan, Branch 49, in Civil Case No. U-4399. He also averred that for reasons unknown to him, [respondents] were claiming ownership of Lot 5582-B-7-D and have constructed a house thereon on January 22, 1990.
“In the Answer filed by [respondents], they claim that [petitioner] is a buyer in bad faith because even before he bought the 2,078 square-meter lot, he knew for a fact that they already bought Lot 5582-B-7-D from the original owner of the said lot and have been residing therein since 1981. [Respondents] also asserted that [petitioner] had knowledge of their claim over the said property because when the whole lot was foreclosed they shared the same problem as [petitioner] also bought a lot with the 2,078 square-meter lot of Juan Peralta.
“Trial ensued and thereafter, the trial court rendered the questioned judgment. x x x.” (Citations omitted)
Ruling of the Trial Court
The trial court ruled that petitioner was not a buyer in good faith despite the fact that he was able to register his ownership of the disputed lot. He admitted knowing that respondents had constructed a house on the disputed lot in 1984, even before he purchased the property from the loan association in 1990. Indeed, he waited more than ten (10) years before contesting respondents’ occupation and possession of the land. The RTC disposed as follows:
“WHEREFORE, IN THE LIGHT OF THE FOREGOING, the Court renders judgment as follows:
“1). The [petitioner] is hereby ordered to convey to the herein [respondent] Rosita Manipon, (defendant Orlando Manipon is already dead) the lot consisting of 339 square meters denominated as Lot 5582-B-7-D and covered by Transfer Certificate of Title No. 171497 after paying the sum of P13,051.50 plus legal interest to the herein [petitioner] anytime after the finality of this decision.
“2). The third-party defendant, Juan Peralta, is ordered to refund to the defendants Manipons the amount of P18,000.00 paid by the latter to him;
“3). x x x no pronouncement as to damages in favor [of] or against either of the parties.”
Ruling of the Court of Appeals
The CA affirmed the Decision of the trial court with the modification that respondents would no longer be required to pay petitioner the value of the disputed portion in a “forced sale.” The appellate court said that petitioner knew that Lot 5582-B-7-D had already been sold by Juan Peralta to respondents before the mother lot was mortgaged, foreclosed and eventually purchased. He bought the entire property from the foreclosing bank, because he feared that he might lose what he had earlier bought in 1981 -- a 350 square meter lot which also formed part of the mother lot.
The Issues
In his Memorandum, petitioner raises the following issues:
“1. Who between petitioner and respondents have a better right of ownership over the lot in question, Lot 5582-B-7-D, with an area of 339 square meters?
“2. Whether respondents’ claim over the lot can rise [above that of] their predecessor in interest Juan Peralta[.]
“3. Whether respondents are under estoppel to question petitioner’s ownership over the lot in question[.]
“4. Whether petitioner was in bad faith in the acquisition of the lot in question[.]
“5. And even assuming without admitting that petitioner is under obligation to convey the lot in question in favor of respondents, whether the consideration of the lot be paid by respondent is P2,000.00 per square meter[.]”
These issues can be summed up into three questions: (1) who has a better right to the disputed property? (2) was petitioner a purchaser in bad faith? and (3) what should be the purchase price of the disputed lot?
This Court’s Ruling
The Petition is partly meritorious.
First Issue:
Better Right to the Disputed Lot
Petitioner claims to have a better right to the disputed portion of the real property. First, although respondents had bought it first, he was the first to register his purchase of the mother lot. Second, respondents’ ownership follows that of their vendor who mortgaged to the bank his title to the mother lot and failed to redeem it.
Petitioner avers that, although respondents purchased the disputed lot by installment on May 9, 1981 and fully paid for it on May 30, 1983, they failed to register their sale with the Registry of Deeds. In the meantime, on June 18, 1981, Juan Peralta mortgaged the mother lot -- including the disputed portion -- to the Thrift Savings and Loan Association, Inc. (TSLAI). The mortgage was foreclosed and the property sold on July 10, 1988. Petitioner, on the other hand, bought the whole lot from the bank for P80,000 on July 15, 1988 and registered it in his name on September 23, 1988.
Third, petitioner claims that from the time respondents fully paid for the lot until they received a Notice to Vacate, they did not do anything to perfect their title thereto; hence, they are now estopped from questioning his ownership of it.
We are not convinced. In estoppel, a person who by deed or conduct induces another to act in a particular manner is barred from adopting an inconsistent position, attitude or course of conduct that thereby causes loss or injury to another. This equitable principle will not apply to respondents, because they exercised dominion over the property by occupying and building their house on it. On the other hand, it was petitioner who, despite having knowledge of the existence of respondents’ house on the disputed portion, bought the whole lot. Before acquiring the mother lot from the bank, he knew of respondents’ claim of ownership and occupation. He cannot now pretend to be an innocent buyer in good faith.
Registration is not the equivalent of title. Under the Torrens system, registration only gives validity to the transfer or creates a lien upon the land. It was not established as a means of acquiring title to private land because it merely confirms, but does not confer, ownership. Moreover, the RTC and the CA have correctly ruled that the preferential right of the first registrant of a real property in a case of double sale is always qualified by good faith under Article 1544 of the Civil Code. A holder in bad faith of a certificate of title is not entitled to the protection of the law, for the law cannot be used as a shield for fraud.
“When the registration of a sale is not made in good faith, a party cannot base his preference of title thereon, because the law will not protect anything done in bad faith. Bad faith renders the registration futile. Thus, if a vendee registers the sale in his favor after he has acquired knowledge that there was a previous sale of the same property to a third party, or that another person claims said property under a previous sale, or that the property is in the possession of one who is not a vendor, or that there were flaws and defects in the vendor’s title, or that this was in dispute, the registration will constitute x x x bad faith, and will not confer upon him any preferential right. The situation will be the same as if there had been no registration, and the vendee who first took possession of the real property in good faith shall be preferred.”
Equally important, under Section 44 of the Property Registration Decree (Presidential Decree No. 1529), every registered owner receiving a certificate of title in pursuance of a decree of registration and every subsequent purchaser of registered land taking such certificate for value and in good faith shall hold the same free from all encumbrances, except those noted on the certificate and enumerated therein. Petitioner is evidently not a subsequent purchaser in good faith. Therefore, between the parties, respondents have a better right to the property based on the concurring factual findings of both the trial and the appellate courts. We quote with approval the following ruling of the CA:
“x x x We are persuaded that [petitioner] knew of the fact that Lot 5582-B-7-D was sold by Juan Peralta to [respondents] before Lot 5582-B-7, the mother lot of Lot 5582-B-7-D, was mortgaged, foreclosed, sold and [its ownership] transferred x x x to him. In fact, [w]e are convinced that the main reason why [petitioner] bought the entire lot from the TSLAI was his fear of losing the 350 square meter-lot he bought sometime in 1981 which also forms part of Lot 5582-B-7. Having been aware of the ‘defects’ in the title of TSLAI as far as Lot 5582-B-7-D is concerned, he cannot now claim to be a purchaser in good faith and for value even if he traces his ownership [to] TSLAI which [w]e believe was a purchaser in good faith - the latter not being aware of the sale that transpired between the [respondents] and Juan Peralta before Lot 5582-B-7 was sold to it in a public auction.
“One who purchases real estate with knowledge of a defect or lack of title in his vendor cannot claim that he has acquired title thereto in good faith as against the true owner of the land or an interest therein. Thus, even assuming arguendo that [petitioner] was not aware of the sale between Juan Peralta and the [respondents], still he cannot be considered as a purchaser in good faith because he had personal knowledge of [respondents’] occupation of the lot in question. This fact alone should have put him on guard before buying the land. But as he admitted during the trial, he was not interested in the [respondents’] reason for occupying the said lot[;] all that he was interested in was to buy the entire lot. This ‘devil-may-care’ attitude of [petitioner] has placed him where he is now. Consequently, he cannot be entitled to the relief he is seeking before this [c]ourt.
“True, the purchaser of a registered land is not required to go behind the title to determine the condition of the property. However, a purchaser cannot close his eyes to facts which should put a reasonable man upon his guard and then claim that he acted in good faith under the belief that there was no defect in the title of the vendor. His mere refusal to believe that such defect exists, or his willful closing of his eyes to the possibility of the existence of a defect in his vendor’s title, will not make him an innocent purchaser for value, if it afterwards develops that the title was in fact defective, and it appears that he had such notice of the defect as would have led to its discovery had he acted with that measure of precaution which may reasonably be required of a prudent man in a like situation.”
All told, the right of a buyer to rely upon the face of the title certificate and to dispense with the need of inquiring further is upheld only when the party concerned had no actual knowledge of facts and circumstances that should impel a reasonably cautious man to conduct further inquiry.
Second Issue:
Bad Faith
Petitioner denies being a purchaser in bad faith. He alleges that the only reason he spoke to the respondents before he bought the foreclosed land was to invite them to share in the purchase price, but they turned him down. This, he argues, was not an indication of bad faith.
Petitioner’s contention is untenable. He might have had good intentions at heart, but it is not the intention that makes one an innocent buyer. A purchaser in good faith or an innocent purchaser for value is one who buys property and pays a full and fair price for it, at the time of the purchase or before any notice of some other person’s claim on or interest in it. One cannot close one’s eyes to facts that should put a reasonable person on guard and still claim to have acted in good faith. As aptly explained by Vitug:
“The governing principle is prius tempore, potior jure (first in time, stronger in right). Knowledge by the first buyer of the second sale cannot defeat the first buyer’s rights except when the second buyer first registers in good faith the second sale (Olivares vs. Gonzales, 159 SCRA 33.) Conversely, knowledge gained by the second buyer of the first sale defeats his rights even if he is first to register, since such knowledge taints his registration with bad faith (see also Astorga vs. Court of Appeals, G.R. No. 58530, 26 December 1984). In Cruz vs. Cabana (G.R. No. 56232, 22 June 1984; 129 SCRA 656), it was held that it is essential, to merit the protection of Art. 1544, second paragraph, that the second realty buyer must act in good faith in registering his deed of sale (citing Carbonell vs. Court of Appeals, 69 SCRA 99, Crisostomo vs. CA, G.R. 95843, 02 September 1992).
“The registration contemplated under Art. 1544 has been held to refer to registration under Act 496 Land Registration Act (now PD 1529) which considers the act of registration as the operative act that binds the land (see Mediante vs. Rosabal, 1 O.G. [12] 900, Garcia vs. Rosabal, 73 Phil 694). On lands covered by the Torrens System, the purchaser acquires such rights and interest as they appear in the certificate of title, unaffected by any prior lien or encumbrance not noted therein. The purchaser is not required to explore farther than what the Torrens title, upon its face, indicates. The only exception is where the purchaser has actual knowledge of a flaw or defect in the title of the seller or of such liens or encumbrances which, as to him, is equivalent to registration (see Sec. 39, Act 496; Bernales vs. IAC, G.R. 75336, 18 October 1988; Hernandez vs. Sales, 69 Phil 744; Tajonera vs. Court of Appeals, L-26677, 27 March 1981).”
By his own allegations, petitioner admits he was not a purchaser in good faith. A buyer of real property which is in the possession of another must be wary and investigate the rights of the latter. Otherwise, without such inquiry, the buyer cannot be said to be in good faith.
Basic is the rule that the factual findings of the appellate court are given great weight, even finality, when they affirm those of the trial court, unless they fall under the exceptions enumerated in Fuentes v. Court of Appeals. Petitioner has not shown that this case falls under any of those exceptions; hence, we find no cogent reason to depart from this general rule.
Third Issue:
Proper Purchase Price
Petitioner protests respondents’ exemption from paying him P13,051.50 with legal interest for the conveyance of the disputed portion. Instead, he pleads that this Court modify the price to P2,000 per square meter.
We are not persuaded. While neither party appealed the issue of the purchase price, petitioner did question the conveyance of Lot 5582-B-7-D to respondents upon payment of the said price. Hence, the payment was also effectively put in issue. It is well-settled that appellate courts have ample authority to rule on matters not specifically assigned as errors in an appeal, if these are indispensable or necessary to the just resolution of the pleaded issues.
However, the CA modification exempting respondents from paying petitioner is flawed, because the RTC had ordered Juan Peralta to refund the P18,000 paid to him by petitioner as the purchase price of the disputed lot. Thus, the trial court correctly ordered (1) respondents to pay petitioner P13,051.50 plus legal interest for Lot 5582-B-7-D and (2) the third-party defendant Peralta to refund to respondents the P18,000 they had paid for the lot. The CA ruling would unjustly enrich respondents, who would receive double compensation. In short, the RTC ruling should have been affirmed in its entirety.
WHEREFORE, the Petition is PARTLY GRANTED. The assailed Decision and Resolution are AFFIRMED without the MODIFICATION ordered by the CA. No pronouncement as to costs.
SO ORDERED.
Melo, (Chairman), Vitug, Sandoval-Gutierrez, and Carpio, JJ., concur.
Seventeenth Division. Penned by Justice Martin S. Villarama Jr. with the concurrence of Justices Romeo J. Callejo Sr. (Division chairman) and Juan Q. Enriquez Jr. (member).
Assailed Decision, pp. 5-6; rollo, pp. 66-67.
CA Decision, pp. 2-3; rollo, pp. 63-64.
RTC Decision, pp. 15-16; rollo, pp. 46-47; penned by Judge Joven F. Costales.
The case was deemed submitted for decision on November 19, 2001 upon the submission of the Memorandum for petitioner.
Signed by Atty. Simplicio M. Sevilleja; Atty. Ruben G. Ticse Sr. signed the Memorandum for respondents, but did not indicate his IBP number and PTF fees. He is advised to do so next time; otherwise, he would be sanctioned.
Petitioner's Memorandum, p. 5; rollo, p. 121.
Cruz v. Court of Appeals, 293 SCRA 239, July 27, 1998.
Lee Tek Sheng v. Court of Appeals, 292 SCRA 544, 548, July 15, 1998.
Sajonas v. Court of Appeals, 258 SCRA 79 & 91, July 5, 1996.
Republic v. Court of Appeals, 301 SCRA 366, 384, January 21, 1999; Heirs of Teodoro Dela Cruz v. Court of Appeals, 298 SCRA 172, October 21, 1998; Strait Times, Inc. v. Court of Appeals, 294 SCRA 714, August 28, 1998; Republic v. Court of Appeals, 258 SCRA 712, 722, July 12, 1996.
"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."
Baricuatro Jr. v. Court of Appeals, 325 SCRA 137, 148-149, February 9, 2000; Uraca v. Court of Appeals, 278 SCRA 702, 712, September 5, 1997.
Baricuatro Jr. v. CA, supra, p. 155.
Tolentino, Civil Code of the Philippines, Vol. V, 1992 ed., p. 100; citations omitted.
CA Decision, pp. 4-5; rollo, pp. 65-66.
Republic v. Court of Appeals, supra, p. 380.
David v. Malay, 318 SCRA 711, 722, November 19, 1999; Republic v. CA, supra, p. 381; Co v. Court of Appeals, 196 SCRA 705, May 6, 1991.
Vitug, Compendium of Civil Law and Jurisprudence, 1993 rev. ed., p. 604.
David v. Malay, supra, p. 724.
Borromeo v. Sun, 317 SCRA 176, 182, October 22, 1999; Compañia Maritima, Inc. v. Court of Appeals, 318 SCRA 169, 177, November 16, 1999.
268 SCRA 703, 708-709, February 26, 1997; Baricuatro Jr. v. CA, supra, p. 145.
Logronio v. Taleseo, 312 SCRA 52, 60, August 6, 1999.
The price was computed as follows: petitioner bought the whole 2.078 sq. m. lot from the bank for P80,000, of P38.50 per sq. m.; therefore, the trial court fixed the value of Lot 5582-B-7-D at 339 sq. m. multiplied by P38.50 or P13,051.50 plus legal interest.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 142403 March 26, 2003
ALEJANDRO GABRIEL and ALFREDO GABRIEL, petitioners,
vs.
SPOUSES PABLO MABANTA and ESCOLASTICA COLOBONG, DEVELOPMENT BANK OF THE PHILIPPINES (Isabela Branch) and ZENAIDA TAN-REYES, respondents.
SANDOVAL-GUTIERREZ, J.:
Born of the need to protect our land registration system from being converted into an instrument of fraud, this Court has consistently adhered to the principle that "a mere registration of title in case of double sale is not enough, good faith must concur with the registration."
In this petition for review on certiorari, Alejandro Gabriel and Alfredo Gabriel assailed the Decision1 dated March 30, 1999 of the Court of Appeals in CA-G.R. CV No. 33941 modifying the Decision2 dated April 12, 1991 of the Regional Trial Court, Branch 21, Santiago, Isabela in Civil Case No. 0399 for specific performance, reconveyance and damages with application for preliminary injunction.
The facts are as follows:
Spouses Pablo and Escolastica Mabanta were the registered owners of two lots located in Patul and Capaltitan, Santiago, Isabela, with an area of 512 and 15,000 square meters, covered by Transfer Certificates of Title (TCT) Nos. 72705 and 72707, respectively. On October 25, 1975, they mortgaged both lots with the Development Bank of the Philippines (DBP) as collateral for a loan of P14,000.00.3
Five years thereafter or on September 1, 1980, spouses Mabanta sold the lots to Susana Soriano by way of a "Deed of Sale of Parcels of Land With Assumption of Mortgage."4 Included in the Deed is an agreement that they could repurchase the lots within a period of two (2) years.
Spouses Mabanta failed to repurchase the lots. But sometime in 1984, they were able to convince Alejandro Gabriel to purchase the lots from Susana Soriano. As consideration, Alejandro delivered to Susana a 500-square meter residential lot with an actual value of P40,000.00 and paid spouses Mabanta the sum of P5,000.00. On May 15, 1984, spouses Mabanta executed a "Deed of Sale with Assumption of Mortgage"5 in favor of Alejandro. For her part, Susana executed a document entitled "Cancellation of Contract"6 whereby she transferred to Alejandro all her rights over the two lots.
Alejandro and his son Alfredo cultivated the lots. They also caused the restructuring of spouses Mabanta’s loan with the DBP.7 However, when they were ready to pay the entire loan, they found that spouses Benito and Pura Tan had paid it and that the mortgage was already cancelled.8
On August 18, 1985, Benito Tan and Alejandro Tridanio, a barangay official, approached Alejandro to refund to him the P5,000.00 he paid to spouses Mabanta. Alejandro refused because Tan was unwilling to return the former’s 500-square meter lot delivered to Susana as purchase price for the lots. Thereafter, spouses Tan tried to eject Alejandro from the lot covered by TCT No. 72707.
On September 17, 1985, Alejandro and Alfredo filed with the Regional Trial Court, Branch 21, Santiago, Isabela a complaint (involving the lot covered by TCT No. 72707) for specific performance, reconveyance and damages with an application for a preliminary injunction against spouses Mabanta, spouses Tan, the DBP and barangay officials Dominador Maylem and Alejandro Tridanio. In due time, these defendants filed their respective answers.
During the proceedings, it turned out that it was spouses Tan’s daughter, Zenaida Tan-Reyes who bought one of the lots (covered by TCT No. 72707) from spouses Mabanta on August 21, 1985. Not having been impleaded as a party-defendant, she filed an answer-in-intervention alleging that she is the registered owner of the lot covered by TCT No. 72707; that she purchased it from spouses Mabanta "in good faith and for value"; that she paid their loan with the DBP in the amounts of P17,580.88 and P16,845.17 per Official Receipts Nos. 1749539 and 1749540, respectively; that the mortgage with the DBP was cancelled and spouses Mabanta executed a "Deed of Absolute Sale"9 in her favor; and that TCT No. T-72707 was cancelled and in lieu thereof, TCT No. T-160391 was issued in her name.
On April 12, 1991, the trial court rendered its Decision sustaining the right of Alejandro and Alfredo Gabriel over the lot covered by TCT No. 72707 (now TCT No. T-160391), thus:
"WHEREFORE, in the light of the foregoing considerations judgment is hereby rendered:
1. DECLARING Exhibit "A", the deed of sale with assumption of mortgage executed by the spouses Pablo Mabanta and Escolastica Colobong (in favor of Alejandro and Alfredo Gabriel) valid and subsisting.
2. ORDERING the plaintiff Alejandro Gabriel to pay to the spouses Pablo Mabanta and Escolastica Colobong the sums of P5,000.00 plus P34,426.05 (representing the loan with the DBP which plaintiff assumed) within 30 days from receipt hereof.
3. DECLARING the deed of sale executed by the spouses Pablo Mabanta and Escolastica Colobong in favor of Zenaida Tan Reyes as null and void.
4. ORDERING the intervenor Zenaida Tan-Reyes to reconvey the land covered by T.C.T. No. T-160391 in favor of Alejandro Gabriel.
"SO ORDERED."
In declaring null and void the "Deed of Absolute Sale" (or second sale) of the lot covered by TCT No. 72707 between spouses Mabanta and Zenaida Tan-Reyes, the trial court ratiocinated as follows:
"But Zenaida (Tan) Reyes professes that she is a buyer in good faith and for value. In her testimony she said that the spouses Mabanta offered to sell the land to her on August 19, 1985. She was informed that the land was mortgaged in the DBP. She readily agreed to buy the land on that same day. She did not inquire further into the status of the land. She did not go and see the land first. What she did was to immediately go to the DBP the following day and paid the mortgage obligation in the amount of P16,845.17 and P17,580.88 (Exhibits "1" and "2"). The following day August 21, a deed of sale in her favor was prepared and on October 17, 1985 she secured a certificate of title (Exhibit "5"). Under the above circumstances, it cannot be said that she is a purchaser in good faith. She should have first made a thorough investigation of the status of the land. Had she inquired, she should have been informed that the land was previously sold to at least two persons Susana Soriano and Alejandro Gabriel. She should also have first visited the land she was buying. Had she done so she should have discovered that the land was being cultivated by the Gabriels who would have informed her that they already bought the land from the Mabantas. The reason why she did not do this is because she already was appraised of the status of the land by her father Benito Tan. For reasons known only to her, she decided to buy the land just the same.
x x x x x x x x x
"Zenaida Tan therefore is not a purchaser in good faith and she cannot seek refuge behind her certificate of title. True, Article 1544 of the Civil Code provides that should immovable property be sold to different vendees, the ownership shall belong to the person who in good faith first recorded it in the registry of property. Unfortunately, the registration made by Zenaida (Tan) Reyes of her deed of sale was not in good faith. For this reason in accordance with the same Article 1544, the land shall pertain to the person who in good faith was first in possession. There is no question that it is the Gabriels who are in possession of the land."
Unsatisfied, spouses Mabanta and Zenaida Tan-Reyes interposed an appeal to the Court of Appeals.
On March 30, 1999, the Court of Appeals rendered a Decision modifying the trial court’s Decision, declaring as valid the second sale of the lot covered by TCT No. 72707 between spouses Mabanta and Zenaida Tan-Reyes on the ground that a person dealing with registered land may simply rely on the correctness of the certificate of title and, in the absence of anything to engender suspicion, he is under no obligation to look beyond it. The dispositive portion of the Appellate Court’s Decision reads:
"Wherefore the appealed judgment is AFFIRMED with the following modification:
1. DECLARING Exhibit "A", the deed of sale with assumption of mortgage executed by the defendants-appellants spouses Pablo Mabanta and Escolastica Colobong over lots covered by TCT Nos. T-72705 and T-72707 valid and subsisting;
2. Ordering spouses Pablo Mabanta and Escolastica Colobong to surrender TCT No. 72705 to plaintiff-appellee Alejandro Gabriel;
3. Declaring the deed of sale executed over lot with TCT No. 72707 (now T-160391) by spouses Pablo Mabanta and Escolastica Colobong in favor of intervenor-appellant Zenaida Tan Reyes as valid;
4. Ordering plaintiffs-appellees and any all persons claiming rights under them to vacate Lot 3651-A now covered by TCT No. T-160391 and to deliver to intervenor-appellant Zenaida Tan-Reyes the possession thereof;
5. Dismissing the case against defendants-appellants Benito Tan and Purita Masa;
6. No pronouncement as to costs.
"SO ORDERED."
In the instant petition for review on certiorari, petitioners Alejandro and Alfredo Gabriel raise this lone issue:
WHETHER OR NOT THE COURT OF APPEALS ERRED IN DECLARING THE SECOND SALE OF THE DISPUTED LOT EXECUTED BY SPOUSES MABANTA IN FAVOR OF ZENAIDA TAN-REYES VALID UNDER ARTICLE 1544 OF THE CIVIL CODE.
Petitioners contend that respondent Reyes is not a purchaser in good faith since she bought the disputed lot with the knowledge that petitioner Alejandro is claiming it in a previous sale.
In her comment on the petition, respondent Reyes maintains that the Court of Appeals’ factual finding that she is a purchaser in good faith and for value is final and conclusive. Meeting the issue head on, she claims that there is no evidence that prior to August 21, 1985, when she purchased the lot from respondent spouses Mabanta, she had knowledge of any previous lien or encumbrance on the property.
For its part, respondent DBP avers that it acted in utmost good faith in releasing the mortgaged lots to respondent spouses Mabanta who had the loan restructured and paid the same. Also, it did not transact business with spouses Tan.
With respect to respondent spouses Mabanta, this Court’s Resolution dated June 14, 2000 requiring them to file comment on the present petition was returned unserved. Thus, in its Resolution dated January 22, 2001, this Court resolved to consider the Resolution of June 14, 2000 "deemed served" upon them.10
The petition is impressed with merit.
The issue for our resolution is whether or not respondent Zenaida Tan-Reyes acted in good faith when she purchased the subject lot and had the sale registered.
Settled is the principle that this Court is not a trier of facts. In the exercise of its power of review, the findings of fact of the Court of Appeals are conclusive and binding and consequently, it is not our function to analyze or weigh evidence all over again.11 This rule, however, is not an iron-clad rule.12 In Floro vs. Llenado,13 we enumerated the various exceptions and one which finds application to the present case is when the findings of the Court of Appeals are contrary to those of the trial court.
We start first with the applicable law.
Article 1544 of the Civil Code provides:
"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 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 possession; and, in the absence thereof; to the person who presents the oldest title, provided there is good faith."
Otherwise stated, where it is an immovable property that is the subject of a double sale, ownership shall be transferred (1) to the person acquiring it who in good faith first recorded it in the Registry of Property; (2) in default thereof, to the person who in good faith was first in possession; and (3) in default thereof, to the person who presents the oldest title, provided there is good faith.14 The requirement of the law then is two-fold: acquisition in good faith and registration in good faith.15 The rationale behind this is well-expounded in Uraca vs. Court of Appeals,16 where this Court held:
"Under the foregoing, the prior registration of the disputed property by the second buyer does not by itself confer ownership or a better right over the property. Article 1544 requires that such registration must be coupled with good faith. Jurisprudence teaches us that "(t)he governing principle is primus tempore, potior jure (first in time, stronger in right). Knowledge gained by the first buyer of the second sale cannot defeat the first buyer’s right except where the second buyer registers in good faith the second sale ahead of the first, as provided by the Civil Code. Such knowledge of the first buyer does not bar her from availing of her rights under the law, among them, to register first her purchase as against the second buyer. But in converso, knowledge gained by the second buyer of the first sale defeats his right even if he is first to register the second sale, since such knowledge taints his prior registration with bad faith. This is the price exacted by Article 1544 of the Civil Code for the second buyer being able to displace the first buyer, that before the second buyer can obtain priority over 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 right) – from the time of acquisition until the title is transferred to him by registration or failing registration, by delivery of possession." (Emphasis supplied)
In the case at bar, certain pieces of evidence, put together, would prove that respondent Reyes is not a buyer in good faith. The records show that on August 18, 1985, spouses Mabanta offered to her for sale the disputed lot. They told her it was mortgaged with respondent DBP and that she had to pay the loan if she wanted to buy it.17 She readily agreed to such a condition. The following day, her father Benito Tan, accompanied by barangay official Tridanio, went to petitioner Alejandro’s house offering to return to him the P5,000.00 he had paid to spouses Mabanta. Tan did not suggest to return the 500-square meter lot petitioner delivered to Susana Soriano.18 For this reason, petitioner refused Tan’s offer and even prohibited him from going to respondent DBP. We quote the following testimony of petitioner who, despite his blindness as shown by the records, testified to assert his right, thus:
"ATTY. CHANGALE:
Q What can you say to that statement?
A That is their mistake, sir.
Q Why do you say that is their mistake?
A Because her husband and Tridanio went at home offering to return the money but I did not accept, sir.
Q Who is this Benito Tan you are referring to?
A The husband of Pura Masa, sir.
Q What is the relationship with the intervenor Zenaida Tan?
A The daughter, sir.
Q When did Benito Tan together with Councilman Tridanio came?
A Before they went to the Development Bank of the Philippines they came at home and I prohibit them, sir.
Q How did you prohibit them?
A No, I said please I am just waiting for the Bank to inspect then I will pay my obligation.
x x x x x x x x x
Q You stated earlier that you will just pay the payments. What are those payments you are referring to?
A The payment I have given to Colobong and to the Bank, sir. They do not want to return the payment I have given to Susana Soriano and that is the beginning of our quarrel."19
We are thus convinced that respondent Reyes had knowledge that petitioner previously bought the disputed lot from respondent spouses Mabanta. Why should her father approach petitioner and offer to return to him the money he paid spouses Mabanta? Obviously, aware of the previous sale to petitioner, respondent Reyes informed her father about it. At this juncture, it is reasonable to conclude that what prompted him to go to petitioner’s house was his desire to facilitate his daughter’s acquisition of the lot, i.e., to prevent petitioner Alejandro from contesting it. He did not foresee then that petitioner would insist he has a prior right over the lot.
Now respondent Reyes claims that she is a purchaser in good faith. This is preposterous. Good faith is something internal. Actually, it is a question of intention. In ascertaining one’s intention, this Court must rely on the evidence of one’s conduct and outward acts. From her actuations as specified above, respondent Reyes cannot be considered to be in good faith when she bought the lot.
Moreover, it bears noting that on September 16, 1985, both petitioners filed with the trial court their complaint involving the lot in question against respondents. After a month, or on October 17, 1985, respondent Reyes had the "Deed of Absolute Sale" registered with the Registry of Property. Evidently, she wanted to be the first one to effect its registration to the prejudice of petitioners who, although in possession, have not registered the same. This is another indicum of bad faith.
We have consistently held that "in cases of double sale of immovables, what finds relevance and materiality is not whether or not the second buyer was a buyer in good faith but whether or not said second buyer registers such second sale in good faith, that is, without knowledge of any defect in the title of the property sold."20 In Salvoro vs. Tanega,21 we had the occasion to rule that:
"If a vendee in a double sale registers the sale after he has acquired knowledge that there was a previous sale of the same property to a third party or that another person claims said property in a previous sale, the registration will constitute a registration in bad faith and will not confer upon him any right."
Mere registration of title is not enough, good faith must concur with the registration. To be entitled to priority, the second purchaser must not only establish prior recording of his deed, but must have acted in good faith, without knowledge of the existence of another alienation by the vendor to the other.22 In the old case of Leung Yee vs. F. L. Strong Machinery, Co. and Williamson, this Court ruled:
"One who purchases a real estate with knowledge of a defect of title in his vendor cannot claim that he has acquired title thereto in good faith as against the true owner of the land or of an interest therein; and the same rule must be applied to one who has knowledge of facts which should have put him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the title of his vendor. A purchaser cannot close his eyes to facts which should put a reasonable man upon his guard, and then claim that he acted in good faith under the belief that there was no defect in the title of the vendor. His mere refusal to believe that such a defect exists, or his willful closing of his eyes to the possibility of the existence of a defect in his vendor’s title will not make him an innocent purchaser for value, if it afterwards develops that the title was in fact defective, and it appears that he had such notice of the defect as would have led to its discovery had he acted with that measure of precaution which may reasonably be required of a prudent man in a like situation. x x x "23
In fine, we hold that respondent Zenaida Tan-Reyes did not act in good faith when she bought the lot and had the sale registered.
WHEREFORE, the assailed Decision of the Court of Appeals is REVERSED and SET ASIDE. The Decision of the trial court is hereby reinstated.
SO ORDERED.
Puno, (Chairman), Panganiban, Corona, and Carpio-Morales, JJ., concur.
Footnotes
1 Rollo, at 118-134, penned by Justice Ruben T. Reyes and concurred in by Justice Salome A. Montoya (retired) and Justice Eloy R. Bello, Jr.
2 Rollo at 59-78, penned by Judge Fe Albano Madrid.
3 Records at 46.
4 Exhibit "B", Folder of Exhibits.
5 Records at 6.
6 Exhibit "D", Folder of Exhibits.
7 TSN, August 26, 1987, at 57. See also Exhibits "E"; "E-1"; E-2" and "F", id.
8 Exhibit "3", id.
9 Rollo at 47.
10 Id. at 190.
11 Alipoon vs. Court of Appeals, G.R. No. 127523, March 22, 1999, 305 SCRA 118.
12 Borlongan vs. Madrideo, G.R. No. 120267, January 25, 2000, 323 SCRA 248.
13 G.R. No. 75723, June 2, 1995, 244 SCRA 713, citing Remalante vs. Tibe, G.R. No. L-59514, February 25, 1988,158 SCRA 138; Banaag vs. Bartolome, G.R. No. 76245, December 20, 1991, 204 SCRA 924; Tongson vs. Court of Appeals, G.R. No. 77104, November 6, 1992, 215 SCRA 426; Geronimo vs. Court of Appeals, G.R. No. 105540, July 3, 1993, 224 SCRA 494.
14 Balatbat vs. Court of Appeals, G.R. No. 109410, August 28, 1996, 261 SCRA 128, 141; Radiowealth Finance Co. vs. Palileo, G.R. No. 83432, May 20, 1991, 197 SCRA 245, 246.
15 Martinez vs. Court of Appeals, G.R. No. 123547, May 21, 2001, 358 SCRA 38.
16 G.R. No. 115158, September 5, 1997, 278 SCRA 702.
17 TSN, July 6, 1989, at 17-18.
18 TSN, December 14, 1990, at 27-30.
19 Id. at 28-29.
20 Bayoca vs. Nogales, G.R. No. 138201, September 12, 2000, 340 SCRA 154, 166; Coronel vs. Court of Appeals, G.R. No. 103577, October 7, 1996, 263 SCRA 15, 38.
21 G.R. No. L-32988, December 29, 1978, 87 SCRA 349.
22 Martinez vs. Court of Appeals, supra; Bautista vs. Court of Appeals, G.R. No. 106042, February 28, 1994, 230 SCRA 446.
23 37 Phil. 644 (1918).
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
GR. No. 101236 January 30, 1992
JULIANA P. YAP, petitioner,
vs.
MARTIN PARAS and ALFREDO D. BARCELONA, SR., Judge of the 3rd MTC of Glan Malapatan, South Cotabato, respondents.
Mariano C. Alegarbes for petitioner.
Public Attorney's Office for private respondent.
CRUZ, J.:
This is still another dispute between brother and sister over a piece of property they inherited from their parents. The case is complicated by the circumstance that the private respondent's counsel in this petition is the son of the judge, the other respondent, whose action is being questioned.
Petitioner Juliana P. Yap was the sister of private respondent Martin Paras.*
On October 31, 1971, according to Yap, Paras sold to her his share in the intestate estate for P300.00. The sale was evidenced by a private document. Nineteen years later, on May 2, 1990, Paras sold the same property to Santiago Saya-ang for P5,000.00. This was evidenced by a notarized Deed of Absolute Sale.
When Yap learned of the second sale, she filed a complaint for estafa against Paras and Saya-ang with the Office of the Provincial Prosecutor of General Santos City. 1 On the same date, she filed a complaint for the nullification of the said sale with the Regional Trial Court of General Santos City. 2
After investigation, the Provincial Prosecutor instituted a criminal complaint for estafa against Paras with the Municipal Circuit Trial Court of Glan-Malapatan, South Cotabato, presided by Judge Alfredo D. Barcelona, Sr.
On April 17, 1991, before arraignment of the accused, the trial judge motu proprio issued an order dismissing the criminal case on the ground that:
. . . after a careful scrutiny of the statements of complainant, Juliana P. Yap and of the respondent Martin Paras and his witnesses, the Court holds and maintained (sic) that there is a prejudicial question to a civil action, which must be ventilated in the proper civil court. In the case of Ras vs. Rasul, 100 SCRA 125, the Supreme Court had already made a pronouncement that "a criminal action for Estafa for alleged double sale of property is a prejudicial question to a civil action for nullity of the alleged Deed of Sale and defense of the alleged vendors of forgeries of their signatures to the Deed." 3
The Petitioner moved for reconsideration, which was denied on April 30, 1990. She then came to this Court for relief in this special civil action for certiorari.
The Court could have referred this petition to the Court of Appeals, which has concurrent jurisdiction under BP 129, but decided to resolve the case directly in view of the peculiar circumstances involved.
The petitioner's contention is that where there is a prejudicial question in a civil case, the criminal action may not be dismissed but only suspended. Moreover, this suspension may not be done motu proprio by the judge trying the criminal case but only upon petition of the defendant in accordance with the Rules of Court. It is also stressed that a reversal of the order of dismissal would not bar the prosecution of the accused under the double jeopardy rule because he has not yet been arraigned.
The Court notes that the counsel for private respondent Paras who filed the comment in his behalf is the son and namesake of Judge Barcelona. Atty. Alfredo L. Barcelona, Jr. is employed in the Public Attorney's Office. He has made it of record that he was not the counsel of Paras at the time the questioned order of dismissal was issued by his father. He thus impliedly rejects the charge of bias against his father.
Perhaps out of filial loyalty, Atty. Barcelona suggests there may have been a basis for the order in view of the alleged double sale of the property which was being litigated in the regional trial court. He concedes, however, that the order may have been premature and that it could not have been issued motu proprio. Agreeing that double jeopardy would not attach because of the lack of arraignment, he asks that his Comment be considered a motion for the suspension of the criminal action on the ground of prejudicial question.
The Court has deliberated on the issues and finds that the respondent judge did indeed commit grave abuse of discretion in motu proprio issuing the order of dismissal.
Section 6, Rule 111 of the 1985 Rules on Criminal Procedure as amended by this Court on July 7, 1988, provides as follows:
Sec. 6. Suspension by reason of prejudicial question. — A petition for suspension of the criminal action based upon the pendency of a prejudicial question in a civil action may be filed in the office of the fiscal or the court conducting the preliminary investigation. When the criminal action has been filed in court for trial, the petition to suspend shall be filed in the same criminal action at any time before the prosecution rests.
Judge Barcelona's precipitate action is intriguing, to say the least, in light of the clear provision of the above-quoted rule. The rule is not even new, being only a rewording of the original provision in the Rules of Court before they were amended. It plainly says that the suspension may be made only upon petition and not at the instance of the judge alone, and it also says suspension, and not dismissal. One also wonders if the person who notarized the disputed second sale, Notary Public Alexander C. Barcelona, might be related to the respondent judge.
But more important than the preceding considerations is the trial judge's misapprehension of the concept of a prejudicial question.
Section 5, Rule 111 of the 1985 Rules on Criminal Procedure as amended provides:
Sec. 5. Elements of prejudicial question. — The two (2) essential elements of a prejudicial question are: (a) the civil action involves an issue similar or intimately related to the issue raised in the criminal action; and (b) the resolution of such issue determines whether or not the criminal action may proceed.
A prejudicial question is defined as that which arises in a case the resolution of which is a logical antecedent of the issue involved therein, and the congnizance of which pertains to another tribunal. The prejudicial question must be determinative of the case before the court but the jurisdiction to try and resolve the question must be lodged in another court or tribunal. 4 It is a question based on a fact distinct and separate from the crime but so intimately connected with it that it determines the guilt or innocence of the accused. 5
We have held that "for a civil case to be considered prejudicial to a criminal action as to cause the suspension of the criminal action pending the determination of the civil action, it must appear not only that the civil case involves the same facts upon which the criminal prosecution is based, but also that the resolution of the issues raised in said civil action would be necessarily determinative of the guilt or innocence of the accused". 6
It is the issue in the civil action that is prejudicial to the continuation of the criminal action, not the criminal action that is prejudicial to the civil action.
The excerpt quoted by the respondent judge in his Order does not appear anywhere in the decision of Ras v. Rasul. 7 Worse, he has not only misquoted the decision but also wrongly applied it. The facts of that case are not analogous to those in the case at bar.
In that case, Ras allegedly sold to Pichel a parcel of land which he later also sold to Martin. Pichel brought a civil action for nullification of the second sale and asked that the sale made by Ras in his favor be declared valid. Ras's defense was that he never sold the property to Pichel and his purported signatures appearing in the first deed of sale were forgeries. Later, an information for estafa was filed against Ras based on the same double sale that was the subject of the civil action. Ras filed a "Motion for Suspension of Action" (that is, the criminal case), claiming that the resolution of the issues in the civil case would necessarily be determinative of his guilt or innocence.
Through then Associate Justice Claudio Teehankee, this Court ruled that a suspension of the criminal action was in order because:
On the basis of the issues raised in both the criminal and civil cases against petitioner and in the light of the foregoing concepts of a prejudicial question, there indeed appears to be a prejudicial question in the case at bar, considering that petitioner Alejandro Ras' defense (as defendant) in Civil Case No. 73 of the nullity and forgery of the alleged prior deed of sale in favor of Luis Pichel (plaintiff in the civil case and complaining witnesses in the criminal case) is based on the very same facts which would be necessarily determinative of petitioner Ras' guilt or innocence as accused in the criminal case. If the first alleged sale in favor of Pichel is void or fictitious, then there would be no double sale and petitioner would be innocent of the offense charged. A conviction in the criminal case (if it were allowed to proceed ahead) would be a gross injustice and would have to be set aside if it were finally decided in the civil action that indeed the alleged prior deed of sale was a forgery and spurious.
xxx xxx xxx
The petitioner Alejandro Ras claims in his answer to the complaint in Civil Case No. 73 that he had never sold the property in litigation to the plaintiff (Luis Pichel) and that his signatures in the alleged deed of sale and that of his wife were forged by the plaintiff. It is, therefore, necessary that the truth or falsity of such claim be first determined because if his claim is true, then he did not sell his property twice and no estafa was committed. The question of nullity of the sale is distinct and separate from the crime of estafa (alleged double sale) but so intimately connected with it that it determines the guilt or innocence of herein petitioner in the criminal action.
In the Ras case, there was a motion to suspend the criminal action on the ground that the defense in the civil case — forgery of his signature in the first deed of sale — had to be threshed out first. Resolution of that question would necessarily resolve the guilt or innocence of the accused in the criminal case. By contrast, there was no motion for suspension in the case at bar; and no less importantly, the respondent judge had not been informed of the defense Paras was raising in the civil action. Judge Barcelona could not have ascertained then if the issue raised in the civil action would determine the guilt or innocence of the accused in the criminal case.
It is worth remarking that not every defense raised in the civil action will raise a prejudicial question to justify suspension of the criminal action. The defense must involve an issue similar or intimately related to the same issue raised in the criminal action and its resolution should determine whether or not the latter action may proceed.
The order dismissing the criminal action without a motion for suspension in accordance with Rule 111, Section 6, of the 1985 Rules on Criminal Procedure as amended, and even without the accused indicating his defense in the civil case for the annulment of the second sale, suggests not only ignorance of the law but also bias on the part of the respondent judge.
Judge Alfredo D. Barcelona, Sr. is sternly reminded that under the Code of Judicial Conduct, "a judge shall be faithful to the law and maintain professional competence" and "should administer justice impartially." He is hereby reprimanded for his questionable conduct in the case at bar, with the warning that commission of similar acts in the future will be dealt with more severely.
WHEREFORE, the petition is GRANTED. The Order issued by Judge Alfredo D. Barcelona, Sr. dated April 17, 1991, dismissing Criminal Case No. 1902-G, and the Order dated April 30, 1991, denying the motion for reconsideration, are REVERSED and SET ASIDE. Criminal Case No. 1902-G is ordered REINSTATED for further proceedings, but to be assigned to a different judge.
SO ORDERED.
Narvasa, C.J., Griño-Aquino and Medialdea, JJ., concur.
Footnotes
* She died pendente lite on September 2, 1991, and was by resolution of the Court dated January 13, 1991, substituted by her children, Ruperto, Rustico, Ignacio, Rogelio, Arsenio, Jr., all surnamed Yap, Rainilda Yap Breta, and the children of the deceased Teodora Yap Cuaycong.
1 Rollo, p. 8.
2 Ibid., p. 13.
3 Id., pp. 30-31.
4 People vs. Aragon, 94 Phil. 357; Merced vs. Diez, 109 Phil. 155; Zapanta vs. Montesa, 114 Phil. 428; Fortich-Celdran vs. Celdran, 19 SCRA 502.
5 De Leon vs. Mabanag, 70 Phil. 202; Mendiola vs. Macadaeg, 1 SCRA 593.
6 Ras vs. Rasul, 100 SCRA 125; Mendiola vs. Macadaeg, supra.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 83432 May 20, 1991
RADIOWEALTH FINANCE COMPANY, petitioner,
vs.
MANUELITO S. PALILEO, respondent.
Rolando A. Calang for petitioner.
Sisenando Villaluz, Sr. for respondent.
GANCAYCO, J.:p
If the same piece of land was sold to two different purchasers, to whom shall ownership belong? Article 1544 of the Civil Code provides that in case of double sale of an immovable property, ownership shall be transferred: (1) to the person acquiring it who in good faith first recorded it in the Registry of Property; (2) in default thereof, to the person who in good faith was first in possession; and (3) in default thereof, to the person who presents the oldest title, provided there is good faith. There is no ambiguity regarding the application of the law with respect to lands registered under the Torrens System. Section 51 of Presidential Decree No. 1529 (amending Section 50 of Act No. 496 clearly provides that the act of registration is the operative act to convey or affect registered lands insofar as third persons are concerned. Thus, a person dealing with registered land is not required to go behind the register to determine the condition of the property. He is only charged with notice of the burdens on the property which are noted on the face of the register or certificate of title. 1 Following this principle, this Court has time and again held that a purchaser in good faith of registered land (covered by a Torrens Title) acquires a good title as against all the transferees thereof whose right is not recorded in the registry of deeds at the time of the sale. 2
The question that has to be resolved in the instant petition is whether or not the rule provided in Article 1544 of the Civil Code as discussed above, is applicable to a parcel of unregistered land purchased at a judicial sale. To be more specific, this Court is asked to determine who, as between two buyers of unregistered land, is the rightful owner—the first buyer in a prior sale that was unrecorded, or the second buyer who purchased the land in an execution sale whose transfer was registered in the Register of Deeds.
The facts as found by the Court of Appeals are as follows:
On April 13, 1970, defendant spouses Enrique Castro and Herminia R. Castro sold to plaintiff-appellee Manuelito Palileo (private respondent herein), a parcel of unregistered coconut land situated in Candiis, Mansayaw, Mainit, Surigao del Norte. The sale is evidenced by a notarized Deed of Absolute Sale (Exh. "E"). The deed was not registered in the Registry of Property for unregistered lands in the province of Surigao del Norte. Since the execution of the deed of sale, appellee Manuelito Palileo who was then employed at Lianga Surigao del Sur, exercised acts of ownership over the land through his mother Rafaela Palileo, as administratrix or overseer. Appellee has continuously paid the real estate taxes on said land from 1971 until the present (Exhs. "C" to "C-7", inclusive).
On November 29, 1976, a judgment was rendered against defendant Enrique T. Castro, in Civil Case No. 0103145 by the then Court of First Instance of Manila, Branch XIX, to pay herein defendant-appellant Radiowealth Finance Company (petitioner herein), the sum of P22,350.35 with interest thereon at the rate of 16% per annum from November 2, 1975 until fully paid, and the further sum of P2,235.03 as attorney's fees, and to pay the costs. Upon the finality of the judgment, a writ of execution was issued. Pursuant to said writ, defendant provincial Sheriff Marietta E. Eviota, through defendant Deputy Provincial Sheriff Leopoldo Risma, levied upon and finally sold at public auction the subject land that defendant Enrique Castro had sold to appellee Manuelito Palileo on April 13,1970. A certificate of sale was executed by the Provincial Sheriff in favor of defendant- appellant Radiowealth Finance Company, being the only bidder. After the period of redemption has (sic) expired, a deed of final sale was also executed by the same Provincial Sheriff. Both the certificate of sale and the deed of final sale were registered with the Registry of Deeds. 3
Learning of what happened to the land, private respondent Manuelito Palileo filed an action for quieting of title over the same. After a trial on the merits, the court a quo rendered a decision in his favor. On appeal, the decision of the trial court was affirmed. Hence, this petition for review on certiorari.
In its petition, Radiowealth Finance Company presents the following errors:
1. THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE DEED OF ABSOLUTE SALE (EXHIBIT B) ALLEGEDLY EXECUTED BY ENRIQUE CASTRO IN FAVOR OF APPELLEE MANUELITO PALILEO, WAS SIMULATED OR FICTITIOUS.
2. THE COURT OF APPEALS ERRED IN NOT FINDING APPELLEE MANUELITO PALILEO AS ADMINISTRATOR ONLY OF THE DISPUTED PROPERTY; AND
3. THE COURT OF APPEALS ERRED IN NOT FINDING DEFENDANT-APPELLANT RADIOWEALTH FINANCE COMPANY OWNER OF THE DISPUTED PROPERTY BY REASON OF THE CERTIFICATE OF SALE AND THE DEED OF FINAL SALE WHICH WERE ALL REGISTERED IN THE REGISTER OF DEEDS, HENCE, SUPERIOR TO THAT OF THE DEED OF SALE IN POSSESSION OF MANUELITO PALILEO, FOR BEING NOT REGISTERED. 4
As regards the first and second assigned errors, suffice it to state that findings of fact of the Court of Appeals are conclusive on this Court and will not be disturbed unless there is grave abuse of discretion. The finding of the Court of Appeals that the property in question was already sold to private respondent by its previous owner before the execution sale is evidenced by a deed of sale. Said deed of sale is notarized and is presumed authentic. There is no substantive proof to support petitioner's allegation that the document is fictitious or simulated. With this in mind, We see no reason to reject the conclusion of the Court of Appeals that private respondent was not a mere administrator of the property. That he exercised acts of ownership through his mother also remains undisputed.
Going now to the third assigned error which deals with the main issue presented in the instant petition, We observe that the Court of Appeals resolved the same in favor of private respondent due to the following reason; what the Provincial Sheriff levied upon and sold to petitioner is a parcel of land that does not belong to Enrique Castro, the judgment debtor, hence the execution is contrary to the directive contained in the writ of execution which commanded that the lands and buildings belonging to Enrique Castro be sold to satisfy the execution. 5
There is no doubt that had the property in question been a registered land, this case would have been decided in favor of petitioner since it was petitioner that had its claim first recorded in the Registry of Deeds. For, as already mentioned earlier, it is the act of registration that operates to convey and affect registered land. Therefore, a bona fide purchaser of a registered land at an execution sale acquires a good title as against a prior transferee, if such transfer was unrecorded.
However, it must be stressed that this case deals with a parcel of unregistered land and a different set of rules applies. We affirm the decision of the Court of Appeals.
Under Act No. 3344, registration of instruments affecting unregistered lands is "without prejudice to a third party with a better right". The aforequoted phrase has been held by this Court to mean that the mere registration of a sale in one's favor does not give him any right over the land if the vendor was not anymore the owner of the land having previously sold the same to somebody else even if the earlier sale was unrecorded.
The case of Carumba vs. Court of Appeals 6 is a case in point. It was held therein that Article 1544 of the Civil Code has no application to land not registered under Act No. 496. Like in the case at bar, Carumba dealt with a double sale of the same unregistered land. The first sale was made by the original owners and was unrecorded while the second was an execution sale that resulted from a complaint for a sum of money filed against the said original owners. Applying Section 35, Rule 39 of the Revised Rules of Court, 7 this Court held that Article 1544 of the Civil Code cannot be invoked to benefit the purchaser at the execution sale though the latter was a buyer in good faith and even if this second sale was registered. It was explained that this is because the purchaser of unregistered land at a sheriffs execution sale only steps into the shoes of the judgment debtor, and merely acquires the latter's interest in the property sold as of the time the property was levied upon.
Applying this principle, the Court of Appeals correctly held that the execution sale of the unregistered land in favor of petitioner is of no effect because the land no longer belonged to the judgment debtor as of the time of the said execution sale.
WHEREFORE, in view of the foregoing, the decision of the Court of Appeals in CA-G.R. CV No. 10788 is hereby AFFIRMED. No costs.
SO ORDERED.
Narvasa, Cruz, Griño-Aquino and Medialdea, JJ., concur.
Footnotes
1 William H. Anderson & Co. vs. Garcia, 64 Phil. 506 (1937).
2 Vargas vs. Tancioco, 67 Phil. 308 (1939).
3 Pages 10-11, Rollo.
4 Page 5, Rollo.
5 Page 14, Rollo; Emphasis supplied.
6 31 SCRA 558 (1970).
7 The second paragraph of this provision states that: "Upon the execution and delivery of said deed the purchaser, or redemptioner, or his assignee, shall be substituted to and acquired all the right, title, interest and claim of the judgment debtor to the property as of the time of the levy, except as against the judgment debtor in possession, in which case the substitution shall be effective as of the time of the deed. . . ." (Emphasis supplied.)
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. Nos. L-50441-42 September 18, 1980
ALENJANDRO RAS, petitioner,
vs.
HON. JAINAL D. RASUL, District Judge of the Court of First Instance of Basilan, and PEOPLE OF THE PHILIPPINES, respondents.
TEEHANKEE, J.:
This is a petition brought by the petitioner to review and set aside the order of respondent Judge dated December 12, 1978 in Criminal Case No. 240 of the Court of First Instance of Basilan denying petitioner's motion as accused therein to suspend proceedings due to the existence of a prejudicial question in Civil Case No. 73 of the same court. Finding the petition and the Solicitor General's concurrence therewith to be meritorious, this Court hereby grants the petition and accordingly sets aside the questioned order and hereby enjoins the respondent Judge from further proceeding with Criminal Case No. 73 until Civil Case No. 240 is finally decided and terminated.
A chronological statement of the antecedent facts follows:
On or about April 27, 1978, Luis Pichel filed a complaint against petitioner Alejandro Ras and a certain Bienvenido Martin before the Court of First Instance of Basilan, docketed therein as Civil Case No. 73 praying for the nullification of the deed of sale executed by Alejandro Ras in favor of his codefendant Bienvenido Martin and for the declaration of the prior deed of sale allegedly executed in his favor by the defendant Alejandro Ras as valid.
In their answer, the defendants (the Ras spouses) alleged that they never sold the property to Pichel and that the signatures appearing in the deed of sale in favor of plaintiff Pichel (in Civil Case No. 73) were forgeries and that therefore the alleged deed of sale in Pichel's favor sought to be declared valid was fictitious and inexistent.
While Civil Case No. 73 was being tried before the Court of First Instance of Basilan, the Provincial Fiscal of Basilan filed on or about September 5, 1978 an Information for Estafa in the same court against Alejandro Ras arising from the same alleged double sale subject matter of the civil complaint filed by Luis Pichel. The case was docketed as Criminal Case No. 240 of the Court of First Instance of Basilan.
On November 6, 1978, petitioner, through counsel, filed a "Motion for Suspension of Action" in said Criminal Case No. 240 claiming that the same facts and issues were involved in both the civil and criminal case and that the resolution of the issues in the civil case would necessarily be determinative of the guilt or innocence of the accused.
The Provincial Fiscal of Basilan filed his opposition on December 4, 1978.
In his Order of December 12, 1978, the respondent judge saw no prejudicial question and accordingly denied the motion. Hence, the present petition.
A prejudicial question is defined as that which arises in a case the resolution of which is a logical antecedent of the issue involved therein, and the cognizance of which pertains to another tribunal. The prejudicial question must be determinative of the case before the court but the jurisdiction to try and resolve the question must be lodged in another court or tribunal 1 It is a question based on a fact distinct and separate from the crime but so intimately connected with it that it determines the guilt or innocence of the accused. 2
For a civil case to be considered prejudicial to a criminal action as to cause the suspension of the criminal action pending the determination of the civil, it must appear not only that the civil case involves the same facts upon which the criminal pro. prosecution is based, but also that the resolution of the issues raised in said civil action would be necessary determinative of the guilt or innocence of the accused. 3
On the basis of the issues raised in both the criminal and civil cases against petitioner and in the light of the foregoing concepts of a prejudicial question, there indeed appears to be a prejudicial question in the case at bar, considering that petitioner Alejandro Ras' defense (as defendant) in Civil Case No. 73 of the nullity and forgery of the alleged prior deed of sale in favor of Luis Pichel (plaintiff in the civil case and complaining witness in the criminal case) is based on the very same facts which would be necessarily determinative of petitioner Ras' guilt or innocence as accused in the criminal case. If the first alleged sale in favor of Pichel is void or fictitious, then there would be no double sale and petitioner would be innocent of the offense charged. A conviction in the criminal case (if it were allowed to proceed ahead) would be a gross injustice and would have to be set aside if it were finally decided in the civil action that indeed the alleged prior deed of sale was a forgery and spurious.
The Solicitor General in his comment expressed his concurrence with the petition thus: "The petitioner Alejandro Ras claims in his answer to the complaint in Civil Case No. 73 that he had never sold the property in litigation to the plaintiff (Luis Pichel) and that his signatures in the alleged deed of and that of his wife were forged by the plaintiff. It is, therefore, necessary that the truth or falsity of such claim be first determined because if his claim is true, then he did not sell his property twice and no estafa was committed. The question of nullity of the sale is distinct and from the crime of estafa (alleged double sale) but so intimately connected with it that it determines the guilt or innocence of herein petitioner in the c action."
Wherefore, the Order of respondent judge in Criminal Case No. 240 dated December 12, 1978 is hereby set aside. The temporary restraining order issued by this Court on May 16, 1979 is hereby made permanent and respondent judge is enjoined from proceeding with the arraignment and trial of Criminal Case No. 240 until and unless Civil Case No. 73 shall have been finally decided and terminated adversely against petitioner. No costs.
Makasiar, Fernandez, Guerrero and Melencio-Herrera, JJ., concur.
Footnotes
1 Rojas vs. People, 57 SCRA 246; People vs. Aragon, 94 Phil. 357; See also Zapanta vs. Montessa, 4 SCRA 510.
2 Benitez vs. Concepcion, 2 SCRA 178.
3 Mendiola vs. Macadaeg, 1 SCRA 593.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-19248 February 28, 1963
ILUMINADO HANOPOL, plaintiff-appellant,
vs.
PERFECTO PILAPIL, defendant-appellee.
Jesus P. Narvios for plaintiff-appellant.
Estacion & Paltriquerra for defendant-appellee.
BARRERA, J.:
This is a case of double sale of the same parcel of unregistered land decided by the Court of First Instance of Leyte (Civil Case No. 21) in favor of defendant-appellee Perfecto Pilapil, originally appealed by plaintiff-appellant Iluminado Hanopol to the Court of Appeals, but later certified to this Court for proper adjudication, the issues involved being exclusively of law.
Appellant Hanopol claims ownership of the land by virtue of a series of purchases effected in 1938 by means of private instruments, executed by the former owners Teodora, Lucia, Generosa, Sinforosa and Isabelo, all surnamed Siapo. Additionally, he invokes in his favor a decision rendered by the Court of First Instance of Leyte (in Civil Case No. 412) on a complaint he filed on June 16, 1948, against the same vendors, who, according to his own averments, took possession of the said property in December, 1945 through fraud, threat and intimidation, pretending falsely to be the owners thereof and ejecting the tenants of Hanopol thereon, and since then had continued to possess the land. Decision declaring him the exclusive owner of the land in question and ordering therein defendants to deliver possession thereof was rendered on September 21, 1958.
On the other hand, appellee Pilapil asserts title to the property on the strength of a duly notarized deed of sale executed in his favor by the same owners on December 3, 1945, which deed of sale was registered in the Registry of Deeds of Leyte on August 20, 1948 under the provisions of Act No. 3344.
Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and approved by this Honorable Court, without prejudice to the parties adducing other evidence to prove their case not covered by this stipulation of facts. 1äwphï1.ñët
The case was submitted for decision without any testimonial evidence, both parties relying exclusively on their documentary evidence consisting, on the part of Hanopol, of the private instruments alluded to and a copy of the decision in the reivindicatory case, and on the part of Pilapil, the notarized deed of sale in his favor bearing annotation of its registration under Act No. 3344. As thus submitted, the trial court rendered the decision adverted to at the beginning of this opinion, mainly upon the authority of the second paragraph of Article 15441 of the New Civil Code, which is a reproduction of Article 1473 of the old Civil Code, the law in force at the time the transaction in this case took place.
Appellant Hanopol in his appeal from the decision of the trial court presents two questions of law; firstly, whether or not the judgment in the former case No. 412 against the vendors Siapos is binding upon the defendant-appellee as their successor-in-interest; and secondly, whether or not the registration of the second deed of sale in favor of appellee Pilapil affects his right as the first vendee.
Under the first assignment of error, the appellant contends that inasmuch as appellee claims to be the successor-in-interest of the vendors, he is bound by the judgment rendered against the latter. This contention is without merit, because it appears from the documentary evidence that appellee Pilapil derived his right to the land from the sale to him of the said property on December 3, 1945, long before the filing of the complaint against the vendors in 1948. He was not made a party in the case against the Siapos, and there was not even a claim that he had knowledge of said litigation. He cannot, therefore, be bound by such judgment in view of the provision of paragraph (b), Section 44 of Rule 39 of the Rules of Court which speaks of the effect of judgment as follows:
... the judgment so ordered is, in respect to the matter directly adjudged, conclusive between the parties and their successors in interest by title subsequent to commencement of the action or special proceeding, litigating for the same thing and under the same title and in the same capacity. (Emphasis supplied)
Since Pilapil was not a party to the action and is not a successor-in-interest by title subsequent to the commencement of the action, having acquired his title in 1945 and the action filed in 1948, the decision in said case cannot be binding on him.
Appellant argues under the second issue raised by him that the registration of Pilapil's notarized deed of sale in 1948 under Act No. 3344 "shall be understood to be without prejudice to a third party with a better right". He contends that since at the time the Siapos sold the land in question in 1945 to Pilapil, the former were no longer the owners as they had already sold the same to appellant since 1938, the first sale to him is a better right which cannot be prejudiced by the registration of the second sale.
We do not think the quoted proviso in Act No. 3344 justifies appellant's contention. If his theory is correct, then the second paragraph of Article 1544 of the New Civil Code (formerly Article 1473 of the old Code) would have no application at all except to lands or real estate registered under the Spanish Mortgage Law or the Land Registration Act. Such a theory would thus limit the scope of that codal provision. But even if we adopt this latter view, that is, that Article 1544 (formerly Article 1473) only applies to registered land, still we cannot agree with the appellant that by the mere fact of his having a previous title or deed of sale, he has acquired thereby what is referred to in Act No. 3344 as the "better right" that would be unaffected by the registration of a second deed of sale under the same law. Under such theory, there would never be a case of double sale of the same unregistered property.
An example of what could be a better right that is protected against the inscription of a subsequent sale is given in the case of Lichauco v. Berenguer (39 Phil. 643). The facts in that case are succinctly stated in the syllabus thereof as follows:
....— In 1882 B sold to S a piece of land. After the sale B continued in the possession of the land in the capacity of lessee of S through payment of rent, and continued as such until his death when he was substituted by the administrator of his property. In 1889 B sold again the same piece of land to L who leased it to B himself under certain conditions. Both sales were executed in a public instrument, the one executed in favor of L being registered only in 1907. Thus, S and L acquired possession of the land through the same vendor upon the latter's ceasing to be the owner and becoming the lessee of said S and L, respectively. HELD: (1) That, with reference to the time prior to 1907, the preference should be in favor of the purchaser who first took possession of the land, because this possession, according to the law in force prior to the promulgation of the Civil Code, constituted the consummation of the contract, and also because afterwards the Civil Code expressly establishes that possession in such cases transfers the ownership of the thing sold. (2) That, when a person buys a piece of land and, instead of taking possession of it, leases it to the vendor, possession by the latter after the sale is possession by the vendee, and such possession, in case of a double sale, determines the preference in favor of the one who first took possession of it, in the absence of inscription, in accordance with the provision of article 1473 of the Civil Code, notwithstanding the material and personal possession by the second vendee. (Bautista vs. Sioson, 39 Phil. Rep., 615)
.... Because L had to receive his possession from B who was a mere lessee of S and as such had no possession to give, inasmuch as his possession was not for himself but in representation of S, it follows that L never possessed the land..
.... The effect which the law gives to the inscription of a sale against the efficacy of the sale which was not registered is not extended to other titles which the other vendee was able to acquire independently as, in this case, the title by prescription.
It thus appears that the "better right" referred to in Act No. 3344 is much more than the mere prior deed of sale in favor of the first vendee. In the Lichauco case just mentioned, it was the prescriptive right that had supervened. Or, as also suggested in that case, other facts and circumstances exist which, in addition to his deed of sale, the first vendee can be said to have better right than the second purchaser.
In the case at bar, there appears to be no clear evidence of Hanopol's possession of the land in controversy. In fact, in his complaint against the vendors, Hanopol alleged that the Siapos took possession of the same land under claim of ownership in 1945 and continued and were in such possession at the time of the filing of the complaint against them in 1948. Consequently, since the Siapos were in actual occupancy of the property under claim of ownership, when they sold the said land to appellee Pilapil on December 3, 1945, such possession was transmitted to the latter, at least constructively, with the execution of the notarial deed of sale, if not actually and physically as claimed by Pilapil in his answer filed in the present case. Thus, even on this score, Hanopol cannot have a better right than appellee Pilapil who, according to the trial court, "was not shown to be a purchaser in bad faith".
WHEREFORE, finding no error in the decision appealed from, the same is hereby affirmed, with costs against the appellant. So ordered.
Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Paredes, Dizon, Regala and Makalintal, JJ., concur.
Separate Opinions
REYES, J.B.L., J., concurring:
I concur, but reserve my vote as to the effect of registration under Act 3344.
Footnotes
1Art. 1544.
x x x x x x x x x
Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded in the Registry of Property.
x x x x x x x x x
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 170405 February 2, 2010
RAYMUNDO S. DE LEON, Petitioner,
vs.
BENITA T. ONG.1 Respondent.
D E C I S I O N
CORONA, J.:
On March 10, 1993, petitioner Raymundo S. de Leon sold three parcels of land2 with improvements situated in Antipolo, Rizal to respondent Benita T. Ong. As these properties were mortgaged to Real Savings and Loan Association, Incorporated (RSLAI), petitioner and respondent executed a notarized deed of absolute sale with assumption of mortgage3 stating:
x x x x x x x x x
That for and in consideration of the sum of ONE MILLION ONE HUNDRED THOUSAND PESOS (P1.1 million), Philippine currency, the receipt whereof is hereby acknowledged from [RESPONDENT] to the entire satisfaction of [PETITIONER], said [PETITIONER] does hereby sell, transfer and convey in a manner absolute and irrevocable, unto said [RESPONDENT], his heirs and assigns that certain real estate together with the buildings and other improvements existing thereon, situated in [Barrio] Mayamot, Antipolo, Rizal under the following terms and conditions:
1. That upon full payment of [respondent] of the amount of FOUR HUNDRED FIFTEEN THOUSAND FIVE HUNDRED (P415,000), [petitioner] shall execute and sign a deed of assumption of mortgage in favor of [respondent] without any further cost whatsoever;
2. That [respondent] shall assume payment of the outstanding loan of SIX HUNDRED EIGHTY FOUR THOUSAND FIVE HUNDRED PESOS (P684,500) with REAL SAVINGS AND LOAN,4 Cainta, Rizal… (emphasis supplied)
x x x x x x x x x
Pursuant to this deed, respondent gave petitioner P415,500 as partial payment. Petitioner, on the other hand, handed the keys to the properties and wrote a letter informing RSLAI of the sale and authorizing it to accept payment from respondent and release the certificates of title.
Thereafter, respondent undertook repairs and made improvements on the properties.5 Respondent likewise informed RSLAI of her agreement with petitioner for her to assume petitioner’s outstanding loan. RSLAI required her to undergo credit investigation.
Subsequently, respondent learned that petitioner again sold the same properties to one Leona Viloria after March 10, 1993 and changed the locks, rendering the keys he gave her useless. Respondent thus proceeded to RSLAI to inquire about the credit investigation. However, she was informed that petitioner had already paid the amount due and had taken back the certificates of title.
Respondent persistently contacted petitioner but her efforts proved futile.
On June 18, 1993, respondent filed a complaint for specific performance, declaration of nullity of the second sale and damages6 against petitioner and Viloria in the Regional Trial Court (RTC) of Antipolo, Rizal, Branch 74. She claimed that since petitioner had previously sold the properties to her on March 10, 1993, he no longer had the right to sell the same to Viloria. Thus, petitioner fraudulently deprived her of the properties.
Petitioner, on the other hand, insisted that respondent did not have a cause of action against him and consequently prayed for the dismissal of the complaint. He claimed that since the transaction was subject to a condition (i.e., that RSLAI approve the assumption of mortgage), they only entered into a contract to sell. Inasmuch as respondent did apply for a loan from RSLAI, the condition did not arise. Consequently, the sale was not perfected and he could freely dispose of the properties. Furthermore, he made a counter-claim for damages as respondent filed the complaint allegedly with gross and evident bad faith.
Because respondent was a licensed real estate broker, the RTC concluded that she knew that the validity of the sale was subject to a condition. The perfection of a contract of sale depended on RSLAI’s approval of the assumption of mortgage. Since RSLAI did not allow respondent to assume petitioner’s obligation, the RTC held that the sale was never perfected.
In a decision dated August 27, 1999,7 the RTC dismissed the complaint for lack of cause of action and ordered respondent to pay petitioner P100,000 moral damages, P20,000 attorney’s fees and the cost of suit.
Aggrieved, respondent appealed to the Court of Appeals (CA),8 asserting that the court a quo erred in dismissing the complaint.
The CA found that the March 10, 2003 contract executed by the parties did not impose any condition on the sale and held that the parties entered into a contract of sale. Consequently, because petitioner no longer owned the properties when he sold them to Viloria, it declared the second sale void. Moreover, it found petitioner liable for moral and exemplary damages for fraudulently depriving respondent of the properties.
In a decision dated July 22, 2005,9 the CA upheld the sale to respondent and nullified the sale to Viloria. It likewise ordered respondent to reimburse petitioner P715,250 (or the amount he paid to RSLAI). Petitioner, on the other hand, was ordered to deliver the certificates of titles to respondent and pay her P50,000 moral damages and P15,000 exemplary damages.
Petitioner moved for reconsideration but it was denied in a resolution dated November 11, 2005.10 Hence, this petition,11 with the sole issue being whether the parties entered into a contract of sale or a contract to sell.
Petitioner insists that he entered into a contract to sell since the validity of the transaction was subject to a suspensive condition, that is, the approval by RSLAI of respondent’s assumption of mortgage. Because RSLAI did not allow respondent to assume his (petitioner’s) obligation, the condition never materialized. Consequently, there was no sale.
Respondent, on the other hand, asserts that they entered into a contract of sale as petitioner already conveyed full ownership of the subject properties upon the execution of the deed.
We modify the decision of the CA.
Contract of Sale or Contract to Sell?
The RTC and the CA had conflicting interpretations of the March 10, 1993 deed. The RTC ruled that it was a contract to sell while the CA held that it was a contract of sale.
In a contract of sale, the seller conveys ownership of the property to the buyer upon the perfection of the contract. Should the buyer default in the payment of the purchase price, the seller may either sue for the collection thereof or have the contract judicially resolved and set aside. The non-payment of the price is therefore a negative resolutory condition.12
On the other hand, a contract to sell is subject to a positive suspensive condition. The buyer does not acquire ownership of the property until he fully pays the purchase price. For this reason, if the buyer defaults in the payment thereof, the seller can only sue for damages.13
The deed executed by the parties (as previously quoted) stated that petitioner sold the properties to respondent "in a manner absolute and irrevocable" for a sum of P1.1 million.14 With regard to the manner of payment, it required respondent to pay P415,500 in cash to petitioner upon the execution of the deed, with the balance15 payable directly to RSLAI (on behalf of petitioner) within a reasonable time.16 Nothing in said instrument implied that petitioner reserved ownership of the properties until the full payment of the purchase price.17 On the contrary, the terms and conditions of the deed only affected the manner of payment, not the immediate transfer of ownership (upon the execution of the notarized contract) from petitioner as seller to respondent as buyer. Otherwise stated, the said terms and conditions pertained to the performance of the contract, not the perfection thereof nor the transfer of ownership.
Settled is the rule that the seller is obliged to transfer title over the properties and deliver the same to the buyer.18 In this regard, Article 1498 of the Civil Code19 provides that, as a rule, the execution of a notarized deed of sale is equivalent to the delivery of a thing sold.
In this instance, petitioner executed a notarized deed of absolute sale in favor of respondent. Moreover, not only did petitioner turn over the keys to the properties to respondent, he also authorized RSLAI to receive payment from respondent and release his certificates of title to her. The totality of petitioner’s acts clearly indicates that he had unqualifiedly delivered and transferred ownership of the properties to respondent. Clearly, it was a contract of sale the parties entered into.
Furthermore, even assuming arguendo that the agreement of the parties was subject to the condition that RSLAI had to approve the assumption of mortgage, the said condition was considered fulfilled as petitioner prevented its fulfillment by paying his outstanding obligation and taking back the certificates of title without even notifying respondent. In this connection, Article 1186 of the Civil Code provides:
Article 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment.
Void Sale Or Double Sale?
Petitioner sold the same properties to two buyers, first to respondent and then to Viloria on two separate occasions.20 However, the second sale was not void for the sole reason that petitioner had previously sold the same properties to respondent. On this account, the CA erred.
This case involves a double sale as the disputed properties were sold validly on two separate occasions by the same seller to the two different buyers in good faith.
Article 1544 of the Civil Code provides:
Article 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 supplied)
This provision clearly states that the rules on double or multiple sales apply only to purchasers in good faith. Needless to say, it disqualifies any purchaser in bad faith.
A purchaser in good faith is one who buys the property of another without notice that some other person has a right to, or an interest in, such property and pays a full and fair price for the same at the time of such purchase, or before he has notice of some other person’s claim or interest in the property.21 The law requires, on the part of the buyer, lack of notice of a defect in the title of the seller and payment in full of the fair price at the time of the sale or prior to having notice of any defect in the seller’s title.
Was respondent a purchaser in good faith? Yes.
Respondent purchased the properties, knowing they were encumbered only by the mortgage to RSLAI. According to her agreement with petitioner, respondent had the obligation to assume the balance of petitioner’s outstanding obligation to RSLAI. Consequently, respondent informed RSLAI of the sale and of her assumption of petitioner’s obligation. However, because petitioner surreptitiously paid his outstanding obligation and took back her certificates of title, petitioner himself rendered respondent’s obligation to assume petitioner’s indebtedness to RSLAI impossible to perform.
Article 1266 of the Civil Code provides:
Article 1266. The debtor in obligations to do shall be released when the prestation become legally or physically impossible without the fault of the obligor.
Since respondent’s obligation to assume petitioner’s outstanding balance with RSLAI became impossible without her fault, she was released from the said obligation. Moreover, because petitioner himself willfully prevented the condition vis-à-vis the payment of the remainder of the purchase price, the said condition is considered fulfilled pursuant to Article 1186 of the Civil Code. For purposes, therefore, of determining whether respondent was a purchaser in good faith, she is deemed to have fully complied with the condition of the payment of the remainder of the purchase price.
Respondent was not aware of any interest in or a claim on the properties other than the mortgage to RSLAI which she undertook to assume. Moreover, Viloria bought the properties from petitioner after the latter sold them to respondent. Respondent was therefore a purchaser in good faith. Hence, the rules on double sale are applicable.
Article 1544 of the Civil Code provides that when neither buyer registered the sale of the properties with the registrar of deeds, the one who took prior possession of the properties shall be the lawful owner thereof.
In this instance, petitioner delivered the properties to respondent when he executed the notarized deed22 and handed over to respondent the keys to the properties. For this reason, respondent took actual possession and exercised control thereof by making repairs and improvements thereon. Clearly, the sale was perfected and consummated on March 10, 1993. Thus, respondent became the lawful owner of the properties.
Nonetheless, while the condition as to the payment of the balance of the purchase price was deemed fulfilled, respondent’s obligation to pay it subsisted. Otherwise, she would be unjustly enriched at the expense of petitioner.
Therefore, respondent must pay petitioner P684,500, the amount stated in the deed. This is because the provisions, terms and conditions of the contract constitute the law between the parties. Moreover, the deed itself provided that the assumption of mortgage "was without any further cost whatsoever." Petitioner, on the other hand, must deliver the certificates of title to respondent. We likewise affirm the award of damages.
WHEREFORE, the July 22, 2005 decision and November 11, 2005 resolution of the Court of Appeals in CA-G.R. CV No. 59748 are hereby AFFIRMED with MODIFICATION insofar as respondent Benita T. Ong is ordered to pay petitioner Raymundo de Leon P684,500 representing the balance of the purchase price as provided in their March 10, 1993 agreement.
Costs against petitioner.
SO ORDERED.
RENATO C. CORONA
Associate Justice
Chairperson
WE CONCUR:
| ANTONIO T. CARPIO | PRESBITERO J. VELASCO, JR. |
| ANTONIO EDUARDO B. NACHURA | DIOSDADO M. PERALTA |
A T T E S T A T I O N
I attest 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.
RENATO C. CORONA
Associate Justice
Chairperson
C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson’s Attestation, 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
* Per Special Order No. 818 dated January 18, 2010.
1 The Court of Appeals was impleaded as respondent but was excluded pursuant to Section 4, Rule 45 of the Rules of Court.
2 Covered by TCT Nos. 226469, 226470 and 226471 registered in the name of petitioner.
3 Rollo, pp. 55-56. There is a marked discrepancy between the total amount and the sum of the payments to be made by respondent (or P1,099,500).
4 The records of this case revealed that petitioner’s outstanding obligation to RSLAI amounted to P715,000 as of April 1, 1993.
5 Respondent had the properties cleaned and landscaped. She likewise had the house (built thereon) painted and repaired.
6 Docketed as Civil Case No. 93-2739.
7 Penned by Judge Francisco A. Querubin. Id., pp. 129-151.
8 Docketed as CA-G.R. CV No. 59748.
9 Penned by Associate Justice Eugenio S. Labitoria and concurred in by Associate Justices Eliezer R. delos Santos and Arturo D. Brion (now a member of this Court) of the Third Division of the Court of Appeals. Rollo, pp. 30-34.
10 Id., pp. 46-47.
11 Under Rule 45 of the Rules of Court.
12 Dijamco v. Court of Appeals. G.R. No. 113665, 7 October 2004, 440 SCRA 190, 197. See also J.B.L. Reyes, 5 Outline of Philippine Civil Law, 2-3 (1957).
13 Id.
14 Supra note 3.
15 Supra note 4.
16 Paragraph 2 of the deed did not prescribe a period within which respondent should settle petitioner’s obligation to RSLAI.
17 See Civil Code, Art. 1370 which provides:
Article 1370. If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of the stipulations shall control.
If the words appear to be contrary to the evident intention of the parties, the latter shall prevail over the former.
18 Civil Code, Art. 1495 provides:
Article 1495. The vendor is bound to transfer the ownership of and deliver, as well as warrant the thing which is the object of the sale.
19 Civil Code, Art. 1498 provides:
Article 1498. When a sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed. the contrary does not appear or cannot be clearly inferred.
With regard to movable property, its delivery may also be made by the delivery of the keys of the place or depository where it is stored or kept. (emphasis supplied)
20 See Delfin v. Lagon, G.R. No. 132262, 15 September 2006, 502 SCRA 24, 31.
21 Centeno v. Spouses Viray, 440 Phil. 881, 885 (2002).
22 See Civil Code, Art. 1498.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-11907 February 27, 1919
FAUSTINO LICHAUCO, ET AL., plaintiffs-appellants,
vs.
JOSE BERENGUER, ET AL., defendants-appellees.
Sumulong & Estrada for appellants.
Ramon Salinas for appellees.
AVANCEÑA, J.:
On July 26, 1882, by a public instrument (Exhibit A-1) Macario Berenguer and to, Cristino Singian with right of repurchase for an indefinite time the land in question which is described as parcel one in the complaint.
On October 7, 1889, by means of another public instrument, Macario Berenguer sold the same and to Cornelia Lauchangco with right of repurchase for the term of two years. It was stipulated that Macario Berenguer would take the land under a lease, paying an anual rent therefor, either in cash or in sugar at the option of Cornelia Lauchangco. It was also stipulated that all the fruits of the land would be stored in Cornelia Lauchangco's enfraderia (sugar packing house) in this city and the proceeds thereof would be applied to the payment of the price of the repurchase (Exhibit A). This sale was registered in 1907.
It appears that on September 2, 1890, Macario Berenguer, by virtue of a public instrument, sold again the land in question with pacto de retro to Cristiano Singian at a higher price but the amount paid on account of the sale of 1882 was considered as a part of the price. In the document wherein appears this contract, it is said that Cristiano Singian accepts the purchase in the name and representation of Anselmo Singian of whom he was the tutor. The contract does not express the period for the redemption (Exhibit A-1.)
On February 20, 1904, Anselmo Singian sold in an absolute sale, also by as public instrument, the same land to Macario Berenguer. Anselmo Singian states in this contract that the land was acquired by him form Macario Berenguer himself by virtue of the above-mentioned contract of 1890 through his (Anselmo's) tutor, Cristiano Singian. It was stipulated that the price of this sale should be paid within the period of eight years and that, if it be not completely paid on the expiration of the term, the ownership of the land should revert to Anselmo Singian (Exhibit X).
The parties to this action are: Faustino Lichauco and others, in their capacity as heirs of Cornelia Lauchangco, as plaintiff; Jose Berenguer, administrator of the estate of Macario Berenguer, and Anselmo Singian in his own behalf, as defendants.
The plaintiffs pray that the sale of the land executed by Macario Berenguer in favor of Cornelia Lauchangco be declared absolute or that the defendant Jose Berenguer be obliged to pay to the plaintiffs the sum of P3,000, the price of the repurchase, with legal interest thereon from October 7, 1891, and the amount of P9,236.86, as rents due, as well as the amounts which would be due until the execution of the sentence with the corresponding interests. The defendants Jose Berenguer prays that he be absolved from the complaint and that the plaintiffs be obliged to execute in this favor the document of repurchase of the land. The defendant Anselmo Singian prays that the sale of the land executed by Macario Berenguer in favor of Cornelia Lauchangco be declared null and void and that he be declared absolute owner of the said land.
The trial court absolved owner of the said land, finding as to costs and from this judgment the plaintiffs appealed.
From what has been said, it appears that the land in question had been twice sold by Macario Berenguer: the first sale was made in 1882 in favor of Cristino Singian and the second, in 1889, in favor of Cornelia Lauchangco, predecessor in interest of the plaintiffs. The question to be decided is, which of these two sales is to be preferred. Both were executed by means of public instruments. Considering the facts in connection with the time prior to 1907, it follows that, since neither of these instruments was inscribed, the preference should be in favor of the purchaser who first took possession of the land, inasmuch as this possession, according to the law in force prior to the promulgation of the Civil Code, constituted the consummation of the contract, and also inasmuch as the civil Code (article 1473) expressly provides that possession in such cases transfers the ownership of the thing sold. The trial court accepted the fact that the defendant Anselmo Singian, by himself and through a representative, took possession of the land since its sale in 1882 and has been continuing in this possession up to the present time. There is evidence in the record which establishes the conclusion, and there is no proof to the contrary.
It appears that after the sale in 1882 to Cristino Singian, the land was held, under a lease through payment of an annul rent, by Macario Berenguer until his death, and even after his death the administrator of his property continued the lease under the same conditions until two years before this action was filed. It does not appear whether, after the sale, Cristiano Singian first took possession of the land and then leased it to Macario Berenguer or the land was immediately leased after the sale without the lease having been preceded by direct possession on the party of the purchaser, Cristino Singian. But, as regards the basis upon which this decision rests, we accept the second alternative as true. It appears also that when the same land was sold in 1889 by same Macario Berenguer to Cornelia Lauchangco, the latter did not also take a direct possession of it but agreed to lease it to Macario Berenguer under certain conditions. It thus appears that both Cristino Singian and Cornelia Lauchangco in like manner took possession of the land through the same vendor, when the latter on ceasing to be the owner became the lessee of each of the former respectively. this court has held that when a person buys a piece of land and, instead of taking possession of it, give it under a lease to the vendor, possession therefore by the later after the sale is possession by the vendee, and such possession, in case of a double sale, determine the preference in favor of the one who first took possession of it, in the absence of inscription, in accordance with the provision of article 1473 of the Civil Code and notwithstanding the material and personal possession by the second vendee. (Bautista vs. Sioson, p. 615, ante.) This doctrine is with greater reason applicable to this cae in that the possession by the second vendee, granting that he had it, was under the same conditions as that of the first vendee. Therefore, in determining the preference between both sales by reason of the priority of possession, supposing that both vendees had such possession in the same manner as we have indicated, the decision must necessarily be in favor of the sale to Cristiano Singian who first enjoyed such possession.
But we can still say that Cornelia Lauchangco never had in the manner indicated the possession of the land. She had to derive this possession from Macario Berenguer. It is true that it was stipulated in the sale to her that Berenguer would cease to be the owner and would be her lessee, but there is a lack of juridical reality to suppose the this was equivalent to a delivery of possession, because on that date Berenguer had no possession which he could transfer, inasmuch as he was then a mere lessee of the former vendee, Cristino Singian, and therefore his possession was not for himself but in representation of the latter.
At all events, if it be interpreted that, in case of a double sale and in the absence of inscription, the preference between both can not be determined, according to article 1473 of the Civil Code, by the possession which the stipulation implies that vendor ceases to become owner and becomes the lessee of the vendee, it follows that, for the purposes of this article, neither Cristino Singian nor Cornelia Lauchangco took possession of the land. Under this supposition the preference between both sales shall also have to be decided in favor of that made to Cristino Singian, because it is of a prior date. (Art. 1473, Civil Code.)
As has been stated, Macario Berenguer sold the land to Cristino Singian in 1882 and in 1890 he again sold it to Cristino Singian in his capacity as tutor of Anselmo Singian. The plaintiffs contend that according to this sale to defendant Anselmo Singian was effected only in 1890 and therefore was not anterior to that made to Cornelia Lauchangco in 1889. We believe that this conclusion is erroneous. After the sale of 1882, Macario Berenguer took from Cristino Singian some more money which amounted to P6,000 and this fact impelled him to make the sale in 1890 in which it was stipulated that the amount paid in the sale of 1882 plus the P6,000 subsequent given by Cristino Singian to Macario Berenguer be considered as part of the price received. it is true that in the sale of Cristino Singian in 1882 it was not stated that he acted in his capacity as tutor of Anselmo Singian, but it appears that with the latter's money the former paid the price in both sales. What really appears is that the second sale was made with the object of aggregating, as part of the price, the amount of P6,000 received subsequently by Macario Berenguer for the purposes of the purchase and not for the transmission of the ownership which was already affected. We accept as a fact that both the sale of 1882 and that of 1890 were made in favor of Anselmo Singian.
The registry in 1907 of the sale to Lauchangco does not alter the aspect of the question involved. From the time Singian took possession of the land up to that date twenty-five years had elapsed. Thus, on the date in which the registry was made, Singian had acquired the ownership of the land by prescription. The registry could have destroyed the efficacy of the sale to Singian but not the legal effects of his possession. The effect which the law gives to the registry of a sale, in case of a double sale, against the efficacy of the sale that was not registered does not extend to the other titles which the other vendee may have gained independently, as the little of prescription in this case. And thus, even supposing that the sale to Singian, for lack of registry, had lost all its efficacy, in itself, as a title transferring ownership as against the sale to Lauchangco which was registered, still there remains for Singian the title of prescription which has not been destroyed by another to the contrary.
The fact that in 1904 Anselmo Singian in turn sold the land in question to Macario Berenguer does not affect the merits of the case. In the said sale it was agreed that Berenguer would pay the stipulated price within the period of eight years and if, at the expiration of the eight years, the amount should not have been completely paid, the ownership of the land would revert to the vendor. It does not appear that no payment on account of this price has been made and inasmuch as this payment should be proved by him who is obliged to do so, we accept as a fact that it was not so made. Under such circumstances, whatever effect may be attributed to the sale during the said period of eight years, which was fixed for the payment of the price, cannot be given such effect after the expiration of the said period, without the price having been paid. At all events, the ownership of the land sold reverted to the vendor.
We have reached the conclusion that the sale to Anselmo Singian represented by his tutor Cristino Singian was valid and produced the effect of transferring in his favor the ownership of the land in question. And, even disregarding the proper effect of this sale, the defendant Anselmo Singian has also acquired the ownership of the land by prescription.
Having reached the conclusion and as the action of the plaintiff against the defendant Berenguer is entirely based upon the efficacy of the sale of the same land made in favor of Cornelia Lauchangco, we have to hold also that the complaint against the latter is improper.
Therefore, we hereby affirm the judgment appealed form in so far as it absolves the defendants from the complaint with the costs against the appellants. So ordered.
Arellano, C.J., Torres, Johnson, Street and Malcolm, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 132161 January 17, 2005
CONSOLIDATED RURAL BANK (CAGAYAN VALLEY), INC., petitioner,
vs.
THE HONORABLE COURT OF APPEALS and HEIRS OF TEODORO DELA CRUZ, respondents.
D E C I S I O N
TINGA, J.:
Petitioner Consolidated Rural Bank, Inc. of Cagayan Valley filed the instant Petition for Certiorari1 under Rule 45 of the Revised Rules of Court, seeking the review of the Decision2 of the Court of Appeals Twelfth Division in CA-G.R. CV No. 33662, promulgated on 27 May 1997, which reversed the judgment3 of the lower court in favor of petitioner; and the Resolution4 of the Court of Appeals, promulgated on 5 January 1998, which reiterated its Decision insofar as respondents Heirs of Teodoro dela Cruz (the Heirs) are concerned.
From the record, the following are the established facts:
Rizal, Anselmo, Gregorio, Filomeno and Domingo, all surnamed Madrid (hereafter the Madrid brothers), were the registered owners of Lot No. 7036-A of plan Psd-10188, Cadastral Survey 211, situated in San Mateo, Isabela per Transfer Certificate of Title (TCT) No. T-8121 issued by the Register of Deeds of Isabela in September 1956.5
On 23 and 24 October 1956, Lot No. 7036-A was subdivided into several lots under subdivision plan Psd- 50390. One of the resulting subdivision lots was Lot No. 7036-A-7 with an area of Five Thousand Nine Hundred Fifty-Eight (5,958) square meters.6
On 15 August 1957, Rizal Madrid sold part of his share identified as Lot No. 7036-A-7, to Aleja Gamiao (hereafter Gamiao) and Felisa Dayag (hereafter, Dayag) by virtue of a Deed of Sale,7 to which his brothers Anselmo, Gregorio, Filomeno and Domingo offered no objection as evidenced by their Joint Affidavit dated 14 August 1957.8 The deed of sale was not registered with the Office of the Register of Deeds of Isabela. However, Gamiao and Dayag declared the property for taxation purposes in their names on March 1964 under Tax Declaration No. 7981.9
On 28 May 1964, Gamiao and Dayag sold the southern half of Lot No. 7036-A-7, denominated as Lot No. 7036-A-7-B, to Teodoro dela Cruz,10 and the northern half, identified as Lot No. 7036-A-7-A,11 to Restituto Hernandez.12 Thereupon, Teodoro dela Cruz and Restituto Hernandez took possession of and cultivated the portions of the property respectively sold to them.13
Later, on 28 December 1986, Restituto Hernandez donated the northern half to his daughter, Evangeline Hernandez-del Rosario.14 The children of Teodoro dela Cruz continued possession of the southern half after their father’s death on 7 June 1970.
In a Deed of Sale15 dated 15 June 1976, the Madrid brothers conveyed all their rights and interests over Lot No. 7036-A-7 to Pacifico Marquez (hereafter, Marquez), which the former confirmed16 on 28 February 1983.17 The deed of sale was registered with the Office of the Register of Deeds of Isabela on 2 March 1982.18
Subsequently, Marquez subdivided Lot No. 7036-A-7 into eight (8) lots, namely: Lot Nos. 7036-A-7-A to 7036-A-7-H, for which TCT Nos. T-149375 to T-149382 were issued to him on 29 March 1984.19 On the same date, Marquez and his spouse, Mercedita Mariana, mortgaged Lots Nos. 7036-A-7-A to 7036-A-7-D to the Consolidated Rural Bank, Inc. of Cagayan Valley (hereafter, CRB) to secure a loan of One Hundred Thousand Pesos (P100,000.00).20 These deeds of real estate mortgage were registered with the Office of the Register of Deeds on 2 April 1984.
On 6 February 1985, Marquez mortgaged Lot No. 7036-A-7-E likewise to the Rural Bank of Cauayan (RBC) to secure a loan of Ten Thousand Pesos (P10,000.00).21
As Marquez defaulted in the payment of his loan, CRB caused the foreclosure of the mortgages in its favor and the lots were sold to it as the highest bidder on 25 April 1986.22
On 31 October 1985, Marquez sold Lot No. 7036-A-7-G to Romeo Calixto (Calixto).23
Claiming to be null and void the issuance of TCT Nos. T-149375 to T-149382; the foreclosure sale of Lot Nos. 7036-A-7-A to 7036-A-7-D; the mortgage to RBC; and the sale to Calixto, the Heirs-now respondents herein-represented by Edronel dela Cruz, filed a case24 for reconveyance and damages the southern portion of Lot No. 7036-A (hereafter, the subject property) against Marquez, Calixto, RBC and CRB in December 1986.
Evangeline del Rosario, the successor-in-interest of Restituto Hernandez, filed with leave of court a Complaint in Intervention25 wherein she claimed the northern portion of Lot No. 7036-A-7.
In the Answer to the Amended Complaint,26 Marquez, as defendant, alleged that apart from being the first registrant, he was a buyer in good faith and for value. He also argued that the sale executed by Rizal Madrid to Gamiao and Dayag was not binding upon him, it being unregistered. For his part, Calixto manifested that he had no interest in the subject property as he ceased to be the owner thereof, the same having been reacquired by defendant Marquez.27
CRB, as defendant, and co-defendant RBC insisted that they were mortgagees in good faith and that they had the right to rely on the titles of Marquez which were free from any lien or encumbrance.28
After trial, the Regional Trial Court, Branch 19 of Cauayan, Isabela (hereafter, RTC) handed down a decision in favor of the defendants, disposing as follows:
WHEREFORE, in view of the foregoing considerations, judgment is hereby rendered:
1. Dismissing the amended complaint and the complaint in intervention;
2. Declaring Pacifico V. Marquez the lawful owner of Lots 7036-A-7 now Lots 7036-A-7-A to 7036-A-7-H, inclusive, covered by TCT Nos. T-149375 to T-149382, inclusive;
3. Declaring the mortgage of Lots 7036-A-7-A, 7036-A-7-B, 7036-A-7-C and 7036-A-7-D in favor of the defendant Consolidated Rural Bank (Cagayan Valley) and of Lot 7036-A-7-E in favor of defendant Rural Bank of Cauayan by Pacifico V. Marquez valid;
4. Dismissing the counterclaim of Pacifico V. Marquez; and
5. Declaring the Heirs of Teodoro dela Cruz the lawful owners of the lots covered by TCT Nos. T-33119, T-33220 and T-7583.
No pronouncement as to costs.
SO ORDERED.29
In support of its decision, the RTC made the following findings:
With respect to issues numbers 1-3, the Court therefore holds that the sale of Lot 7036-A-7 made by Rizal Madrid to Aleja Gamiao and Felisa Dayag and the subsequent conveyances to the plaintiffs and intervenors are all valid and the Madrid brothers are bound by said contracts by virtue of the confirmation made by them on August 14, 1957 (Exh. B).
Are the defendants Pacifico V. Marquez and Romeo B. Calixto buyers in good faith and for value of Lot 7036-A-7?
It must be borne in mind that good faith is always presumed and he who imputes bad faith has the burden of proving the same (Art. 527, Civil Code). The Court has carefully scrutinized the evidence presented but finds nothing to show that Marquez was aware of the plaintiffs’ and intervenors’ claim of ownership over this lot. TCT No. T-8121 covering said property, before the issuance of Marquez’ title, reveals nothing about the plaintiffs’ and intervenors’ right thereto for it is an admitted fact that the conveyances in their favor are not registered.
The Court is therefore confronted with two sales over the same property. Article 1544 of the Civil Code provides:
"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. x x x " (Underscoring supplied).
From the foregoing provisions and in the absence of proof that Marquez has actual or constructive knowledge of plaintiffs’ and intervenors’ claim, the Court has to rule that as the vendee who first registered his sale, Marquez’ ownership over Lot 7036-A-7 must be upheld.30
The Heirs interposed an appeal with the Court of Appeals. In their Appellant’s Brief,31 they ascribed the following errors to the RTC: (1) it erred in finding that Marquez was a buyer in good faith; (2) it erred in validating the mortgage of the properties to RBC and CRB; and (3) it erred in not reconveying Lot No. 7036-A-7-B to them.32
Intervenor Evangeline del Rosario filed a separate appeal with the Court of Appeals. It was, however, dismissed in a Resolution dated 20 September 1993 for her failure to pay docket fees. Thus, she lost her standing as an appellant.33
On 27 May 1997, the Court of Appeals rendered its assailed Decision34 reversing the RTC’s judgment. The dispositive portion reads:
WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE. Accordingly, judgment is hereby rendered as follows:
1. Declaring the heirs of Teodoro dela Cruz the lawful owners of the southern half portion and Evangeline Hernandez-del Rosario the northern half portion of Lot No. 7036-A-7, now covered by TCT Nos. T-149375 to T-149382, inclusive;
2. Declaring null and void the deed of sale dated June 15, 1976 between Pacifico V. Marquez and the Madrid brothers covering said Lot 7036-A-7;
3. Declaring null and void the mortgage made by defendant Pacifico V. Marquez of Lot Nos. 7036-A-7-A, 7036-A-7-B, 7036-A-7-C and 7036-A-7-D in favor of the defendant Consolidated Rural Bank and of Lot 7036-A-7-E in favor of defendant Rural Bank of Cauayan; and
4. Ordering Pacifico V. Marquez to reconvey Lot 7036-A-7 to the heirs of Teodoro dela Cruz and Evangeline Hernandez-del Rosario.
No pronouncement as to costs.
SO ORDERED.35
In upholding the claim of the Heirs, the Court of Appeals held that Marquez failed to prove that he was a purchaser in good faith and for value. It noted that while Marquez was the first registrant, there was no showing that the registration of the deed of sale in his favor was coupled with good faith. Marquez admitted having knowledge that the subject property was "being taken" by the Heirs at the time of the sale.36 The Heirs were also in possession of the land at the time. According to the Decision, these circumstances along with the subject property’s attractive location—it was situated along the National Highway and was across a gasoline station—should have put Marquez on inquiry as to its status. Instead, Marquez closed his eyes to these matters and failed to exercise the ordinary care expected of a buyer of real estate.37
Anent the mortgagees RBC and CRB, the Court of Appeals found that they merely relied on the certificates of title of the mortgaged properties. They did not ascertain the status and condition thereof according to standard banking practice. For failure to observe the ordinary banking procedure, the Court of Appeals considered them to have acted in bad faith and on that basis declared null and void the mortgages made by Marquez in their favor.38
Dissatisfied, CRB filed a Motion for Reconsideration39 pointing out, among others, that the Decision promulgated on 27 May 1997 failed to establish good faith on the part of the Heirs. Absent proof of possession in good faith, CRB avers, the Heirs cannot claim ownership over the subject property.
In a Resolution40 dated 5 January 1998, the Court of Appeals stressed its disbelief in CRB’s allegation that it did not merely rely on the certificates of title of the properties and that it conducted credit investigation and standard ocular inspection. But recalling that intervenor Evangeline del Rosario had lost her standing as an appellant, the Court of Appeals accordingly modified its previous Decision, as follows:
WHEREFORE, the decision dated May 27, 1997, is hereby MODIFIED to read as follows:
WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE insofar as plaintiffs-appellants are concerned. Accordingly, judgment is hereby rendered as follows:
1. Declaring the Heirs of Teodoro dela Cruz the lawful owners of the southern half portion of Lot No. 7036-A-7;
2. Declaring null and void the deed of sale dated June 15, 1976 between Pacifico V. Marquez and the Madrid brothers insofar as the southern half portion of Lot NO. (sic) 7036-A-7 is concerned;
3. Declaring the mortgage made by defendant Pacifico V. Marquez in favor of defendant Consolidated Rural Bank (Cagayan Valley) and defendant Rural Bank of Cauayan as null and void insofar as the southern half portion of Lot No. 7036-A-7 is concerned;
4. Ordering defendant Pacifico V. Marquez to reconvey the southern portion of Lot No. 7036-A-7 to the Heirs of Teodoro dela Cruz.
No pronouncement as to costs.
SO ORDERED.41
Hence, the instant CRB petition. However, both Marquez and RBC elected not to challenge the Decision of the appellate court.
Petitioner CRB, in essence, alleges that the Court of Appeals committed serious error of law in upholding the Heirs’ ownership claim over the subject property considering that there was no finding that they acted in good faith in taking possession thereof nor was there proof that the first buyers, Gamiao and Dayag, ever took possession of the subject property. CRB also makes issue of the fact that the sale to Gamiao and Dayag was confirmed a day ahead of the actual sale, clearly evincing bad faith, it adds. Further, CRB asserts Marquez’s right over the property being its registered owner.
The petition is devoid of merit. However, the dismissal of the petition is justified by reasons different from those employed by the Court of Appeals.
Like the lower court, the appellate court resolved the present controversy by applying the rule on double sale provided in Article 1544 of the Civil Code. They, however, arrived at different conclusions. The RTC made CRB and the other defendants win, while the Court of Appeals decided the case in favor of the Heirs.
Article 1544 of the Civil Code reads, thus:
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 possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith.
The provision is not applicable in the present case. It contemplates a case of double or multiple sales by a single vendor. More specifically, it covers a situation where a single vendor sold one and the same immovable property to two or more buyers.42 According to a noted civil law author, it is necessary that the conveyance must have been made by a party who has an existing right in the thing and the power to dispose of it.43 It cannot be invoked where the two different contracts of sale are made by two different persons, one of them not being the owner of the property sold.44 And even if the sale was made by the same person, if the second sale was made when such person was no longer the owner of the property, because it had been acquired by the first purchaser in full dominion, the second purchaser cannot acquire any right.45
In the case at bar, the subject property was not transferred to several purchasers by a single vendor. In the first deed of sale, the vendors were Gamiao and Dayag whose right to the subject property originated from their acquisition thereof from Rizal Madrid with the conformity of all the other Madrid brothers in 1957, followed by their declaration of the property in its entirety for taxation purposes in their names. On the other hand, the vendors in the other or later deed were the Madrid brothers but at that time they were no longer the owners since they had long before disposed of the property in favor of Gamiao and Dayag.
Citing Manresa, the Court of Appeals in 1936 had occasion to explain the proper application of Article 1473 of the Old Civil Code (now Article 1544 of the New Civil Code) in the case of Carpio v. Exevea,46 thus:
In order that tradition may be considered performed, it is necessary that the requisites which it implies must have been fulfilled, and one of the indispensable requisites, according to the most exact Roman concept, is that the conveyor had the right and the will to convey the thing. The intention to transfer is not sufficient; it only constitutes the will. It is, furthermore, necessary that the conveyor could juridically perform that act; that he had the right to do so, since a right which he did not possess could not be vested by him in the transferee.
This is what Article 1473 has failed to express: the necessity for the preexistence of the right on the part of the conveyor. But even if the article does not express it, it would be understood, in our opinion, that that circumstance constitutes one of the assumptions upon which the article is based.
This construction is not repugnant to the text of Article 1473, and not only is it not contrary to it, but it explains and justifies the same. (Vol. 10, 4th ed., p. 159)47
In that case, the property was transferred to the first purchaser in 1908 by its original owner, Juan Millante. Thereafter, it was sold to plaintiff Carpio in June 1929. Both conveyances were unregistered. On the same date that the property was sold to the plaintiff, Juan Millante sold the same to defendant Exevea. This time, the sale was registered in the Registry of Deeds. But despite the fact of registration in defendant’s favor, the Court of Appeals found for the plaintiff and refused to apply the provisions of Art. 1473 of the Old Civil Code, reasoning that "on the date of the execution of the document, Exhibit 1, Juan Millante did not and could not have any right whatsoever to the parcel of land in question."48
Citing a portion of a judgment dated 24 November 1894 of the Supreme Court of Spain, the Court of Appeals elucidated further:
Article 1473 of the Civil Code presupposes the right of the vendor to dispose of the thing sold, and does not limit or alter in this respect the provisions of the Mortgage Law in force, which upholds the principle that registration does not validate acts or contracts which are void, and that although acts and contracts executed by persons who, in the Registry, appear to be entitled to do so are not invalidated once recorded, even if afterwards the right of such vendor is annulled or resolved by virtue of a previous unrecorded title, nevertheless this refers only to third parties.49
In a situation where not all the requisites are present which would warrant the application of Art. 1544, the principle of prior tempore, potior jure or simply "he who is first in time is preferred in right,"50 should apply.51 The only essential requisite of this rule is priority in time; in other words, the only one who can invoke this is the first vendee. Undisputedly, he is a purchaser in good faith because at the time he bought the real property, there was still no sale to a second vendee.52 In the instant case, the sale to the Heirs by Gamiao and Dayag, who first bought it from Rizal Madrid, was anterior to the sale by the Madrid brothers to Marquez. The Heirs also had possessed the subject property first in time. Thus, applying the principle, the Heirs, without a scintilla of doubt, have a superior right to the subject property.
Moreover, it is an established principle that no one can give what one does not have¾nemo dat quod non habet. Accordingly, one can sell only what one owns or is authorized to sell, and the buyer can acquire no more than what the seller can transfer legally.53 In this case, since the Madrid brothers were no longer the owners of the subject property at the time of the sale to Marquez, the latter did not acquire any right to it.
In any event, assuming arguendo that Article 1544 applies to the present case, the claim of Marquez still cannot prevail over the right of the Heirs since according to the evidence he was not a purchaser and registrant in good faith.
Following Article 1544, in the double sale of an immovable, the rules of preference are:
(a) the first registrant in good faith;
(b) should there be no entry, the first in possession in good faith; and
(c) in the absence thereof, the buyer who presents the oldest title in good faith. 54
Prior registration of the subject property does not by itself confer ownership or a better right over the property. Article 1544 requires that before the second buyer can obtain priority over 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)¾from the time of acquisition until the title is transferred to him by registration or failing registration, by delivery of possession.55
In the instant case, the actions of Marquez have not satisfied the requirement of good faith from the time of the purchase of the subject property to the time of registration. Found by the Court of Appeals, Marquez knew at the time of the sale that the subject property was being claimed or "taken" by the Heirs. This was a detail which could indicate a defect in the vendor’s title which he failed to inquire into. Marquez also admitted that he did not take possession of the property and at the time he testified he did not even know who was in possession. Thus, he testified on direct examination in the RTC as follows:
ATTY. CALIXTO –
Q Can you tell us the circumstances to your buying the land in question?
A In 1976 the Madrid brothers confessed to me their problems about their lots in San Mateo that they were being taken by Teodoro dela Cruz and Atty. Teofilo A. Leonin; that they have to pay the lawyer’s fee of P10,000.00 otherwise Atty. Leonin will confiscate the land. So they begged me to buy their properties, some of it. So that on June 3, 1976, they came to Cabagan where I was and gave them P14,000.00, I think. We have talked that they will execute the deed of sale.
Q Why is it, doctor, that you have already this deed of sale, Exh. 14, why did you find it necessary to have this Deed of Confirmation of a Prior Sale, Exh. 15?
A Because as I said a while ago that the first deed of sale was submitted to the Register of Deeds by Romeo Badua so that I said that because when I became a Municipal Health Officer in San Mateo, Isabela, I heard so many rumors, so many things about the land and so I requested them to execute a deed of confirmation.56
. . .
ATTY. CALIXTO-
Q At present, who is in possession on the Riceland portion of the lot in question?
A I can not say because the people working on that are changing from time to time.
Q Why, have you not taken over the cultivation of the land in question?
A Well, the Dela Cruzes are prohibiting that we will occupy the place.
Q So, you do not have any possession?
A None, sir.57
One who purchases real property which is in actual possession of others should, at least, make some inquiry concerning the rights of those in possession. The actual possession by people other than the vendor should, at least, put the purchaser upon inquiry. He can scarcely, in the absence of such inquiry, be regarded as a bona fide purchaser as against such possessions.58 The rule of caveat emptor requires the purchaser to be aware of the supposed title of the vendor and one who buys without checking the vendor’s title takes all the risks and losses consequent to such failure.59
It is further perplexing that Marquez did not fight for the possession of the property if it were true that he had a better right to it. In our opinion, there were circumstances at the time of the sale, and even at the time of registration, which would reasonably require a purchaser of real property to investigate to determine whether defects existed in his vendor’s title. Instead, Marquez willfully closed his eyes to the possibility of the existence of these flaws. For failure to exercise the measure of precaution which may be required of a prudent man in a like situation, he cannot be called a purchaser in good faith.60
As this Court explained in the case of Spouses Mathay v. Court of Appeals:61
Although it is a recognized principle that a person dealing on a registered land need not go beyond its certificate of title, it is also a firmly settled rule that where there are circumstances which would put a party on guard and prompt him to investigate or inspect the property being sold to him, such as the presence of occupants/tenants thereon, it is, of course, expected from the purchaser of a valued piece of land to inquire first into the status or nature of possession of the occupants, i.e., whether or not the occupants possess the land en concepto de dueño, in concept of owner. As is the common practice in the real estate industry, an ocular inspection of the premises involved is a safeguard a cautious and prudent purchaser usually takes. Should he find out that the land he intends to buy is occupied by anybody else other than the seller who, as in this case, is not in actual possession, it would then be incumbent upon the purchaser to verify the extent of the occupant’s possessory rights. The failure of a prospective buyer to take such precautionary steps would mean negligence on his part and would thereby preclude him from claiming or invoking the rights of a "purchaser in good faith."62
This rule equally applies to mortgagees of real property. In the case of Crisostomo v. Court of Appeals,63 the Court held:
It is a well-settled rule that a purchaser or mortgagee cannot close his eyes to facts which should put a reasonable man upon his guard, and then claim that he acted in good faith under the belief that there was no defect in the title of the vendor or mortgagor. His mere refusal to believe that such defect exists, or his willful closing of his eyes to the possibility of the existence of a defect in the vendor’s or mortgagor’s title, will not make him an innocent purchaser or mortgagee for value, if it afterwards develops that the title was in fact defective, and it appears that he had such notice of the defects as would have led to its discovery had he acted with the measure of a prudent man in a like situation.64
Banks, their business being impressed with public interest, are expected to exercise more care and prudence than private individuals in their dealings, even those involving registered lands. Hence, for merely relying on the certificates of title and for its failure to ascertain the status of the mortgaged properties as is the standard procedure in its operations, we agree with the Court of Appeals that CRB is a mortgagee in bad faith.
In this connection, Marquez’s obstention of title to the property and the subsequent transfer thereof to CRB cannot help the latter’s cause. In a situation where a party has actual knowledge of the claimant’s actual, open and notorious possession of the disputed property at the time of registration, as in this case, the actual notice and knowledge are equivalent to registration, because to hold otherwise would be to tolerate fraud and the Torrens system cannot be used to shield fraud. 65
While certificates of title are indefeasible, unassailable and binding against the whole world, they merely confirm or record title already existing and vested. They cannot be used to protect a usurper from the true owner, nor can they be used for the perpetration of fraud; neither do they permit one to enrich himself at the expense of others.66
We also find that the Court of Appeals did not err in awarding the subject property to the Heirs absent proof of good faith in their possession of the subject property and without any showing of possession thereof by Gamiao and Dayag.
As correctly argued by the Heirs in their Comment,67 the requirement of good faith in the possession of the property finds no application in cases where there is no second sale.68 In the case at bar, Teodoro dela Cruz took possession of the property in 1964 long before the sale to Marquez transpired in 1976 and a considerable length of time—eighteen (18) years in fact¾before the Heirs had knowledge of the registration of said sale in 1982. As Article 526 of the Civil Code aptly provides, "(H)e is deemed a possessor in good faith who is not aware that there exists in his title or mode of acquisition any flaw which invalidates it." Thus, there was no need for the appellate court to consider the issue of good faith or bad faith with regard to Teodoro dela Cruz’s possession of the subject property.
Likewise, we are of the opinion that it is not necessary that there should be any finding of possession by Gamiao and Dayag of the subject property. It should be recalled that the regularity of the sale to Gamiao and Dayag was never contested by Marquez.69 In fact the RTC upheld the validity of this sale, holding that the Madrid brothers are bound by the sale by virtue of their confirmation thereof in the Joint Affidavit dated 14 August 1957. That this was executed a day ahead of the actual sale on 15 August 1957 does not diminish its integrity as it was made before there was even any shadow of controversy regarding the ownership of the subject property.
Moreover, as this Court declared in the case of Heirs of Simplicio Santiago v. Heirs of Mariano E. Santiago ,70 tax declarations "are good indicia of possession in the concept of an owner, for no one in his right mind would be paying taxes for a property that is not in his actual or constructive possession."71
WHEREFORE, the Petition is DENIED. The dispositive portion of the Court of Appeals’ Decision, as modified by its Resolution dated 5 January 1998, is AFFIRMED. Costs against petitioner.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ., concur.
Footnotes
1 Dated 26 February 1998; Filed on 12 March 1998; Rollo, pp. 9-41 with annexes.
2 Penned by Justice Artemio G. Tuquero, concurred in by Justices Artemon D. Luna and Hector L. Hofileña; Rollo, pp. 23-30.
3 Dated 10 May 1991; Written by Honorable Artemio R. Alivia, Regional Trial Judge; Rollo, pp. 98-109.
4 Penned by Justice Artemio G. Tuquero, concurred in by Justices Artemon D. Luna and Hector L. Hofileña; Rollo, pp. 33-34.
5 Rollo, p. 23.
6 Ibid.
7 Exhibit A.
8 Rollo, pp. 23 and 103; RTC Decision, p. 6; Exhibit B, RTC Records, p. 6; In this Joint Affidavit executed before Apolonio S. Padua, Justice of Peace, Anselmo, Gregorio, Filomeno and Domingo, all surnamed Madrid, under oath, declared that "… we have no objection of the alienation, as it is a part of the exclusive share of our brother the vendor still unsegregated; that as such we hereunto confirm the said sale in favor of Aleja Gamiao and Felisa Dayag."
9 Exhibit C; Rollo, p. 103; RTC Decision, p. 6.
10 Rollo, p. 24; Exhibit I-2.
11 Ibid; Exhibit I-1.
12 Exhibits D and E; Rollo, p. 103; RTC Decision, p. 6.
13 Rollo, pp. 24 and 103; RTC Decision, p. 6.
14 Ibid; Exhibit F.
15 Exhibit 14.
16 Exhibit 15.
17 Rollo, pp. 24 and 104.
18 Ibid.
19 Exhibits K, K-1 to K-7, Exhibits 6-13.
20 Rollo, pp. 24 and 105; CA Records, p. 54.
21 Rollo, pp. 24 and 105.
22 Ibid; CA Records, p. 55.
23 Rollo, p. 24.
24 Complaint dated 15 December 1986, RTC Records, pp. 1-8 with Annexes; Amended Complaint dated 24 December 1986, RTC Records, pp. 14-18.
25 Dated 24 January 1987; RTC Records, pp. 33-40 with annexes.
26 Dated 4 March 1987, Id. at 53-57.
27 Rollo, pp. 100-101; Id. at 3-4.
28 Id. at 100; Id. at 3.
29 Id. at 25 and 109; Id. at 12.
30 Id. at 106-107; Id. at 9-10.
31 CA Records, pp. 45-79.
32 Rollo, p. 26; Id. at 49-50.
33 Id. at 33.
34 Id. at 23-30.
35 Id. at 29-30.
36 Id. at 27; TSN, pp. 35-36, 21 September 1989.
37 Id. at 27-28.
38 Id. at 29.
39 Filed on 17 June 1997; See Rollo, p. 9.
40 Rollo, pp. 33-34.
41 Id. at 34.
42 C. Villanueva, Philippine Law on Sales 100 (1995).
43 A. TOLENTINO, COMMENTARIES AND JURISPRUDENCE ON THE CIVIL CODE OF THE PHILIPPINES, VOLUME V 96 (1999), citing 10 Manresa 170, 171.
44 Id., citing Olsen v. Yearsley, 11 Phil. 178, Carpio v. Exevea, (C.A.) 38 Off. Gaz. 1356 and Cruzado v. Bustos, 34 Phil. 17.
45 Id., citing Bautista v. Sioson, 39 Phil. 615; Lichauco v. Berenger, 39 Phil. 643; Salvaro v. Cabana, 129 SCRA 656.
46 No. 43354, (CA) 38 Off. Gaz. 1356 (1936). This case is cited in the following books to demonstrate that Art. 1544 (then Art. 1473 of the Old Civil Code) cannot be invoked if the sale is made by two different vendors: A. Padilla, Civil Law, Civil Code Annotated 878 (1953); E. Paras, Civil Code of the Philippines Annotated Vol. V, 12th ED. 166-167 (1990); A. Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines, Vol. V 96 (1999); C. Villanueva, Philippine Law on SAles 100 (1995).
47 Id. at 1357.
48 Id. at 1358.
49 Supra note 47.
50 Black’s Law Dictionary 6th Ed. 1194 (1990).
51 Supra note 42.
52 D. Jurado, Civil Law Reviewer 19th Ed. 879 (1999).
53 Tangalin v. Court of Appeals, 422 Phil. 358, 365 (2001).
54 A. Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines, Vol. V 96 (1999); Martinez v. Court of Appeals, G.R. No. 123547 , 21 May 2001, 358 SCRA 38, 50; Bayoca v. Nogales, G.R. No. 138201 , 12 September 2000, 340 SCRA 154, 165-166, citing J.C. Vitug, Compendium of Civil Law and Jurisprudence, pp. 604-605; Balatbat v. Court of Appeals, 329 Phil. 858, 872 (1996). Citation omitted.
55 Uraca v. CA, 344 Phil. 253, 265 (1997).
56 TSN, pp. 34-35, 21 September 1989.
57 Id. at 38-39, 21 September 1989.
58 Republic v. Hon. Court of Appeals, No. L-42856, 27 January 1981, 102 SCRA 331, 344, citing Conspecto v. Fruto, 31 Phil. 144, 149.
59 Caram, Jr. v. Laureta, No. L-28740, 24 February 1981, 103 SCRA 7, 16.
60 Voluntad v. Sps. Dizon, 372 Phil. 82, 91 (1999).
61 356 Phil. 870 (1998).
62 Id. at 892.
63 274 Phil. 1134 (1991).
64 Id. at 1142-1143, citations omitted.
65 Lavides v. Pre, 419 Phil. 665, 671-672 (2001).
66 Bayoca v. Nogales, G.R. No. 138201 , 12 September 2000, 340 SCRA 154, 169.
67 Rollo, pp. 63-77.
68 Id. at 71.
69 Id. at 105.
70 G.R. No. 151440, 17 June 2003, 404 SCRA 193.
71 Id. at 199; See also Larena v. Mapili, G.R. No. 146341 , 7 August 2003, 408 SCRA 484, 491.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 124242 January 21, 2005
SAN LORENZO DEVELOPMENT CORPORATION, petitioner,
vs.
COURT OF APPEALS, PABLO S. BABASANTA, SPS. MIGUEL LU and PACITA ZAVALLA LU, respondents.
D E C I S I O N
TINGA, J.:
From a coaptation of the records of this case, it appears that respondents Miguel Lu and Pacita Zavalla, (hereinafter, the Spouses Lu) owned two (2) parcels of land situated in Sta. Rosa, Laguna covered by TCT No. T-39022 and TCT No. T-39023 both measuring 15,808 square meters or a total of 3.1616 hectares.
On 20 August 1986, the Spouses Lu purportedly sold the two parcels of land to respondent Pablo Babasanta, (hereinafter, Babasanta) for the price of fifteen pesos (P15.00) per square meter. Babasanta made a downpayment of fifty thousand pesos (P50,000.00) as evidenced by a memorandum receipt issued by Pacita Lu of the same date. Several other payments totaling two hundred thousand pesos (P200,000.00) were made by Babasanta.
Sometime in May 1989, Babasanta wrote a letter to Pacita Lu to demand the execution of a final deed of sale in his favor so that he could effect full payment of the purchase price. In the same letter, Babasanta notified the spouses about having received information that the spouses sold the same property to another without his knowledge and consent. He demanded that the second sale be cancelled and that a final deed of sale be issued in his favor.
In response, Pacita Lu wrote a letter to Babasanta wherein she acknowledged having agreed to sell the property to him at fifteen pesos (P15.00) per square meter. She, however, reminded Babasanta that when the balance of the purchase price became due, he requested for a reduction of the price and when she refused, Babasanta backed out of the sale. Pacita added that she returned the sum of fifty thousand pesos (P50,000.00) to Babasanta through Eugenio Oya.
On 2 June 1989, respondent Babasanta, as plaintiff, filed before the Regional Trial Court (RTC), Branch 31, of San Pedro, Laguna, a Complaint for Specific Performance and Damages1 against his co-respondents herein, the Spouses Lu. Babasanta alleged that the lands covered by TCT No. T- 39022 and T-39023 had been sold to him by the spouses at fifteen pesos (P15.00) per square meter. Despite his repeated demands for the execution of a final deed of sale in his favor, respondents allegedly refused.
In their Answer,2 the Spouses Lu alleged that Pacita Lu obtained loans from Babasanta and when the total advances of Pacita reached fifty thousand pesos (P50,000.00), the latter and Babasanta, without the knowledge and consent of Miguel Lu, had verbally agreed to transform the transaction into a contract to sell the two parcels of land to Babasanta with the fifty thousand pesos (P50,000.00) to be considered as the downpayment for the property and the balance to be paid on or before 31 December 1987. Respondents Lu added that as of November 1987, total payments made by Babasanta amounted to only two hundred thousand pesos (P200,000.00) and the latter allegedly failed to pay the balance of two hundred sixty thousand pesos (P260,000.00) despite repeated demands. Babasanta had purportedly asked Pacita for a reduction of the price from fifteen pesos (P15.00) to twelve pesos (P12.00) per square meter and when the Spouses Lu refused to grant Babasanta’s request, the latter rescinded the contract to sell and declared that the original loan transaction just be carried out in that the spouses would be indebted to him in the amount of two hundred thousand pesos (P200,000.00). Accordingly, on 6 July 1989, they purchased Interbank Manager’s Check No. 05020269 in the amount of two hundred thousand pesos (P200,000.00) in the name of Babasanta to show that she was able and willing to pay the balance of her loan obligation.
Babasanta later filed an Amended Complaint dated 17 January 19903 wherein he prayed for the issuance of a writ of preliminary injunction with temporary restraining order and the inclusion of the Register of Deeds of Calamba, Laguna as party defendant. He contended that the issuance of a preliminary injunction was necessary to restrain the transfer or conveyance by the Spouses Lu of the subject property to other persons.
The Spouses Lu filed their Opposition4 to the amended complaint contending that it raised new matters which seriously affect their substantive rights under the original complaint. However, the trial court in its Order dated 17 January 19905 admitted the amended complaint.
On 19 January 1990, herein petitioner San Lorenzo Development Corporation (SLDC) filed a Motion for Intervention6 before the trial court. SLDC alleged that it had legal interest in the subject matter under litigation because on 3 May 1989, the two parcels of land involved, namely Lot 1764-A and 1764-B, had been sold to it in a Deed of Absolute Sale with Mortgage.7 It alleged that it was a buyer in good faith and for value and therefore it had a better right over the property in litigation.
In his Opposition to SLDC’s motion for intervention,8 respondent Babasanta demurred and argued that the latter had no legal interest in the case because the two parcels of land involved herein had already been conveyed to him by the Spouses Lu and hence, the vendors were without legal capacity to transfer or dispose of the two parcels of land to the intervenor.
Meanwhile, the trial court in its Order dated 21 March 1990 allowed SLDC to intervene. SLDC filed its Complaint-in-Intervention on 19 April 1990.9 Respondent Babasanta’s motion for the issuance of a preliminary injunction was likewise granted by the trial court in its Order dated 11 January 199110 conditioned upon his filing of a bond in the amount of fifty thousand pesos (P50,000.00).
SLDC in its Complaint-in-Intervention alleged that on 11 February 1989, the Spouses Lu executed in its favor an Option to Buy the lots subject of the complaint. Accordingly, it paid an option money in the amount of three hundred sixteen thousand one hundred sixty pesos (P316,160.00) out of the total consideration for the purchase of the two lots of one million two hundred sixty-four thousand six hundred forty pesos (P1,264,640.00). After the Spouses Lu received a total amount of six hundred thirty-two thousand three hundred twenty pesos (P632,320.00) they executed on 3 May 1989 a Deed of Absolute Sale with Mortgage in its favor. SLDC added that the certificates of title over the property were delivered to it by the spouses clean and free from any adverse claims and/or notice of lis pendens. SLDC further alleged that it only learned of the filing of the complaint sometime in the early part of January 1990 which prompted it to file the motion to intervene without delay. Claiming that it was a buyer in good faith, SLDC argued that it had no obligation to look beyond the titles submitted to it by the Spouses Lu particularly because Babasanta’s claims were not annotated on the certificates of title at the time the lands were sold to it.
After a protracted trial, the RTC rendered its Decision on 30 July 1993 upholding the sale of the property to SLDC. It ordered the Spouses Lu to pay Babasanta the sum of two hundred thousand pesos (P200,000.00) with legal interest plus the further sum of fifty thousand pesos (P50,000.00) as and for attorney’s fees. On the complaint-in-intervention, the trial court ordered the Register of Deeds of Laguna, Calamba Branch to cancel the notice of lis pendens annotated on the original of the TCT No. T-39022 (T-7218) and No. T-39023 (T-7219).
Applying Article 1544 of the Civil Code, the trial court ruled that since both Babasanta and SLDC did not register the respective sales in their favor, ownership of the property should pertain to the buyer who first acquired possession of the property. The trial court equated the execution of a public instrument in favor of SLDC as sufficient delivery of the property to the latter. It concluded that symbolic possession could be considered to have been first transferred to SLDC and consequently ownership of the property pertained to SLDC who purchased the property in good faith.
Respondent Babasanta appealed the trial court’s decision to the Court of Appeals alleging in the main that the trial court erred in concluding that SLDC is a purchaser in good faith and in upholding the validity of the sale made by the Spouses Lu in favor of SLDC.
Respondent spouses likewise filed an appeal to the Court of Appeals. They contended that the trial court erred in failing to consider that the contract to sell between them and Babasanta had been novated when the latter abandoned the verbal contract of sale and declared that the original loan transaction just be carried out. The Spouses Lu argued that since the properties involved were conjugal, the trial court should have declared the verbal contract to sell between Pacita Lu and Pablo Babasanta null and void ab initio for lack of knowledge and consent of Miguel Lu. They further averred that the trial court erred in not dismissing the complaint filed by Babasanta; in awarding damages in his favor and in refusing to grant the reliefs prayed for in their answer.
On 4 October 1995, the Court of Appeals rendered its Decision11 which set aside the judgment of the trial court. It declared that the sale between Babasanta and the Spouses Lu was valid and subsisting and ordered the spouses to execute the necessary deed of conveyance in favor of Babasanta, and the latter to pay the balance of the purchase price in the amount of two hundred sixty thousand pesos (P260,000.00). The appellate court ruled that the Absolute Deed of Sale with Mortgage in favor of SLDC was null and void on the ground that SLDC was a purchaser in bad faith. The Spouses Lu were further ordered to return all payments made by SLDC with legal interest and to pay attorney’s fees to Babasanta.
SLDC and the Spouses Lu filed separate motions for reconsideration with the appellate court.12 However, in a Manifestation dated 20 December 1995,13 the Spouses Lu informed the appellate court that they are no longer contesting the decision dated 4 October 1995.
In its Resolution dated 11 March 1996,14 the appellate court considered as withdrawn the motion for reconsideration filed by the Spouses Lu in view of their manifestation of 20 December 1995. The appellate court denied SLDC’s motion for reconsideration on the ground that no new or substantial arguments were raised therein which would warrant modification or reversal of the court’s decision dated 4 October 1995.
Hence, this petition.
SLDC assigns the following errors allegedly committed by the appellate court:
THE COURT OF APPEALS ERRED IN HOLDING THAT SAN LORENZO WAS NOT A BUYER IN GOOD FAITH BECAUSE WHEN THE SELLER PACITA ZAVALLA LU OBTAINED FROM IT THE CASH ADVANCE OF P200,000.00, SAN LORENZO WAS PUT ON INQUIRY OF A PRIOR TRANSACTION ON THE PROPERTY.
THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE ESTABLISHED FACT THAT THE ALLEGED FIRST BUYER, RESPONDENT BABASANTA, WAS NOT IN POSSESSION OF THE DISPUTED PROPERTY WHEN SAN LORENZO BOUGHT AND TOOK POSSESSION OF THE PROPERTY AND NO ADVERSE CLAIM, LIEN, ENCUMBRANCE OR LIS PENDENS WAS ANNOTATED ON THE TITLES.
THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE FACT THAT RESPONDENT BABASANTA HAS SUBMITTED NO EVIDENCE SHOWING THAT SAN LORENZO WAS AWARE OF HIS RIGHTS OR INTERESTS IN THE DISPUTED PROPERTY.
THE COURT OF APPEALS ERRED IN HOLDING THAT NOTWITHSTANDING ITS FULL CONCURRENCE ON THE FINDINGS OF FACT OF THE TRIAL COURT, IT REVERSED AND SET ASIDE THE DECISION OF THE TRIAL COURT UPHOLDING THE TITLE OF SAN LORENZO AS A BUYER AND FIRST POSSESSOR IN GOOD FAITH. 15
SLDC contended that the appellate court erred in concluding that it had prior notice of Babasanta’s claim over the property merely on the basis of its having advanced the amount of two hundred thousand pesos (P200,000.00) to Pacita Lu upon the latter’s representation that she needed the money to pay her obligation to Babasanta. It argued that it had no reason to suspect that Pacita was not telling the truth that the money would be used to pay her indebtedness to Babasanta. At any rate, SLDC averred that the amount of two hundred thousand pesos (P200,000.00) which it advanced to Pacita Lu would be deducted from the balance of the purchase price still due from it and should not be construed as notice of the prior sale of the land to Babasanta. It added that at no instance did Pacita Lu inform it that the lands had been previously sold to Babasanta.
Moreover, SLDC stressed that after the execution of the sale in its favor it immediately took possession of the property and asserted its rights as new owner as opposed to Babasanta who has never exercised acts of ownership. Since the titles bore no adverse claim, encumbrance, or lien at the time it was sold to it, SLDC argued that it had every reason to rely on the correctness of the certificate of title and it was not obliged to go beyond the certificate to determine the condition of the property. Invoking the presumption of good faith, it added that the burden rests on Babasanta to prove that it was aware of the prior sale to him but the latter failed to do so. SLDC pointed out that the notice of lis pendens was annotated only on 2 June 1989 long after the sale of the property to it was consummated on 3 May 1989.1awphi1.nét
Meanwhile, in an Urgent Ex-Parte Manifestation dated 27 August 1999, the Spouses Lu informed the Court that due to financial constraints they have no more interest to pursue their rights in the instant case and submit themselves to the decision of the Court of Appeals.16
On the other hand, respondent Babasanta argued that SLDC could not have acquired ownership of the property because it failed to comply with the requirement of registration of the sale in good faith. He emphasized that at the time SLDC registered the sale in its favor on 30 June 1990, there was already a notice of lis pendens annotated on the titles of the property made as early as 2 June 1989. Hence, petitioner’s registration of the sale did not confer upon it any right. Babasanta further asserted that petitioner’s bad faith in the acquisition of the property is evident from the fact that it failed to make necessary inquiry regarding the purpose of the issuance of the two hundred thousand pesos (P200,000.00) manager’s check in his favor.
The core issue presented for resolution in the instant petition is who between SLDC and Babasanta has a better right over the two parcels of land subject of the instant case in view of the successive transactions executed by the Spouses Lu.
To prove the perfection of the contract of sale in his favor, Babasanta presented a document signed by Pacita Lu acknowledging receipt of the sum of fifty thousand pesos (P50,000.00) as partial payment for 3.6 hectares of farm lot situated at Barangay Pulong, Sta. Cruz, Sta. Rosa, Laguna.17 While the receipt signed by Pacita did not mention the price for which the property was being sold, this deficiency was supplied by Pacita Lu’s letter dated 29 May 198918 wherein she admitted that she agreed to sell the 3.6 hectares of land to Babasanta for fifteen pesos (P15.00) per square meter.
An analysis of the facts obtaining in this case, as well as the evidence presented by the parties, irresistibly leads to the conclusion that the agreement between Babasanta and the Spouses Lu is a contract to sell and not a contract of sale.
Contracts, in general, are perfected by mere consent,19 which is manifested by the meeting of the offer and the acceptance upon the thing which are to constitute the contract. The offer must be certain and the acceptance absolute.20 Moreover, contracts shall be obligatory in whatever form they may have been entered into, provided all the essential requisites for their validity are present.21
The receipt signed by Pacita Lu merely states that she accepted the sum of fifty thousand pesos (P50,000.00) from Babasanta as partial payment of 3.6 hectares of farm lot situated in Sta. Rosa, Laguna. While there is no stipulation that the seller reserves the ownership of the property until full payment of the price which is a distinguishing feature of a contract to sell, the subsequent acts of the parties convince us that the Spouses Lu never intended to transfer ownership to Babasanta except upon full payment of the purchase price.
Babasanta’s letter dated 22 May 1989 was quite telling. He stated therein that despite his repeated requests for the execution of the final deed of sale in his favor so that he could effect full payment of the price, Pacita Lu allegedly refused to do so. In effect, Babasanta himself recognized that ownership of the property would not be transferred to him until such time as he shall have effected full payment of the price. Moreover, had the sellers intended to transfer title, they could have easily executed the document of sale in its required form simultaneously with their acceptance of the partial payment, but they did not. Doubtlessly, the receipt signed by Pacita Lu should legally be considered as a perfected contract to sell.
The distinction between a contract to sell and a contract of sale is quite germane. In a contract of sale, title passes to the vendee upon the delivery of the thing sold; whereas in a contract to sell, by agreement the ownership is reserved in the vendor and is not to pass until the full payment of the price.22 In a contract of sale, the vendor has lost and cannot recover ownership until and unless the contract is resolved or rescinded; whereas in a contract to sell, title is retained by the vendor until the full payment of the price, such payment being a positive suspensive condition and failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from becoming effective.23
The perfected contract to sell imposed upon Babasanta the obligation to pay the balance of the purchase price. There being an obligation to pay the price, Babasanta should have made the proper tender of payment and consignation of the price in court as required by law. Mere sending of a letter by the vendee expressing the intention to pay without the accompanying payment is not considered a valid tender of payment.24 Consignation of the amounts due in court is essential in order to extinguish Babasanta’s obligation to pay the balance of the purchase price. Glaringly absent from the records is any indication that Babasanta even attempted to make the proper consignation of the amounts due, thus, the obligation on the part of the sellers to convey title never acquired obligatory force.
On the assumption that the transaction between the parties is a contract of sale and not a contract to sell, Babasanta’s claim of ownership should nevertheless fail.
Sale, being a consensual contract, is perfected by mere consent25 and from that moment, the parties may reciprocally demand performance.26 The essential elements of a contract of sale, to wit: (1) consent or meeting of the minds, that is, to transfer ownership in exchange for the price; (2) object certain which is the subject matter of the contract; (3) cause of the obligation which is established.27
The perfection of a contract of sale should not, however, be confused with its consummation. In relation to the acquisition and transfer of ownership, it should be noted that sale is not a mode, but merely a title. A mode is the legal means by which dominion or ownership is created, transferred or destroyed, but title is only the legal basis by which to affect dominion or ownership.28 Under Article 712 of the Civil Code, "ownership and other real rights over property are acquired and transmitted by law, by donation, by testate and intestate succession, and in consequence of certain contracts, by tradition." Contracts only constitute titles or rights to the transfer or acquisition of ownership, while delivery or tradition is the mode of accomplishing the same.29 Therefore, sale by itself does not transfer or affect ownership; the most that sale does is to create the obligation to transfer ownership. It is tradition or delivery, as a consequence of sale, that actually transfers ownership.
Explicitly, the law provides that the ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any of the ways specified in Article 1497 to 1501.30 The word "delivered" should not be taken restrictively to mean transfer of actual physical possession of the property. The law recognizes two principal modes of delivery, to wit: (1) actual delivery; and (2) legal or constructive delivery.
Actual delivery consists in placing the thing sold in the control and possession of the vendee.31 Legal or constructive delivery, on the other hand, may be had through any of the following ways: the execution of a public instrument evidencing the sale;32 symbolical tradition such as the delivery of the keys of the place where the movable sold is being kept;33 traditio longa manu or by mere consent or agreement if the movable sold cannot yet be transferred to the possession of the buyer at the time of the sale;34 traditio brevi manu if the buyer already had possession of the object even before the sale;35 and traditio constitutum possessorium, where the seller remains in possession of the property in a different capacity.36
Following the above disquisition, respondent Babasanta did not acquire ownership by the mere execution of the receipt by Pacita Lu acknowledging receipt of partial payment for the property. For one, the agreement between Babasanta and the Spouses Lu, though valid, was not embodied in a public instrument. Hence, no constructive delivery of the lands could have been effected. For another, Babasanta had not taken possession of the property at any time after the perfection of the sale in his favor or exercised acts of dominion over it despite his assertions that he was the rightful owner of the lands. Simply stated, there was no delivery to Babasanta, whether actual or constructive, which is essential to transfer ownership of the property. Thus, even on the assumption that the perfected contract between the parties was a sale, ownership could not have passed to Babasanta in the absence of delivery, since in a contract of sale ownership is transferred to the vendee only upon the delivery of the thing sold.37
However, it must be stressed that the juridical relationship between the parties in a double sale is primarily governed by Article 1544 which lays down the rules of preference between the two purchasers of the same property. It provides:
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.
The principle of primus tempore, potior jure (first in time, stronger in right) gains greater significance in case of double sale of immovable property. When the thing sold twice is an immovable, the one who acquires it and first records it in the Registry of Property, both made in good faith, shall be deemed the owner.38 Verily, the act of registration must be coupled with good faith— that is, the registrant must have no knowledge of the defect or lack of title of his vendor or must not have been aware of facts which should have put him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the title of his vendor.39
Admittedly, SLDC registered the sale with the Registry of Deeds after it had acquired knowledge of Babasanta’s claim. Babasanta, however, strongly argues that the registration of the sale by SLDC was not sufficient to confer upon the latter any title to the property since the registration was attended by bad faith. Specifically, he points out that at the time SLDC registered the sale on 30 June 1990, there was already a notice of lis pendens on the file with the Register of Deeds, the same having been filed one year before on 2 June 1989.
Did the registration of the sale after the annotation of the notice of lis pendens obliterate the effects of delivery and possession in good faith which admittedly had occurred prior to SLDC’s knowledge of the transaction in favor of Babasanta?
We do not hold so.
It must be stressed that as early as 11 February 1989, the Spouses Lu executed the Option to Buy in favor of SLDC upon receiving P316,160.00 as option money from SLDC. After SLDC had paid more than one half of the agreed purchase price of P1,264,640.00, the Spouses Lu subsequently executed on 3 May 1989 a Deed of Absolute Sale in favor or SLDC. At the time both deeds were executed, SLDC had no knowledge of the prior transaction of the Spouses Lu with Babasanta. Simply stated, from the time of execution of the first deed up to the moment of transfer and delivery of possession of the lands to SLDC, it had acted in good faith and the subsequent annotation of lis pendens has no effect at all on the consummated sale between SLDC and the Spouses Lu.
A purchaser in good faith is one who buys property of another without notice that some other person has a right to, or interest in, such property and pays a full and fair price for the same at the time of such purchase, or before he has notice of the claim or interest of some other person in the property.40 Following the foregoing definition, we rule that SLDC qualifies as a buyer in good faith since there is no evidence extant in the records that it had knowledge of the prior transaction in favor of Babasanta. At the time of the sale of the property to SLDC, the vendors were still the registered owners of the property and were in fact in possession of the lands.l^vvphi1.net Time and again, this Court has ruled that a person dealing with the owner of registered land is not bound to go beyond the certificate of title as he is charged with notice of burdens on the property which are noted on the face of the register or on the certificate of title.41 In assailing knowledge of the transaction between him and the Spouses Lu, Babasanta apparently relies on the principle of constructive notice incorporated in Section 52 of the Property Registration Decree (P.D. No. 1529) which reads, thus:
Sec. 52. Constructive notice upon registration. – Every conveyance, mortgage, lease, lien, attachment, order, judgment, instrument or entry affecting registered land shall, if registered, filed, or entered in the office of the Register of Deeds for the province or city where the land to which it relates lies, be constructive notice to all persons from the time of such registering, filing, or entering.
However, the constructive notice operates as such¾by the express wording of Section 52¾from the time of the registration of the notice of lis pendens which in this case was effected only on 2 June 1989, at which time the sale in favor of SLDC had long been consummated insofar as the obligation of the Spouses Lu to transfer ownership over the property to SLDC is concerned.
More fundamentally, given the superiority of the right of SLDC to the claim of Babasanta the annotation of the notice of lis pendens cannot help Babasanta’s position a bit and it is irrelevant to the good or bad faith characterization of SLDC as a purchaser. A notice of lis pendens, as the Court held in Nataño v. Esteban,42 serves as a warning to a prospective purchaser or incumbrancer that the particular property is in litigation; and that he should keep his hands off the same, unless he intends to gamble on the results of the litigation." Precisely, in this case SLDC has intervened in the pending litigation to protect its rights. Obviously, SLDC’s faith in the merit of its cause has been vindicated with the Court’s present decision which is the ultimate denouement on the controversy.
The Court of Appeals has made capital43 of SLDC’s averment in its Complaint-in-Intervention44 that at the instance of Pacita Lu it issued a check for P200,000.00 payable to Babasanta and the confirmatory testimony of Pacita Lu herself on cross-examination.45 However, there is nothing in the said pleading and the testimony which explicitly relates the amount to the transaction between the Spouses Lu and Babasanta for what they attest to is that the amount was supposed to pay off the advances made by Babasanta to Pacita Lu. In any event, the incident took place after the Spouses Lu had already executed the Deed of Absolute Sale with Mortgage in favor of SLDC and therefore, as previously explained, it has no effect on the legal position of SLDC.
Assuming ex gratia argumenti that SLDC’s registration of the sale had been tainted by the prior notice of lis pendens and assuming further for the same nonce that this is a case of double sale, still Babasanta’s claim could not prevail over that of SLDC’s. In Abarquez v. Court of Appeals,46 this Court had the occasion to rule that if a vendee in a double sale registers the sale after he has acquired knowledge of a previous sale, the registration constitutes a registration in bad faith and does not confer upon him any right. If the registration is done in bad faith, it is as if there is no registration at all, and the buyer who has taken possession first of the property in good faith shall be preferred.
In Abarquez, the first sale to the spouses Israel was notarized and registered only after the second vendee, Abarquez, registered their deed of sale with the Registry of Deeds, but the Israels were first in possession. This Court awarded the property to the Israels because registration of the property by Abarquez lacked the element of good faith. While the facts in the instant case substantially differ from that in Abarquez, we would not hesitate to rule in favor of SLDC on the basis of its prior possession of the property in good faith. Be it noted that delivery of the property to SLDC was immediately effected after the execution of the deed in its favor, at which time SLDC had no knowledge at all of the prior transaction by the Spouses Lu in favor of Babasanta.1a\^/phi1.net
The law speaks not only of one criterion. The first criterion is priority of entry in the registry of property; there being no priority of such entry, the second is priority of possession; and, in the absence of the two priorities, the third priority is of the date of title, with good faith as the common critical element. Since SLDC acquired possession of the property in good faith in contrast to Babasanta, who neither registered nor possessed the property at any time, SLDC’s right is definitely superior to that of Babasanta’s.
At any rate, the above discussion on the rules on double sale would be purely academic for as earlier stated in this decision, the contract between Babasanta and the Spouses Lu is not a contract of sale but merely a contract to sell. In Dichoso v. Roxas,47 we had the occasion to rule that Article 1544 does not apply to a case where there was a sale to one party of the land itself while the other contract was a mere promise to sell the land or at most an actual assignment of the right to repurchase the same land. Accordingly, there was no double sale of the same land in that case.
WHEREFORE, the instant petition is hereby GRANTED. The decision of the Court of Appeals appealed from is REVERSED and SET ASIDE and the decision of the Regional Trial Court, Branch 31, of San Pedro, Laguna is REINSTATED. No costs.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ., concur.
Footnotes
1 RTC Records, pp. 1-11.
2 Id. at 30-37.
3 Id. at 73-90.
4 Id. at 104-106.
5 Id. at 96.
6 Id. at 98- 100.
7 Id. at 116-119.
8 Id. at 120-121.
9 Id. at 162-168.
10 Id. at 287-288.
11 Penned by Justice Cesar D. Francisco, concurred in by Justices Eubulo G. Verzola and Oswaldo D. Agcaoili.
12 CA Rollo, pp. 204-220 for SLDC and pp. 224-230 for Spouses Lu.
13 Id. at 251.
14 Id. at 261-262.
15 Rollo, pp. 19-20.
16 Id. at 347-348.
17 RTC Records, p. 9.
18 Rollo, p. 11.
19 Art. 1315, Civil Code.
20 Art. 1319, Civil Code.
21 Tan v. Lim, 357 Phil. 452 (1998); Cenido v. Apacionado, 376 Phil. 801 (1999).
22 Ong v. Court of Appeals, 361 Phil. 228 (1999).
23 Odyssey Park, Inc. v. Court of Appeals, 345 Phil. 475 (1997).
24 Vda. de Zulueta, et.al., v. Octaviano, 205 Phil. 247 (1983).
25 Co v. Court of Appeals, 349 Phil. 745 (1998); Fule v. Court of Appeals, 350 Phil. 349 (1998).
26 Xentrex Automotive, Inc. v. Court of Appeals, 353 Phil. 258 (1998).
27 San Juan Structural and Steel Fabricators, Inc. v. Court of Appeals, 357 Phil. 631 (1998); Archipelago Management and Marketing Corporation v. Court of Appeals, 359 Phil. 363 (1998.
28 Villanueva, Philippine Law on Sales, 1995 Edition, at p. 5.
29 Gonzales v. Rojas, 16 Phil. 51 (1910); Ocejo, Perez and Co. v. International Bank, 37 Phil. 631 (1917-18); Fidelity and Deposit Co. v. Wilson, 8 Phil. 51 (1907).
30 Art. 1495, Civil Code
31 Art. 1497, Civil Code.
32 Art. 1498, Civil Code.
33 Art. 1498, par. 2, Civil Code.
34 Art. 1499, Civil Code.
35 Ibid.
36 Art. 1500, Civil Code.
37 Dawson v. Register of Deeds of Quezon City, 356 Phil. 1037 (1998).
38 Nuguid v. Court of Appeals, G.R. No. 77423, 13 March 1989, 171 SCRA 213; Bautista v. Court of Appeals, G.R. No. 106042, 28 February 1994, 230 SCRA 446.
39 Balatbat v. Court of Appeals, 329 Phil. 858 (1996).
40 Bautista v. Court of Appeals, supra note 39.
41 Viray v. Court of Appeals, 350 Phil. 107 (1998); Heirs of Leopoldo Vencilao, Sr. v. Court of Appeals, 351 Phil. 815 (1998); Heirs of Spouses Benito Gavino and Juana Euste v. Court of Appeals, 353 Phil. 686 (1998).
42 124 Phil. 1067, 1072 (1966); citation omitted.
43 Rollo, pp. 25-29.
44 RTC Records, p. 165.
45 TSN, September 19, 1991, pp. 11-12, 14-15, 19.
46 G.R. No. 95843, 2 September 1992, 213 SCRA 415 citing Palanca v. Director of Lands, 43 Phil. 146 (1922); Cagaoan v. Cagaoan, 43 Phil. 554 (1922); Fernandez v. Mercader, 43 Phil. 581 (1922).
47 11 Phil. 768 (1908).
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