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Rev. Fr.

Dante Martinez vs CA FACTS: Sometime in February 1981, private respondents Godofredo Dela Paz and his sister Manuela Dela Paz entered into an oral contract with petitioner Fr. Dante Martinez, then Assistant Parish Priest of Cabanatuan City for the sale of a certain lot located at Villa Fe Subdivision. At the time of the sale, the lot was still registered under the name of Claudia Dela Paz, private respondents mother although the latter had already sold it to private respondent Manuela Dela Paz by virtue if a Deed of Absolute Sale. Private respondent subsequently registered the lot under her name and was issued a Transfer Certificate Title. When the land was offered for sale to petitioner, private respondents Dela Paz were accompanied by their mother since petitioner dealt with the Dela Pazes as a family and not individually. He was assured by them that the lot belonged to Manuela. It was agreed that petitioner will pay 3000 downpayment and the balance would be payable in installments. Petitioner started the construction of a house on the lot with the written consent if the then registered owner, Claudia. Construction on the house was completed and since them, petitioner and his family have maintained their residence there. On January 1983, petitioner completed payment of the lot for which private respondents Dela Paz executed two documents. The first document was a promise that the Deed of Sale shall be delivered to petitioner on February 25, 1983 and the second document was a certification that Freddie Dela Paz has agreed to sign the affidavit of sale of lot sold to petitioner. However, private respondents Dela Paz never delivered the Deed of Sale as they promised to petitioner. In the meantime, in a Deed of Absolute Sale with right to repurchase, private respondents Dela Paz sold three lots with right to repurchase the same within one year to private respondents spouses Veneracion. One of the lots sold was the lot previously sold to petitioner. Spouses Veneracion never took actual possession of any of these lots during the period of redemption, but all the titles to the lots were given to him. Before the expiration of the one year period, private respondet Godofredo Dela Paz informed private respondent Reynaldo Veneracion that he was selling the three lots to another person. Indeed, Veneracion received a call from Mr. Tecson verifying if he had the titles ti the properties as the Dela Pazes were offering to sell the two lots. The offer included the lot purchased by petitioner. Private respondent Veneracion offered to purchase the same two lots from Dela Paz and so a Deed of Absolute Sale was executed over these lots. Sometime in January 1984, Reynaldo Veneracion asked a certain Renato Reyes, petitioners neighbor, who the owner of the building erected on the subject lot was. Reyes told him that it was Feliza Martines, petitioners mother, who was in possession of the property. Veneracion told Godofredo about the matter and was assured by the latter that he would talk to Feliza. Based on that assurance, private respondents Veneracion registered the lots with the Register of Deeds. Petitioner discovered that the lot he was occupying with his family had been sold to the spouses Veneracion after receiving a letter from private respondent Reynaldo Veneracion, claiming ownership of the land and demanding that they vacate the property and remove their improvements thereon. Petitioner, in turn, demanded through counsel the execution of the deed of sale from private respondents Dela Paz and informed Reynaldo Veneracion that he was the owner of the property as he had previously purchased the same from private respondents Dela Paz. The matter was then referred to the Katarungang Pambarangay for conciliation but the parties failed to reach an agreement. As a consequence, private respondent Reynaldo Veneracion brought an action for ejectment in the MTC against petitioner and his mother. On the other hand, petitioner caused a notice of lis pendens to be recorded in the TCT. The TC rendered a decision in favor of petitioner. The TCs decision where objected by the private respondents Veneracion and these cases were forwarded to the RTC. RTC rendered a decision finding private respondents Veneracion as the true owner of the lot in dispute by virtue of their prior registration with the Register of Deeds. Meanwhile, while the ejectment case was pending before the MTC, petitioner Martinez filed a complaint for annulment of sale with damages against the Veneracions and Dela Pazez with the RTC. RTC rendered a decision finding private respondents Veneracion owners of the land in dispute. Petitioner then filed a petition for review for the ejectment case before the CA. As to the case for annulment of sale and damages, the petitioner likewise appealed the TCs decision before the CA.

CA rendered a decision in favor of respondents. Petitioner filed a motion for reconsideration but was denied. Hence, this case.

ISSUE Whether or not private respondents Veneracion are buyers in good faith of the lot in dispute as to make them the absolute owners thereof. HELD The CA based its ruling that private respondents are the owner of the disputed lot on their reliance on private respondent Godofredo Dela Pazs assurance that he would take care of the matter concerning petitioners occupancy of the disputed lot as constituting good faith. This case, however, involves double sale and, on this matter, Article 1544 of the CC which provides two requirements acquisition in good faith and recording in good faith. The presence of good faith shall be ascertained from the circusmtances surrounding the purchase of the land and the SC ruled in three ways. First, with regard to the first sale to private respondents Veneracion, Reynaldo Veneracion testified that before the execution of the sale with right to repurchase, he inspected the lot and it was vacant. However, this is belied by the testimony of Engr. Minor who was the building inspector and when he conducted an ocular inspection of the lot in dispute, he found that the building was 100% completed. Thus, private respondents already knew that there was a construction being made on the property they purchased. Second, the parties entered into an equitable mortgage and not contract of sale. The requisites were all present: a. Private respondents Veneracion never took actual possession of the three lots; b. Private respondents Dela Paz remained possession of the third lot which was co-owned by them and where they resided; c. During the first sale and second sale, Veneracion never made any effort to take possession of the properties; and d. When the period of redemption expired and when they were informed that the Dela Pazes are offering the lots for sale, they never objected and instead, offered to purchase the two lots. Third, the appellate courts reliance on Articles 1357 and 1358 of the Civil Code to determine private respondents Veneractions lack of knowledge of petitioners ownership of the disputed lot is erroneous. a. Art. 1357 and Art. 1358, in relation to Art. 1403(2) of the Civil Code, requires that the sale of real property must be in writing for it to be enforceable. b. It need not be notarized. c. If the sale has not been put in writing, either of the contracting parties can compel the other to observe such requirement. d. This is what petitioner did when he repeatedly demanded that a Deed of Absolute Sale be executed in his favor by private respondents De la Paz. e. There is nothing in the above provisions which require that a contract of sale of realty must be executed in a public document. f. In any event, it has been shown that private respondents Veneracion had knowledge of facts which would put them on inquiry as to the nature of petitioners occupancy of the disputed lot. Finally, the SC reversed the decision of the Court of Appeals and: a. Declared the deed of sale executed by private respondents Godofredo and Veneracion null and void; b. Ordered private respondents Godofredo and Manuela to execute a Deed of Absolute Sale in favor of petitioner Rev. Fr. Dante Martinez; c. Ordered private respondents Dela Pazes to reimburse spouses Veneracion the amount the latter may have paid; d. Ordered the Register of Deeds to cancel the TCT in favor of the Veneracion spouses and issue a new one in the name of petitioner and e. Ordered private respondents to pay petitioner jointly and severally the sum as attorneys fees and to pay the cosrs of the suit.