1.

CARBONEL VS. CA

SYNOPSIS
On January 27, 1955, Jose Poncio executed a private memorandum of sale of the
property in question in favor of Rosario Carbonell. Four days latter, or an January 31,
1955, Poncio in a private memorandum bound himself to sell the property for an
improved price to one Emma Infante, and on February 2, 1955, he executed a formal
registerable deed of sale in her (Infante's) favor. So, when the first buyer Carbonell saw
the seller Poncio a few days afterwards, bringing the formal deed of sale for the latter's
signature and the balance of the agreed cash payment, she was told that he could no
longer proceed with formalizing the contract with her (Carbonell) because he had already
formalized a sales contract in favor of Infante.
Since Carbonell (the first buyer) did not have a formal registerable deed of sale, she did
the next best thing to protect her legal rights and registered on February 8, 1955 with the
Register of Deeds her adverse claim as first buyer entitled to the property. The second
buyer registered the sale in her favor with the Register of Deeds only on February 12,
1955, so that the transfer certificate of title issued in her favor carried the duly annotated
adverse claim of Carbonell as the first buyer.
The trial court declared the claim of the second buyer Infante to be superior to that of the
first buyer Carbonell. The Court of Appeals (Fifth Division) reversed the decision of the
trial court, declaring the first buyer Carbonell to have a superior right to the land in
question, and condemning the second buyer Infante to reconvey to the former, after
reimbursement of expenses, the land in question and all its improvements. On motion for
reconsideration, a special division of five of the said appeals court annulled and set aside
the decision of the regular division and entered another judgment affirming in toto the
decision of the court a quo.
The Supreme Court reversed the decision of the Special Division of Five of the Court of
Appeals and declared the first buyer Rosario Carbonell to have the superior right to the
land in question.
DECISION
Petitioner seeks a review of the resolution of the Court of Appeals (Special Division of
Five) dated October 30, 1968, reversing its decision of November 2, 1967 (Fifth Division),
and its resolution of December 6, 1968 denying petitioner's motion for reconsideration.
The dispositive part of the challenged resolution reads:
"Wherefore, the motion for reconsideration filed on behalf of appellee Emma Infante, is
hereby granted and the decision of November 2, 1967, is hereby annulled and set aside.
Another judgment shall be entered affirming in toto that of the court a quo dated January
20, 1965, which dismisses the plaintiff's complaint and defendants' counterclaim. Without
costs.

The facts of the case are as follows:

Prior to January 27, 1955, respondent Jose Poncio, a native of the Batanes Islands, was
the owner of the parcel of land herein involved with improvements situated at 179 V.
Agan St., San Juan, Rizal, having an area of some one hundred ninety-five (195) square
meters, more or less, covered by TCT No. 5040 and subject to a mortgage in favor of the
Republic Savings Bank for the sum of P1,500.00. Petitioner Rosario Carbonell, a cousin
and adjacent neighbor of respondent Poncio, and also from the Batanes Islands, lived in
the adjoining lot at 177 V. Agan Street. LexLib
Both petitioners Rosario Carbonell and respondent Emma Infante offered to buy the said
lot from Poncio (Poncio's Answer, p. 38, rec. on appeal).
Respondent Poncio, unable to keep up with the installments due on the mortgage,
approached petitioner one day and offered to sell to the latter the said lot, excluding the
house wherein respondent lived. Petitioner accepted the offer and proposed the price of
P9.50 per square meter. Respondent Poncio, after having secured the consent of his wife
and parents, accepted the price proposed by petitioner, on the condition that from the
purchase price would come the money to be paid to the bank.
Petitioner and respondent Jose Poncio then went to the Republic Savings Bank and
secured the consent of the President thereof for her to pay the arrears on the mortgage
and to continue the payment of the installments as they fall due. The amount in arrears
reached a total sum of P247.26. But because respondent Poncio had previously told her
that the money needed was only P200.00, only the latter amount was brought by
petitioner constraining respondent Jose Poncio to withdraw the sum of P47.00 from his
bank deposit with Republic Savings Bank. But the next day, petitioner refunded to Poncio
the sum of P47.00. Cdpr
On January 27, 1955, petitioner and respondent Poncio, in the presence of a witness,
made and executed a document in the Batanes dialect, which, translated into English,
reads:
"CONTRACT FOR ONE HALF LOT WHICH I BOUGHT FROM
JOSE PONCIO
"Beginning today, January 27, 1955, Jose Poncio can start living on the lot sold by him to
me, Rosario Carbonell, until after one year during which time he will not pay anything.
Then if after said one year, he could not find any place where to move his house, he
could still continue occupying the site but he should pay a rent that may be agreed.

(Sgd.) "JOSE PONCIO

(Sgd.) "ROSARIO CARBONELL
(Sgd.) "CONSTANCIO MEONADA
Witness"
(Pp. 6-7, rec. on appeal).
Thereafter, petitioner asked Atty. Salvador Reyes, also from the Batanes Islands, to
prepare the formal deed of sale, which she brought to respondent Poncio together with
the amount of some P400.00, the balance she still had to pay in addition to her assuming
the mortgage obligation to Republic Savings Bank.
Upon arriving at respondent Jose Poncio's house, however, the latter told petitioner that
he could not proceed any more with the sale, because he had already even the lot to
respondent Emma Infante; and that he could not withdraw from his deal with respondent
Mrs. Infante, even if he were to go to jail. Petitioner then sought to contact respondent
Mrs. Infante, but the latter refused to see her. LLjur
On February 5, 1955, petitioner saw Emma Infante erecting a wall around the lot with a
gate.
Petitioner then consulted Atty. Jose Garcia, who advised her to present and adverse
claim over the land in question with the Office of the Register of Deeds Rizal. Atty. Garcia
actually sent a letter of inquiry to the Register of Deeds and demand letters to private
respondents Jose Poncio and Emma Infante.
In his answer to the complaint, Poncio admitted "that on January 30, 1955, Mrs. Infante
improved her offer and he agreed to sell the land and its improvements to her for
P3,535.00" (pp. 38-40, ROA).
In a private memorandum agreement dated January 31, 1955, respondent Poncio indeed
bound himself to sell to his co-respondent Emma Infante, the property for the sum of
P2,357.52, with respondent Emma Infante still assuming the existing mortgage debt in
favor of Republic Savings Bank in the amount of P1,177.48. Emma Infante lives just
behind the houses of Poncio and Rosario Carbonell.
On February 2, 1955, respondent Jose Poncio executed the formal deed of sale in favor
of respondent Mrs. Infante in the total sum of P3,554.00 and on the same date, the latter
paid Republic Savings Bank the mortgage indebtedness of P1,500.00. The mortgage on
the lot was eventually discharged.
Informed that the sale in favor of respondent Emma Infante had not yet been registered,
Atty. Garcia prepared an adverse claim for petitioner, who signed and swore to and
registered the same on February 8, 1955.

The deed of sale in favor of respondent Mrs. Infante was registered only on February 12,
1955. As a consequence thereof, a Transfer Certificate of Title was issued to her but with
the annotation of the adverse claim of petitioner Rosario Carbonell.
Respondent Emma Infante took immediate possession of the lot involved, covered the
same with 500 cubic meters of garden soil and built therein a wall and gate, spending the
sum of P1,500.00. She further contracted the services of an architect to build a house;
but the construction of the same started only in 1959 years after the litigation actually
began and during its pendency. Respondent Mrs. Infante spent for the house the total
amount of P11,929.00.
On June 1, 1955, petitioner Rosario Carbonell, thru counsel, filed a second amended
complaint against private respondents, praying that she be declared the lawful owner of
the questioned parcel of land; that the subsequent sale to respondents Ramon R. Infante
and Emma L. Infante be declared null and void, and that respondent Jose Poncio be
ordered to execute the corresponding deed of conveyance of said land in her favor and
for damages and attorney's fees (pp. 1-7, rec. on appeal in the C.A.).
Respondents first moved to dismiss the complaint on the ground, among others, that
petitioner's claim is unenforceable under the Statute of Frauds, the alleged sale in her
favor not being evidenced by a written document (pp. 7-13, rec. on appeal in the C.A.);
and when said motion was denied without prejudice to passing on the question raised
therein when the case would be tried on the merits (p. 17, ROA in the C.A.), respondents
filed separate answers, reiterating the grounds of their motion to dismiss (pp. 18-23, ROA
in the C.A.).
During the trial, when petitioner started presenting evidence of the sale of the land in
question to her by respondent Poncio, part of which evidence was the agreement written
in the Batanes dialect aforementioned, respondent Infantes objected to the presentation
by petitioner of parol evidence to prove the alleged sale between her and respondent
Poncio. In its order of April 26, 1966, the trial court sustained the objection and dismissed
the complaint on the ground that the memorandum presented by petitioner to prove said
sale does not satisfy the requirements of the law (pp. 31-35, ROA in the C.A.).
From the above order of dismissal, petitioner appealed to the Supreme Court (G.R. No.
L-1 1231) which ruled in a decision dated May 12, 1958, that the Statute of Frauds, being
applicable only to executory contracts, does not apply to the alleged sale between
petitioner and respondent Poncio, which petitioner claimed to have been partially
performed, so that petitioner is entitled to establish by parol evidence "the truth of this
allegation, as well as the contract itself." The order appealed from was thus reversed, and
the case remanded to the court a quo for further proceedings (pp. 26-49, ROA in the
C.A.).

After trial in the court a quo, a decision was rendered on December 5, 1962, declaring the
second sale by respondent Jose Poncio to his co-respondents Ramon Infante and Emma
Infante of the land in question null and void and ordering respondent Poncio to execute
the proper deed of conveyance of said land in favor of petitioner after compliance by the
latter of her covenants under her agreement with respondent Poncio (pp. 50-56, ROA in
the C.A.).
On January 23, 1963, respondent Infantes, through another counsel, filed a motion for retrial to adduce evidence for the proper implementation of the court's decision in case it
would be affirmed on appeal (pp. 56-60, ROA in the C.A.), which motion was opposed by
petitioner for being premature (pp. 61-64, ROA in the C.A.). Before their motion for re-trial
could be resolved, respondent Infantes, this time through their former counsel, filed
another motion for new trial, claiming that the decision of the trial court is contrary to the
evidence and the law (pp. 64-78, ROA in the C.A.), which motion was also opposed by
petitioner (pp. 78-89, ROA in the C.A.). prLL

Petitioner Rosario Carbonell moved to reconsider the Resolution of the Special Division
of Five, which motion was denied by Minute Resolution of December 6, 1968 (but with
Justices Rodriguez and Gatmaitan voting for reconsideration) [Appendix "C" of Petition].
Hence, this appeal by certiorari.
Article 1544, New Civil Code, which is decisive of this case, recites:
"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.

The trial court granted a new trial (pp. 89-90, ROA in the C.A.), at which re-hearing only
the respondents introduced additional evidence consisting principally of the cost of
improvements they introduced on the land in question (p. 9, ROA in the C.A.).

"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).

After the re-hearing, the trial court rendered a decision, reversing its decision of
December 5, 1962 on the ground that the claim of the respondents was superior to the
claim of petitioner, and dismissing the complaint (pp. 91-95, ROA in the C.A.). From this
decision, petitioner Rosario Carbonell appealed to the respondent Court of Appeals (p.
96, ROA in the C.A.).

It is essential that the buyer of realty must act in good faith in registering his deed of sale
to merit the protection of the second paragraph of said Article 1544.

On November 2, 1967, the Court of Appeals (Fifth Division composed of Justices Magno
Gatmaitan, Salvador V. Esguerra and Angel H. Mojica, speaking through Justice Magno
Gatmaitan), rendered judgment reversing the decision of the trial court, declaring
petitioner herein, to have a superior right to the land in question, and condemning
defendant Infantes to reconvey to petitioner, after her reimbursement to them of the sum
of P3,000.00 plus legal interest, the land in question and all its improvements (Appendix
"A" of Petition).
Respondents Infantes sought reconsideration of said decision and acting on the motion
for reconsideration, the Appellate Court, three Justices (Villamor, Esguerra and Nolasco),
of Special Division of Five, granted said motion, annulled and set aside its decision of
November 2, 1967, and entered another judgment affirming in toto the decision of the
court a quo, with Justices Gatmaitan and Rodriguez dissenting (Appendix "B" of Petition).

Unlike the first and third paragraphs of said Article 1544, which accord preference to the
one who first takes possession in good faith of personal or real property, the second
paragraph directs that ownership of immovable property should be recognized in favor of
one "who in good faith first recorded" his right. Under the first and third paragraphs, good
faith must characterize the prior possession. Under the second paragraph, good faith
must characterize the act of anterior registration (DBP vs. Mangawang, et al., 11 SCRA
405; Soriano, et al. vs. Magale, et al., 8 SCRA 489). LLphil
If there is no inscription, what is decisive is prior possession in good faith. If there is
inscription, as in the case at bar, prior registration in good faith is a pre-condition to
superior title.
When Carbonell bought the lot from Poncio on January 27, 1955, she was the only buyer
thereof and the title of Poncio was still in his name solely encumbered by bank mortgage
duly annotated thereon. Carbonell was not aware and she could not have been aware
of any sale to Infante as there was no such sale to Infante then. Hence, Carbonell's
prior purchase of the land was made in good faith. Her good faith subsisted and
continued to exist when she recorded her adverse claim four (4) days prior to the
registration of Infante's deed of sale. Carbonell's good faith did not cease after Poncio
told her on January 31, 1955 of his second sale of the same lot to Infante, Because of
that information, Carbonell wanted an audience with Infante, which desire underscores
Carbonell's good faith. With an aristocratic disdain unworthy of the good breeding of a

good Christian and good neighbor, Infante snubbed Carbonell like a leper and refused to
see her. So Carbonell did the next best thing to protect her right she registered her
adverse claim on February 8, 1955. Under the circumstances, this recording of her
adverse claim should be deemed to have been done in good faith and should emphasize
Infante's bad faith when she registered her deed of sale four (4) days later on February
12, 1955.
Bad faith arising from previous knowledge by Infante of the prior sale to Carbonell is
shown by the following facts, the vital significance and evidenciary effect of which the
respondent Court of Appeals either overlooked or failed to appreciate:
(1) Mrs. Infante refused to see Carbonell, who wanted to see Infante after she was
informed by Poncio that he sold the lot to Infante but several days before Infante
registered her deed of sale. This indicates that Infante knew from Poncio and from the
bank of the prior sale of the lot by Poncio to Carbonell. Ordinarily, one will not refuse to
see a neighbor. Infante lives just behind the house of Carbonell. Her refusal to talk to
Carbonell could only mean that she did not want to listen to Carbonell's story that she
(Carbonell) had previously bought the lot from Poncio.
(2) Carbonell was already in possession of the mortgage passbook [not Poncio's savings
deposit passbook Exhibit "1" Infantes] and Poncio's copy of the mortgage contract,
when Poncio sold the lot to Infante. This also shows that the lot was already sold to
Carbonell who, after paying the arrearages of Poncio, assumed the balance of his
mortgage indebtedness to the bank, which in the normal course of business must have
necessarily informed Infante about the said assumption by Carbonell of the mortgage
indebtedness of Poncio. Before or upon paying in full the mortgage indebtedness of
Poncio to the bank, Infante naturally must have demanded from Poncio the delivery to
her of his mortgage passbook as well as Poncio's mortgage contract so that the fact of
full payment of his bank mortgage will be entered therein; and Poncio, as well as the
bank, must have inevitably informed her that said mortgage passbook could not be given
to her because it was already delivered to Carbonell.
If Poncio was still in possession of the mortgage passbook and his copy of the mortgage
contract at the time he executed a deed of sale in favor of the Infantes and when the
Infantes redeemed his mortgage indebtedness from the bank, Poncio would have
surrendered his mortgage passbook and his copy of the mortgage contract to the
Infantes, who could have presented the same as exhibits during the trial, in much the
same way that the Infantes were able to present as evidence Exhibit "1" Infantes,
Poncio's savings deposit passbook, of which Poncio necessarily remained in possession
as the said deposit passbook was never involved in the contract of sale with assumption
of mortgage. Said savings deposit passbook merely proves that Poncio had to withdraw
P47.26, which amount was added to the sum of P200.00 paid by Carbonell for Poncio's
amortization arrearages in favor of the bank on January 27, 1955; because Carbonell on
that day brought with her only P200.00, as Poncio told her that was the amount of his

arrearages to the bank. But the next day Carbonell refunded to Poncio the sum of
P47.26. prLL
(3) The fact that Poncio was no longer in possession of his mortgage passbook and that
the said mortgage passbook was already in possession of Carbonell, should have
compelled Infante to inquire from Poncio why he was no longer in possession of the
mortgage passbook and from Carbonell why she was in possession of the same
(Paglago, et al., vs. Jarabe, et al., 22 SCRA 1247, 1252-1253). The only plausible and
logical reason why Infante did not bother anymore to make such inquiry, was because in
the ordinary course of business the bank must have told her that Poncio already sold the
lot to Carbonell who thereby assumed the mortgage indebtedness of Poncio and to
whom Poncio delivered his mortgage passbook. Hoping to give a semblance of truth to
her pretended good faith, Infante snubbed Carbonell's request to talk to her about the
prior sale to her by Poncio of the lot. As aforestated, this is not the attitude expected of a
good neighbor imbued with Christian charity and good will as well as a clear conscience.
(4) Carbonell registered on February 8, 1955 her adverse claim, which was accordingly
annotated on Poncio's title four [4] days before Infante registered on February 12, 1955
her deed of sale executed on February 2, 1955. Here she was again on notice of the prior
sale to Carbonell. Such registration of adverse claim is valid and effective (Jovellanos vs.
Dimalanta, L-11736-37, January 30, 1959, 105 Phil. 1250-51).
(5) In his answer to the complaint filed by Poncio, as defendant in the Court of First
Instance, he alleged that both Mrs. Infante and Mrs. Carbonell offered to buy the lot at
P15.00 per square meter, which offers he rejected as he believed that his lot is worth at
least P20.00 per square meter. It is therefore logical to presume that Infante was told by
Poncio and consequently knew of the offer of Carbonell which fact likewise should have
put her on her guard and should have compelled her to inquire from Poncio whether or
not he had already sold the property to Carbonell.
As recounted by Chief Justice Roberto Concepcion, then Associate Justice, in the
preceding case of Rosario Carbonell vs. Jose Poncio, Ramon Infante and Emma Infante
(L-11231, May 12, 1958), Poncio alleged in his answer:
". . . that he had consistently turned down several offers, made by plaintiff, to buy the land
in question, at P15 a square meter, for he believes that it is worth not less than P20 a
square meter; that Mrs. Infante, likewise, tried to buy the land at P15 a square meter; that
on or about January 27, 1955, Poncio was advised by plaintiff that should she decide to
buy the property at P20 a square meter, she would allow bill to remain in the property for
one year; that plaintiff then induced Poncio to sign a document, copy of which is probably
the one appended to the second amended complaint; that Poncio signed it 'relying upon
the statement of the plaintiff that the document was a permit for him to remain in the
premises in the event defendant decided to sell the property to the plaintiff at P20.00 a
square meter'; that on January 30, 1955 Mrs. Infante improved her offer and he agreed to
sell the land and its improvements to her for P3,535.00; that Poncio has not lost 'his

mind,' to sell his property, worth at least P4,000, for the paltry sum P1,177.48, the amount
of his obligation to the Republic Savings Bank; and that plaintiff's action is barred by the
Statute of Frauds. . . ." (pp. 38-40, ROA, emphasis supplied).

IIEXISTENCE OF THE PRIOR SALE TO CARBONELL DULY ESTABLISHED

(1) In his order dated April 26, 1956 dismissing the complaint on the ground that the
private document Exhibit "A" executed by Poncio and Carbonell and witnessed by
Constancio Meonada captioned "Contract for One-half Lot which I Bought from Jose
Poncio," was not such a memorandum in writing within the purview of the Statute of
Frauds, the trial judge himself recognized the fact of the prior sale to Carbonell when he
stated that "the memorandum in question merely states that Poncio is allowed to stay in
the property which he had sold to the plaintiff . There is no mention of the consideration,
a description of the property and such other essential elements of the contract of sale.
There is nothing in the memorandum which would tend to show even in the slightest
manner that it was intended to be an evidence of contract of sale. On the contrary, from
the terms of the memorandum, it tends to show that the sale of the property in favor of
the plaintiff is already an accomplished act. By the very contents of the memorandum
itself, it cannot therefore, be considered to be the memorandum which would show that a
sale has been made by Poncio in favor of the plaintiff" (p. 33, ROA, emphasis supplied).
As found by the trial court, to repeat, the said memorandum states "that Poncio is
allowed to stay in the property which he had sold to the plaintiff . . ., it tends to show that
the sale of the property in favor of the plaintiff is already an accomplished act. . . . ."
(2) When the said order was appealed to the Supreme Court by Carbonell in the previous
case of Rosario Carbonell vs. Jose Poncio, Ramon Infante and Emma Infante (L-11231,
supra), Chief Justice Roberto Concepcion, then Associate Justice, speaking for a
unanimous Court, reversed the aforesaid order of the trial court dismissing the complaint,
holding that because the complaint alleges and the plaintiff claims that the contract of
sale was partly performed, the same is removed from the application of the Statute of
Frauds and Carbonell should be allowed to establish by parol evidence the truth of her
allegation of partial performance of the contract of sale, and further stated:
"Apart from the foregoing, there are in the case at bar several circumstances indicating
that plaintiff's claim might not be entirely devoid of factual basis. Thus, for instance,
Poncio admitted in his answer that plaintiff had offered several times to purchase his
land.
"Again, there is Exhibit A, a document signed by the defendant. It is in the Batanes
dialect, which, according to plaintiff's uncontradicted evidence, is the one spoken by
Poncio, he being a native of said region. Exhibit A states that Poncio would stay in the
land sold by him to plaintiff for one year, from January 27, 1955, free of charge, and that,
if he cannot find a place where to transfer his house thereon, he may remain in said lot
under such terms as may be agreed upon. Incidentally, the allegation in Poncio's answer

to the effect that he signed Exhibit A under the belief that it 'was a permit for him to
remain in the premises in the event' that 'he decided to sell the property' to the plaintiff at
P20 a sq. m.' is, on its face, somewhat difficult to believe. Indeed, if he had not decided
as yet to sell the land to plaintiff , who had never increased her offer of P15 a square
meter, there was no reason for Poncio to get said permit from her. Upon the other hand, if
plaintiff intended to mislead Poncio, she would have caused Exhibit A to be drafted,
probably, in English, instead of taking the trouble of seeing to it that it was written
precisely in his native dialect, the Batanes. Moreover, Poncio's signature on Exhibit A
suggests that he is neither illiterate nor so ignorant as to sign a document without reading
its contents, apart from the fact that Meonada had read Exhibit A to him and given him a
copy thereof , before he signed thereon, according to Meonada's uncontradicted
testimony.
"Then, also, defendants say in their brief:
"'The only allegation in plaintiff's complaint that bears any relation to her claim that there
has been partial performance of the supposed contract of sale, is the notation of the sum
of P247.26 in the bank book of defendant Jose Poncio. The noting or jotting down of the
sum of P247.26 in the bank book of Jose Poncio does not prove of the property in
question. For all we knew, the price of the property in question. For all we knew, the sum
of P247.26 which plaintiff claims to have paid to the Republic Savings Bank for the
account of the defendant, assuming that the money paid to the Republic Savings Bank
came from the plaintiff, was the result of some usurious loan or accommodation, rather
than earnest money or part payment of the land. Neither is it competent or satisfactory
evidence to prove the conveyance of the land in question the fact that the bank book
account of Jose Poncio happens to be in the possession of the plaintiff.' (DefendantsAppellees' brief, pp. 25-26).
"How shall We know why Poncio's bank deposit book is in plaintiff's possession, or
whether there is any relation between the P247.26 entry therein and the partial payment
of P247.26 allegedly made by plaintiff to Poncio on account of the price of his land, if we
do not allow the plaintiff to explain it on the witness stand? Without expressing any
opinion on the merits of plaintiffs claim, it is clear, therefore, that she is entitled, legally as
well as from the viewpoint of equity, to an opportunity to introduce parol evidence in
support of the allegations of her second amended complaint" (pp. 46-49, ROA, emphasis
supplied).
(3) In his first decision of December 5, 1962 declaring null and void the sale in favor of
the Infantes and ordering Poncio to execute a deed of conveyance in favor of Carbonell,
the trial judge found:
". . . . A careful consideration of the contents of Exh. 'A' show to the satisfaction of the
court that the sale of the parcel of land in question by the defendant Poncio in favor of the
plaintiff was covered therein and that the said Exh. 'A' was also executed to allow the
defendant Poncio to continue staying in the premises for the stated period. It will be noted

that Exh. 'A' refers to a lot 'sold by him to me' and having been written originally in a
dialect well understood by the defendant Poncio, he signed the said Exh. 'A' with a full
knowledge and consciousness of the terms and consequences thereof . This therefore,
corroborates the testimony of the plaintiff Carbonell that the sale of the land was made by
Poncio. It is further pointed out that there was a partial performance of the verbal sale
executed by Poncio in favor of the plaintiff , when the latter paid P247.26 to the Republic
Savings Bank on account of Poncio's mortgage indebtedness. Finally, the possession by
the plaintiff of the defendant Poncio's passbook of the Republic Savings Bank also adds
credibility to her testimony. The defendant contends on the other hand that the testimony
of the plaintiff, as well as her witnesses, regarding the sale of the land made by Poncio in
favor of the plaintiff is inadmissible under the provision of the Statute, of Fraud based on
the argument that the note Exh. 'A' is not the note or memorandum referred to in the
Statute of Fraud. The defendants argue that Exh. 'A' fails to comply with the requirements
of the Statute of Fraud to qualify it as the note or memorandum referred to therein and
open the way for the presentation of parole evidence to prove the fact contained in the
note or memorandum. The defendant argues that there is even no description of the lot
referred to in the note, especially when the note refers to only one half lot. With respect to
the latter argument of the defendant, plaintiff points out that one half lot was mentioned in
Exhibit 'A' because the original description carried in the title states that it was formerly
part of a bigger lot and only segregated later. The explanation is tenable, in considering
the time value of the contents of Exh. 'A', the court has arrived at the conclusion that
there is a sufficient description of the lot referred to in Exh. 'A' as none other than the
parcel of land occupied by the defendant Poncio and where he has his improvements
erected. The identity of the parcel of land involved herein is sufficiently established by the
contents of the note Exh. 'A' . For a while, this court had that similar impression but after
a more and thorough consideration of the context in Exh. 'A' and for the reasons stated
above, the Court has arrived at the conclusion stated earlier" (pp. 52-54, ROA, emphasis
supplied).
(4) After re-trial on motion of the Infantes, the trial Judge rendered on January 20, 1965
another decision dismissing the complaint, although he found
"1. That on January 27, 1955, the plaintiff purchased from the defendant Poncio a parcel
of land with an area of 195 square meters, more or less, covered by TCT No. 5040 of the
Province of Rizal, located at San Juan del Monte, Rizal, for the price of P9.50 per square
meter;
"2. That the purchase made by the plaintiff was not reduced to writing except for a short
note or memorandum Exh. A, which also recited that the defendant Poncio would be
allowed to continue his stay in the premises, among other things; . . . " (pp. 91-92, ROA,
emphasis supplied).
From such factual findings, the trial judge confirms the due execution of Exhibit "A", only
that his legal conclusion is that it is not sufficient to transfer ownership (pp. 93-94, ROA).

(5) In the first decision of November 2, 1967 of the Fifth Division of the Court of Appeals
composed of Justices Esguerra (now Associate Justice of the Supreme Court),
Gatmaitan and Mojica, penned by Justice Gatmaitan., the Court of Appeals found that:
". . . the testimony of Rosario Carbonell not having at all been attempted to be disproved
by defendants, particularly Jose Poncio, and corroborated as it is by the private
document in the Batanes dialect, Exhibit A, the testimony being to the effect that between
herself and Jose there had been celebrated a sale of the property excluding the house for
the price of P9.50 per square meter, so much so that on faith of that, Rosario had
advanced the sum of P247.26 and binding herself to pay unto Jose the balance of the
purchase price after deducting the indebtedness to the Bank and since the wording of
Exhibit A, the private document goes so far as to describe their transaction as one of
sale, already consummated between them, note the past tense used in the phrase, 'the
lot sold by him to me' and going so far even as to state that from that day onwards,
vendor would continue to live therein, for one year, 'during which time he will not pay
anything' this can only mean that between Rosario and Jose, there had been a true
contract of sale, consummated by delivery constitutum possessorium, Art.1500, New Civil
Code; vendor's possession having become converted from then on, as a mere tenant of
vendee, with the special privilege of not paying rental for one year, it is true that the
sale by Jose Poncio to Rosario Carbonell corroborated documentarily only by Exhibit A
could not have been registered at all, but it was a valid contract nonetheless, since under
our law, a contract sale is consensual, perfected by mere consent, Couto vs. Cortes, 8
Phil. 459, so much so that under the New Civil Code, while a sale of an immovable is
ordered to be reduced to a public document, Art. 1358, that mandate does not render an
oral sale of realty unvalid, but merely incapable of proof, where still executory and action
is brought and resisted for its performance, 1403, par. 2, 3; but where already wholly or
partly executed or where even if not yet, it is evidenced by a memorandum, in any case
where evidence to further demonstrate is presented and admitted as the case was here,
then the oral sale becomes perfectly good, and becomes a good cause of action not only
to reduce it to the form of a public document, but even to enforce the contract in its
entirety, Art. 1357; and thus it is that what we now have is a case wherein on the one
hand Rosario Carbonell has proved that she had an anterior sale, celebrated in her favor
on 27 January, 1955, Exhibit A, annotated as an adverse claim on 8 February, 1955, and
on other, a sale in due form in favor of Emma L. Infante on 2 February, 1955, Exhibit 3Infante, and registered in due form with title unto her issued on 12 February, 1955; the
vital question must now come on which of these two sales should prevail; . . ." (pp. 74-76,
rec., emphasis supplied).

(6) In the resolution dated October 30, 1968 penned by then Court of Appeals Justice
Esguerra (now a member of this Court), concurred in by Justices Villamor and Nolasco,
constituting the majority of a Special Division of Five, the Court of Appeals, upon motion
of the Infantes, while reversing the decision of November 2, 1967 and affirming the
decision of the trial court of January 20, 1965 dismissing plaintiffs complaint, admitted the

existence and genuineness of Exhibit "A" the private memorandum dated January 27,
1955, although it did not consider the same as satisfying "the essential elements of a
contract of sale," because it "neither specifically describes the property and its
boundaries, nor mention its certificate of title number, nor states the price certain to be
paid, or contrary to the express mandate of Articles 1458 and 1475 of the Civil Code.
(7) In his dissent concurred in by Justice Rodriguez, Justice Gatmaitan maintains his
decision of November 2, 1967 as well as his findings of facts therein, and reiterated that
the private memorandum Exhibit "A", is a perfected sale, as a sale is consensual and
consummated by mere consent, and is binding on and effective between the parties. This
statement of the principle is correct [pp. 89-92, rec.].

money and without remorse of conscience, dishonored his own plighted word to
Carbonell, his own cousin.
Inevitably evident therefore from the foregoing discussion, is the bad faith of Emma
Infante from the time she enticed Poncio to dishonor his contract with Carbonell, and
instead to sell the lot to her (Infante) by offering Poncio a much hinger price than the
price for which he sold the same to Carbonell. Being guilty of bad faith, both in taking
physical possession of the lot and in recording their deed of sale, the Infantes cannot
recover the value of the improvements they introduced in the lot. And after the filing by
Carbonell of the complaint in June, 1955, the Infantes had less justification to erect a
building thereon since their title to said lot is seriously disputed by Carbonell on the basis
of a prior sale to her.

III
ADEQUATE CONSIDERATION OR PRICE FOR THE SALE IN FAVOR OF CARBONELL
It should be emphasized that the mortgage on the lot was about to be foreclosed by the
bank for failure on the part of Poncio to pay the amortizations thereon. To forestall the
foreclosure and at the same time to realize some money from his mortgaged lot, Poncio
agreed to sell the same to Carbonell at P9.50 per square meter, on condition that
Carbonell [1] should pay (a) the amount of P400.00 to Poncio and (b) the arrears in the
amount of P247.26 to the bank; and [2] should assume his mortgage indebtedness. The
bank president agreed to the said sale with assumption of mortgage in favor of Carbonell
and Carbonell accordingly paid the arrears of P247.26. On January 27, 1955, she paid
the amount of P200.00 to the bank because that was the amount that Poncio told her as
his arrearages and Poncio advanced the sum of P47.26 which amount was refunded to
him by Carbonell the following day. This conveyance was confirmed that same day,
January 27, 1955, by the private document, Exhibit "A", which was prepared in the
Batanes dialect by the witness Constancio Meonada, who is also from Batanes like
Poncio and Carbonell.
The sale did not include Poncio's house on the lot. And Poncio was given the right to
continue staying on the land without paying any rental for one year, after which he should
pay rent if he could not still find a place to transfer his house. All these terms are part of
the consideration of the sale to Carbonell. LexLib
It is evident therefore that there was ample consideration, and not merely the sum of
P200.00, for the sale of Poncio to Carbonell of the lot in question.
But Poncio, induced by the higher price offered to him by Infante. reneged on his
commitment so Carbonell and told Carbonell, who confronted him about it, that he would
not withdraw from his deal with Infante even if he is sent to jail. The victim, therefore, "of
injustice and outrage" is the widow Carbonell and not the Infantes, who without moral
compunction exploited the greed and treacherous nature of Poncio, who, for love of

With respect to the claim of Poncio that he signed the document Exhibit "A" under the
belief that it was a permit for him to remain in the premises in case he decides to sell the
property to Carbonell at P20.00 per square meter, the observation of the Supreme Court
through Mr. Chief Justice Concepcion in G.R. No. L-11231, supra, bears repeating:
". . . Incidentally, the allegation in Poncio's answer to the effect that he signed Exhibit A
under the belief that it, 'was a permit for him to remain in the premises in the event' that
'he decided to sell the property' to the plaintiff at P20.00 a sq. m.' is, on its face,
somewhat difficult to believe. Indeed, if he had not decided as yet to sell the land to
plaintiff, who had never increased her offer of P15 a square meter, there was no reason
for Poncio to get said permit from her. Upon the other hand, if plaintiff intended to mislead
Poncio, she would have caused Exhibit A to be drafted, probably, in English, instead of
taking the trouble of seeing to it that it was written precisely in his native dialect, the
Batanes. Moreover, Poncio's signature on Exhibit A suggests that he is neither illiterate
nor so ignorant as to sign a document without reading its contents, apart from the fact
that Meonada had read Exhibit A to him and given him a copy thereof, before he signed
thereon, according to Meonada's uncontradicted testimony" (pp. 46-47, ROA).
As stressed by Justice Gatmaitan in his first decision of November 2, 1965, which he
reiterated in his dissent from the resolution of the majority of the Special Division of Five
on October 30, 1968, Exhibit A, the private document in the Batanes dialect, is a valid
contract of sale between the parties, since sale is a consensual contract and is perfected
by mere consent (Couto vs. Cortes, 8 Phil. 459). Even an oral contract of realty is valid
between the parties and accords to the vendee the right to compel the vendor to execute
the proper public document. As a matter of fact, Exhibit A, while merely a private
document, can be fully or partially performed, to remove it from the operation of the
statute of frauds. Being a valid consensual contract, Exhibit A effectively transferred the
possession of the lot to the vendee Carbonell by constitutum possessorium (Article 1500,
New Civil Code); because thereunder the vendor Poncio continued to retain physical
possession of the lot as tenant of the vendee and no longer as owner thereof. More than
just the signing of Exhibit A by Poncio and Carbonell with Constancio Meonada as
witness to perfect the contract of sale, the transaction was further confirmed when Poncio

agreed to the actual payment by Carbonell of his mortgage arrearages to the bank on
January 27, 1955 and by his consequent delivery of his own mortgage passbook to
Carbonell. If he remained owner and mortgagor, Poncio would not have surrendered his
mortgage passbook to Carbonell. LLphil
IV IDENTIFICATION AND DESCRIPTION OF THE DISPUTED LOT IN THE
MEMORANDUM EXHIBIT "A"
The claim that the memorandum Exhibit "A" does not sufficiently describe the disputed lot
as the subject matter of the sale, was correctly disposed of in the first decision of the trial
court of December 5, 1962, thus: "The defendant argues that there is even no description
of the lot referred to in the note (or memorandum), especially when the note refers to only
one-half lot. With respect to the latter argument of the defendant, plaintiff points out that
one-half lot was mentioned in Exhibit 'A' because the original description carried in the
title states that it was formerly part of a bigger lot and only segregated later. The
explanation is tenable, in (sic) considering the time value of the contents of Exh. 'A', the
court has arrived at the conclusion that there is sufficient description of the lot referred to
in Exh. 'A' as none other than the parcel of lot occupied by the defendant Poncio and
where he has his improvements erected. The identity of the parcel of land involved herein
is sufficiently established by the contents of the notice Exh. 'A'. For a while, this court had
that similar impression but after a more and thorough consideration of the context in Exh.
'A' and for the reasons stated above, the court has arrived to (sic) the conclusion stated
earlier" (pp. 53-54, ROA).
Moreover, it is not shown that Poncio owns another parcel with the same area, adjacent
to the lot of his cousin Carbonell and likewise mortgaged by him to the Republic Savings
Bank. The transaction therefore between Poncio and Carbonell can only refer and does
refer to the lot involved herein. If Poncio had another lot to remove his house, Exhibit A
would not have stipulated to allow him to stay in the sold lot without paying any rent for
one year and thereafter to pay rental in case he cannot find another place to transfer his
house.
While petitioner Carbonell has the superior title to the lot, she must however refund to
respondents Infantes the amount of P1,500.00, which the Infantes paid to the Republic
Savings Bank to redeem the mortgage.
It appearing that the Infantes are possessors in bad faith, their rights to the improvements
they introduced on the disputed lot are governed by Articles 546 and 547 of the New Civil
Code. Their expenses consisting of P1,500.00 for draining the property, filling it with 500
cubic meters of garden soil, building a wall around it and installing a gate and P11,929.00
for erecting a bungalow thereon, are useful expenditures; for they add to the value of the
property (Aringo vs. Arenas, 14 Phil. 263; Alburo vs. Villanueva, 7 Phil. 277; Valencia vs.
Ayala de Roxas, 13 Phil. 45).

Under the second paragraph of Article 546, the possessor in good faith can retain the
useful improvements unless the person who defeated him in his possession refunds him
the amount of such useful expenses or pay him the increased value the land may have
acquired by reason thereof. Under Article 547, the possessor in good faith has also the
right to remove the useful improvements if such removal can be done without damage to
the land, unless the person with the superior right elects to pay for the useful
improvements or reimburse the expenses therefor under paragraph 2 of Article 546.
These provisions seem to imply that the possessor in bad faith has neither the right of
retention of useful improvements nor the right to a refund for useful expenses.
But, if the lawful possessor can retain the improvements introduced by the possessor in
bad faith for pure luxury or mere pleasure only by paying the value thereof at the time he
enters into possession (Article 549 NCC), as a matter of equity, the Infantes, although
possessors in bad faith, should be allowed to remove the aforesaid improvements, unless
petitioner Carbonell chooses to pay for their value at the time the Infantes introduced said
useful improvements in 1955 and 1959. The Infantes cannot claim reimbursement for the
current value of the said useful improvements; because they have been enjoying such
improvements for about two decades without paying any rent on the land and during
which period herein petitioner Carbonell was deprived of its possession and use.
WHEREFORE, THE DECISION OF THE SPECIAL DIVISION OF FIVE OF THE COURT
OF APPEALS OF OCTOBER 30, 1968 IS HEREBY REVERSED; PETITIONER
ROSARIO CARBONELL IS HEREBY DECLARED TO HAVE THE SUPERIOR RIGHT TO
THE LAND IN QUESTION AND IS HEREBY DIRECTED TO REIMBURSE TO PRIVATE
RESPONDENTS INFANTES THE SUM OF ONE THOUSAND FIVE HUNDRED PESOS
(P1,500.00) WITHIN THREE (3) MONTHS FROM THE FINALITY OF THIS DECISION;
AND THE REGISTER OF DEEDS OF RIZAL IS HEREBY DIRECTED TO CANCEL
TRANSFER CERTIFICATE OF TITLE NO. 37842 ISSUED IN FAVOR OF PRIVATE
RESPONDENTS INFANTES COVERING THE DISPUTED LOT, WHICH CANCELLED
TRANSFER CERTIFICATE OF TITLE NO. 5040 IN THE NAME OF JOSE PONCIO, AND
TO ISSUE A NEW TRANSFER CERTIFICATE OF TITLE IN FAVOR OF PETITIONER
ROSARIO CARBONELL UPON PRESENTATION OF PROOF OF PAYMENT BY HER
TO THE INFANTES OF THE AFORESAID AMOUNT OF ONE THOUSAND FIVE
HUNDRED PESOS (P1,500.00).
PRIVATE RESPONDENTS INFANTES MAY REMOVE THEIR AFOREMENTIONED
USEFUL IMPROVEMENTS FROM THE LOT WITHIN THREE (3) MONTHS FROM THE
FINALITY OF THIS DECISION, UNLESS THE PETITIONER ROSARIO CARBONELL
ELECTS TO ACQUIRE THE SAME AND PAYS THE INFANTES THE AMOUNT OF
THIRTEEN THOUSAND FOUR HUNDRED TWENTY-NINE PESOS (P13,429.00)
WITHIN THREE (3) MONTHS FROM THE FINALITY OF THIS DECISION. SHOULD
PETITIONER CARBONELL FAIL TO PAY THE SAID AMOUNT WITHIN THE
AFORESTATED PERIOD OF THREE (3) MONTHS FROM THE FINALITY OF THIS
DECISION, THE PERIOD OF THREE (3) MONTHS WITHIN WHICH THE
RESPONDENTS INFANTES MAY REMOVE THEIR AFOREMENTIONED USEFUL
IMPROVEMENTS SHALL COMMENCE FROM THE EXPIRATION OF THE THREE (3)

MONTHS GIVEN PETITIONER CARBONELL TO PAY FOR THE SAID USEFUL

IMPROVEMENTS. WITH COSTS AGAINST PRIVATE RESPONDENTS.
SEPARATE OPINIONS
I concur. My concurrence proceeds from the same premise as the dissenting opinion of
Justice Muoz Palma that both the conflicting buyers of the real property in question,
namely, petitioner Rosario Carbonell as the first buyer and respondent Emma Infante as
the second buyer may be deemed purchasers in good faith at the respective dates of
their purchase.
The answer to the question of who between the two buyers in good faith should prevail is
provided in the second paragraph of Article 1544 of the Civil Code 1 (formerly Article
1473 of the old Civil Code) which ordains that "the ownership of the immovable property
shall belong to the person acquiring it who in good faith first recorded it in the Registry of
Property."
In the case at bar, the seller executed on January 27, 1955 the private memorandum of
sale of the property in favor of the first buyer Carbonell. However, six days later on
February 2, 1955, the seller sold the property for a second time for an improved price,
this time executing a formal registrable deed of sale in favor of the second buyer Infante.
Cdpr
So it was that when the first buyer Carbonell saw the seller a few days afterwards
bringing the formal deed of sale for the seller's signature and the balance of the agreed
cash payment, the seller told her that he could not proceed anymore with formalizing the
first sale because he had already formalized the second sale in favor of the second buyer
Infante.
Since Carbonell (the first buyer) did not have a formal registrable deed of sale, she did
the next best thing to protect her legal rights and registered on February 8, 1955 with the
Rizal Register of Deeds her adverse claim as first buyer entitled to the property. The
second buyer Infante registered the deed of sale in her favor with the Rizal Register of
Deeds only on February 12, 1955 (notwithstanding its having been executed ten days
earlier on February 2, 1955), and therefore the transfer certificate of title issued in her
favor carried the duly annotated adverse claim of Carbonell as the first buyer.
Both these registrations were in good faith and hence, as provided by the cited codal
article, the first buyer Carbonell as also the first registrant is legally entitled to the
property.
The fact that Carbonell registered only an adverse claim as she had no registrable deed
of sale is of no moment. The facts of record amply show that she had a written
memorandum of sale, which was partially executed with the advance payment made by

her for the seller's mortgage account with the bank, and which was perfected and binding
in law by their accord on the subject matter and price. Carbonell could in law enforce in
court her rights as first buyer under the memorandum agreement and compel the seller to
execute in her favor a formal registrable deed of sale which would relate back to the date
of the original memorandum agreement.
And under the cited codal provision, Carbonell had to duly register such adverse claim as
first buyer, as otherwise the subsequent registration of the second buyer's deed of sale
would have obliterated her legal rights and enabled the seller to achieve his fraudulent
act of selling the property a second time for a better price in derogation of her prior right
thereto.
The fact that the seller refused to execute the formal deed of sale in Carbonell's favor
and (as was only to be expected) informed her that he could not proceed anymore with
the sale because he had sold it for a second time for a better price did not convert her
prior registration of her adverse claim into one of bad faith.
The fraudulent seller's act of informing the first buyer that he has wrongfully sold his
property for a second time cannot work out to his own advantage and to the detriment of
the innocent first buyer (by being considered as an "automatic registration" of the second
sale) and defeat the first buyer's right of priority, in time, in right and in registration. LexLib
The governing principle here is prius tempore, potior jure 2 (first in time, stronger in right).
Knowledge gained by the first buyer of the second sale cannot defeat the first buyer's
rights except only as provided by the Civil Code and that is where the second buyer first
registers in good faith the second sale ahead of the first. 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 rights 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 rights) from the time of acquisition until the title is transferred to him
by registration or failing registration, by delivery of possession. The second buyer must
show continuing good faith and innocence or lack of knowledge of the first sale until his
contract ripens into full ownership through prior registration as provided by law.
The above principles were aptly restated in a 1948 Court of Appeals decision in the case
of Gallardo vs. Gallardo penned by Justice J.B.L. Reyes, then a member of the appellate
court. 3 The facts of that case and the case at bar are virtually identical, except that the
earlier case was decided under the old Civil Code (Article 1473 thereof now reproduced
as Article 1544 of the present Civil Code), and the ratio decidendi thereof, mutatis
mutandis, is fully applicable, as follows:

"Analysis of article 1473 of the Civil Code shows that before a second vendee can obtain
priority over the first, it is indispensable that he should have acted in good faith, (that is to
say, in ignorance of the rights of the first vendee's rights) until the title is transferred to
him by actual or constructive delivery of the thing sold. This is the price exacted by law
for his being able to displace the first vendee; and the mere fact that the second contract
of sale was perfected in good faith is not sufficient if , before the title passes, the second
vendee acquires knowledge of the first transaction. The second buyer innocently agreed
to purchase the land may protect him against responsibility of conspiring with his vendor
to defraud the established rights of the first purchaser; but to defeat the latter's priority in
time (based on the old principle ' prius tempore, potior jure,' first in time, better in right)
the good faith or innocence of the posterior vendee must continue until his contract ripens
into ownership by tradition or recording (Palanca vs. Director of Lands, 43 Phil. 141, 154).
"That the formal deed of conveyance to Gabino Gallardo was executed after that of
Caoagas is of no moment, the contract of sale being perfected and binding by mere
accord on the first subject matter and the price, even if neither is delivered (Article 1450,
civil Code), the deed of conveyance will relate back to the date of the original
agreement." 4
Finally, in the present case, the first buyer's registration (February 8, 1955) concededly
preceded the second buyer's registration (February 12, 1955) by four days, and
therefore, as provided by the Civil Code, the first buyer thereby duly preserved her right
of priority and is entitled to the property.
MUOZ PALMA, J., dissenting:
Strongly convinced as I am that the decision of the Court of Appeals under review should
be affirmed, this dissenting opinion is being written.
We are here confronted with a double sale made by Jose Poncio of his 195-square meter
lot located at V. Agan St., San Juan, Rizal, covered by Transfer Certificate of Title No.
5040, the solution to which is found in Art. 1544 of the Civil Code, more particularly the
second paragraph thereof which provides that should the thing sold be immovable
property, the ownership shall belong to the person acquiring it who in good faith first
recorded it in the Registry of Property.
1 . The two purchasers, namely, petitioner Rosario Carbonell and respondent Emma
Infante, are both purchasers in good faith.
That Rosario Carbonell is a buyer in good faith cannot be disputed for at the time
negotiations for the purchase of the lot were being made between her and the vendor,
Jose Poncio, as of January 27, 1955, there was no indication at all from the latter that
another sale was being contemplated.

That Emma Infante is likewise a buyer in good faith is supported by: (a) an express
finding of the trial court in its decision of January 20, 1965, to the effect that when the
vendor and purchaser Infante consummated the sale on or about January 29, 1955, an
examination of the original T.C.T. 5040 on file with the Register of Deeds of Rizal as well
as the owner's duplicate revealed no annotation of any encumbrance or lien other than
the mortgage in favor of the Republic Savings Bank (p. 92, Record on Appeal); (b) the
findings of fact of the Court of Appeals given in the decision penned by then Justice
Salvador V. Esguerra as well as in the first decision written by Justice Magno Gatmaitan
which subsequently became the basis of the dissenting opinion to the majority, and from
which I quote: prLL
"2. CONSIDERING: That as basis for discussion of this issue, it must have to be
remembered that the first vendee, Rosario Carbonell, certainly was an innocent
purchaser . . . but also must it be remembered that Emma L. Infante, when she bought
the property on 2 February, 1955, under Exhibit 3-Infante, neither had she before then
been previously informed of the first sale to Rosario . . .; indeed as Emma has testified on
this detail, it is easy to accept her declaration:
'Q. When Mr. Jose Poncio offered you this land in question, did he tell you that the land
was sold or otherwise promised to Mrs. Carbonell?
'A. Of course not, otherwise I will never buy.'"(tsn. II-27).
in other words, at the respective dates of their purchase, both vendees, Rosario and
Emma, were innocent and had acted in the best of good faith . . ." (pp. 9-10 of Justice
Gatmaitan's decision found on pp. 76-77, rollo; see also p. 7 of his dissenting opinion
found on p. 95, rollo).
Departing from a well-entrenched rule set down in a long array of decisions of this Court
that factual findings of the trial court and of the Court of Appeals are generally binding
and conclusive, 1 and that on appeal by certiorari, questions of fact are not to be
determined nor reviewed by Us, 2 the Majority Opinion of my colleagues however
undertakes a fact-finding process of its own, and draws the conclusion that Emma Infante
was a buyer in bad faith because, among other things: (a) Emma allegedly refused to talk
to Rosario Carbonell when the latter went to see her about the sale of the lot, which "is
not the attitude expected of a good neighbor imbued with christian charity and goodwill as
well as a clean conscience" (p. 10, Majority Opinion); (b) "(B)efore or upon paying in full
the mortgage indebtedness of Poncio to the bank, Infante naturally must have demanded
from Poncio the delivery to her of his mortgage passbook as well as Poncio's mortgage
contract . . . and Poncio as well as the bank, must have inevitably informed her that said
mortgage passbook could not be given to her because it was already delivered to
Carbonell" (p. 9, ibid); and (c) ". . . (T)he victim, therefore, 'of injustice and outrage' is the
widow Carbonell and not the Infantes, who without moral compunction exploited the
greed and treacherous nature of Poncio, who, for love of money and without remorse of

conscience, dishonored his own plighted word to Carbonell, his own cousin. . . .
Inevitably evident therefore from the foregoing discussion, is the bad faith of Emma
Infante from the time she enticed Poncio to dishonor his contract with Carbonell, and
instead to sell the lot to her (Infante) by offering Poncio a much higher price than the
price for which he sold the same to Carbonell . . ." (p. 20, Majority Opinion; all italicized
portions supplied) all of which are unsupported by the evidence and diametrically
contrary to the findings of the court a quo and the appellate court sustaining the good
faith of Emma Infante.
2. Inasmuch as the two purchasers are undoubtedly in good faith, the next question to be
resolved is who of the two first registered her purchase or title in good faith.
In applying Art. 1544 of the Civil Code, it is not enough that the buyer bought the property
in good faith, but that the registration of her title must also be accomplished in good faith.
This requirement of good faith is not only applicable to the second or subsequent
purchaser but to the first as well. 3
Construing and applying the second paragraph of Art. 1473 of the Spanish Civil Code
which has been adopted verbatim in Art. 1544 of the Civil Code of the Philippines, this
Court in Leung Lee vs. F. L. Strong Machinery Co., et al., 37 Phil. 644, declared:
"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." (pp 648-649, supra).
Good faith means "freedom from knowledge and circumstances which ought to put a
person on inquiry"; 3* it consists of an honest intention to abstain from taking any
unconscientious advantage of another. 4
On this point it is my view that Rosario Carbonell cannot be held to have a title superior to
that of Emma Infante for even if We were to concede that the notation of her adverse
claim on February 8, 1955, was in the nature of registration of a title as required in Art.
1544 of the Civil Code, 5 the same was not accomplished in good faith. This is obvious
from occurrences narrated in the Majority Opinion, thus: that on January 27, 1955,

Carbonell and Jose Poncio made and executed the memorandum of sale, Exhibit A; that
thereafter Carbonell asked Atty. Salvador Reyes to prepare the formal deed of sale which
she brought to Poncio together with the amount of some P400.00, the balance she had to
pay in addition to her assuming the mortgage obligation to Republic Savings Bank; that
upon arriving at Poncio's house the latter told Carbonell that he could not proceed
anymore with the sale because he had already given the lot to Emma Infante; that on
February 5, 1955, Carbonell saw Emma Infante erecting a wall around the lot with a gate;
that Carbonell consulted Atty. Jose Garcia who advised her to present an adverse claim
with the Office of the Register of Deeds, and that being informed, that the sale in favor of
Emma Infante had not yet been registered, Atty. Garcia prepared the notice of adverse
claim which was signed and sworn to by Rosario Carbonell and registered on February 8,
1955. (see pp. 3-4, Decision). prcd
At the time petitioner herein caused the annotation of her adverse claim she was,
therefore, cognizant of facts which impaired her title to the property in question, and
taking advantage of the situation that the second purchaser had not as yet registered her
deed of sale, she went ahead of the second buyer and annotated what was only in the
nature of an adverse claim inasmuch as she had no registrable document of sale at the
time. That annotation of Carbonell's adverse claim did not produce any legal effects as to
place her in a preferential situation to that of Infante, the second purchaser, for the simple
reason that a registration made in bad faith is equivalent to no registration at all. It is a
settled rule that the inscription in the registry, to be effective, must be made in good faith.
(Pea, supra, p. 164).
3. One last point to be considered is the theory advanced by the dissenting opinion of
Justice Gatmaitan that while Carbonell's registration of her adverse claim may indeed be
considered in bad faith, nonetheless that of Infante was likewise in bad faith because at
the time of the registration of the latter's deed of sale there was already inscribed on the
original of the title on file with the Register of Deeds the adverse claim of Rosario
Carbonell.
With due respect to the foregoing conclusion of a highly respected Colleague, I hold the
view that the act of the registration of Infante's deed of sale on February 12, 1955, was
but a formality in the sense that it simply formalized what had already been accomplished
earlier, that is, the registration of Infante's purchase as against Carbonell when the latter
acquired knowledge of the second sale on or about January 27, 1955, when she brought
the memorandum of sale, Exh. A, to Jose Poncio and was informed by the latter that he
could not go through with the sale because he had already sold it to Emma Infante, which
information was bolstered by the fact that Carbonell saw Infante erecting a wall around
the lot on February 5.
We have long accepted the rule that knowledge is equivalent to registration. What would
be the purpose of registration other than to give notice to interested parties and to the
whole world of the existence of rights or liens against the property under question?

What has been clearly and succinctly postulated in T. de Winkleman and Winkleman vs.
Veluz, 1922, 43 Phil. 604, 609, is applicable to the case before Us, and We quote
therefrom:
". . . The purpose of registering an instrument relating to land, annuities, mortgages, liens,
or any other class of real rights is to give notice to persons interested of the existence of
these various liens against the property. If the parties interested have actual notice of the
existence of such liens, then the necessity for registration does not exist. Neither can one
who has actual notice of existing liens acquire any rights in such property free from such
liens by the mere fact that such liens have not been recorded . . ." (citing Obras Pias vs.
Devera Ignacio, 17 Phil. 45, 47).
We cannot overlook the fact that while it may be true that the vendor Poncio had signed
the memorandum, Exh. A, from which it may be implied that he sold a lot to Carbonell,
there were other things to be accomplished for purposes of binding third parties, the lot in
question being registered land, such as the execution of a formal deed of sale. Such a
document of sale was never signed by Poncio for according to petitioner Carbonell, when
she presented to Poncio the corresponding document together with the sum of P400.00
which according to her was the balance of the purchase price after she had assumed the
mortgage with the Republic Bank, she was informed by the vendor that the property had
been sold to another. That sale was confirmed when Carbonell saw Infante erecting a
wall around the lot on February 5, 1955. As of that moment when Carbonell had notice or
actual knowledge of the second sale in favor of Emma Infante a valid registration of the
latter's deed of sale was constituted as against Carbonell. Accordingly, Infante has a
preferential right to the property, the registration of her sale having been effected in the
foregoing manner, prior to the annotation of Carbonell's adverse claim on February 8,
1955. LLjur
The circumstances of the present case are strikingly similar to the hypothetical problem
posted in Commentator Edgardo Paras' Book on the Civil Code of the Philippines and I
wholeheartedly concur with his solution of the problem which is based on law. From him I
quote: 6
"A sold a parcel of land with a torrens title to B on January 5. A week later, A sold the
same land to C. Neither sale was registered. As soon as B learned of the sale in favor of
C, he (b) registered an adverse claim stating that he was making the claim because the
second sale was in fraud of his rights as first buyer. Later, C registered the deed of sale
that had been made in his favor. Who is now the owner B or C?
"Ans. C is clearly the owner, although he was the second buyer. This is so, not because
of the registration of the sale itself but because of the AUTOMATIC registration in his
favor cause by B's knowledge of the first sale (actual knowledge being equivalent to
registration). The purpose of registration is to notify. This notification was done because
of B's knowledge. It is wrong to assert that B was only trying to protect his right for
there was no more right to be protected. He should have registered the sale BEFORE

knowledge came to him. It is now too late. It is clear from this that with respect to the
principle "actual knowledge is equivalent to registration of the sale about which
knowledge has been obtained' the knowledge may be that of either the FIRST or the
SECOND buyer." (pp. 142-143, Vol. V, 1972 Ed.)
Aside from the fact that the sale to Infante was considered registered prior to the
registration of Carbonell's notice of adverse claim, Infante also took immediate physical
possession of the property by erecting a fence with a gate around the lot on February 5,
at least three days prior to Carbonell's registration on February 8, 1955.
On top of all these, equity is on the side of Emma Infante. Under the Majority Opinion,
Emma Infante stands to lose the lot she bought in good faith which was fully paid for plus
the building she erected thereon for which she spent the total sum of a little less than
P14,000.00, or equivalent to about P40,000.00 at the time the case was decided by the
Appellate Court, considering that Rosario Carbonell is being given the option either to
order the removal of the house or to acquire it at P13,429.00. On this point I agree with
the following statement of Justice Esguerra who penned the decision of the Appellate
Court, thus:
"It is indeed inequitable and revolting to one's sense of justice and fairness that Rosario
Carbonell who paid out of her own money the sum of only P200.00 to the Republic
Savings Bank for the account of Jose Poncio, which was the motivation for the execution
of the private instrument, Exhibit A, should have a superior right to the land involved. The
property has been improved at a great expense and a building of strong materials has
been constructed thereon by Emma Infante who spent for the lot and building the total
sum of P13,429.00 made up of P11,929.00 for cost of land and improvements and the
building and P1,500.00 to discharge the mortgage in favor of the Republic Savings Bank.
With the present purchasing power of the peso, this sum, after more than 13 years, would
be now equivalent to about P40,000.00, Courts should not lend a hand to the
perpetration of such kind of injustice and outrage." (see page 88, rollo)
I close paraphrasing the Supreme Court of Oklahoma in Phelps vs. Theime, et al., 217 P
376, 377, that "equity is a right wiseneth that considereth all of the particular
circumstances of the case and is also tempered with the sweetness of mercy." (quoting
from St. Germain) In this case now before Us there is no need to invoke mercy, for all
that is required is a wise consideration of the particular circumstances narrated above
which warrant a judgment in favor of respondents Infante.
With all the foregoing, I vote for the affirmance of the decision under review.

2.

DAGUPAN TRADING VS. MACAM

SYLLABUS

1. SALES; CONFLICTING SALES; ONE SALE BEFORE REGISTRATION OF LAND

AND THE OTHER AN EXECUTION SALE AFTER REGISTRATION OF LAND; LAW
GOVERNING. Where one of two conflicting sales of a piece of land was executed
before the land was registered, while the other was an execution sale in favor of the
judgment creditor of the owner made after the same property had been registered, what
should determine the issue are the provisions of the last paragraph of Section 35, Rule
39 of the Rules of Court to the effect that, upon the execution and delivery of the final
certificate of sale in favor of the purchaser of land sold in an execution sale, such
purchaser "shall be substituted to and acquire all the rights, title, interest and claim of the
judgment debtor to the property as of the time of the levy".

In the year 1955, Sammy Maron and his seven brothers and sisters were pro-indiviso
owners of a parcel of unregistered land located in barrio Parayao, Municipality of
Binmaley, Pangasinan. While their application for registration of said land under Act No.
496 was pending, they executed, on June 19 and September 21, 1955, two deeds of sale
conveying the property to appellee, who thereafter took possession thereof and
proceeded to introduce substantial improvements therein. One month later, that is on
October 14, 1955, Original Certificate of Title No. 6942 covering the land was issued in
the name of the Marons, free from all liens and encumbrances.

2. ID.; ID.; ID.; UNREGISTERED SALE CANNOT BE DEFEATED BY SUBSEQUENT

EXECUTION SALE AND REGISTRATION OF LATTER. Where for a considerable time
prior to the levy on execution the interest of the owner of the land levied upon had
already been conveyed to another who took possession thereof and introduced
improvements therein, the aforesaid levy is void. The prior sale, albeit unregistered,
cannot be deemed automatically cancelled upon the subsequent issuance of the Torrens
title over the land.

On August 4, 1956, by virtue of a final judgment rendered in Civil Case No. 42215 of the
Municipal Court of Manila against Sammy Maron in favor of the Manila Trading and
Supply Company, levy was made upon whatever interest he had in the aforementioned
property, and thereafter said interest was sold at public auction to the judgment creditor.
The corresponding notice of levy, certificate of sale and the sheriff's certificate of final
sale in favor of the Manila Trading and Supply Co. because nobody exercised the right
of redemption were duly registered. On March 1, 1958, the latter sold all its rights and
title in the property to appellant.

3. ID.; ID.; ID.; RIGHT OF OWNERSHIP ALREADY FIXED UNDER CIVIL LAW AND/OR
MORTGAGE LAW CANNOT BE OVERTHROWN BY NEW LAW. As between a right
of ownership already fixed and established under the Civil Law and/or the Spanish
Mortgage Law, and a new law or system which would make possible the overthrowing of
such ownership on admittedly artificial and technical grounds, the former must be upheld.
DECISION
On September 4, 1958, appellant commenced the action mentioned above against
appellee Rustico Macam, praying that it be declared owner of one-eighth portion of the
land described in paragraph 2 of the complaint; that a partition of the whole property be
made; that appellee be ordered to pay it the amount of P500.00 a year as damages from
1958 until said portion is delivered, plus attorney's fees and costs.
Answering the complaint, appellee alleged, in the main, that Sammy Maron's share in the
property described in the complaint, as well as that of all his co-heirs, had been acquired
by purchase by appellee since June 19 and September 21, 1955, before the issuance of
the original certificate of title in their name; that at the time levy in execution was made on
Sammy Maron's share therein, the latter had no longer any right or interest in said
property; that appellant and its predecessor in interest were cognizant of the facts already
mentioned; that since the sales made in his favor, he had enjoyed uninterrupted
possession of the property and introduced considerable improvements therein. Appellee
likewise sought to recover damages by way of counterclaim.
After trial upon the issue thus joined, the court rendered judgment dismissing the
complaint, which, on appear, was affirmed by the Court of Appeals.
The facts of the case are not disputed.

The question before Us now is: Who has the better right as between appellant Dagupan
Trading Company, on the one hand, and appellee Rustico Macam, on the other, to the
one-eighth share of Sammy Maron in the property mentioned heretofore?
If the property covered by the conflicting sales were unregistered land, Macam would
undoubtedly have the better right in view of the fact that his claim is based on a prior sale
coupled with public, exclusive and continuous possession thereof as owner. On the other
hand, were the land involved in the conflicting transactions duly registered land, We
would be inclined to hold that appellant has the better right because, as We have
consistently held, in case of conveyance of registered real estate, the registration of the
deed of sale is the operative act that gives validity to the transfer. This would be fatal to
appellee's claim, the deeds of sale executed in his favor by the Marons not having been
registered, while the levy in execution and the provisional certificate of sale as well as the
final deed of sale in favor of appellant were registered. Consequently, this registered
conveyance must prevail although posterior to the one executed in favor of appellee, and
appellant must be deemed to have acquired such right, title and interest as appeared on
the certificate of title issued in favor of Sammy Maron, subject to no lien, encumbrance or
burden not noted thereon. (Anderson & Co., vs. Garcia 64 Phil. 506; Reynes et al., vs.
Barrera, et al., 68 Phil. 656; Banco National, etc. vs. Camus, 70 Phil. 289)
The present case, however, does not fall within either situation. Here the sale in favor of
appellee was executed before the land subject matter thereof was registered, while the
conflicting sale in favor of appellant was executed after the same property had been
registered. We can not, therefore, decide the case in the light of whatever adjudicated
cases there are covering the two situations mentioned in the preceding paragraph. It is
our considered view that what should determine the issue are the provisions of the last

paragraph of Section 35, Rule 39 of the Rules of Court, to the effect that upon the
execution and delivery of the final certificate of sale in favor of the purchaser of land sold
in an execution sale, such purchaser "shall be substituted to and acquire all the right,
title, interest and claim of the judgment debtor to the property as of the time of the levy".
Now We ask: What was the interest and claim of Sammy Maron on the one-eight portion
of the property inherited by him and his co-heirs, at the time of the levy? The answer
must necessarily be that he had none, because for a considerable time prior to the levy,
his interest had already been conveyed to appellee, "fully and irretrievably" as the
Court of Appeals held. Consequently, subsequent levy made on the property for the
purpose of satisfying the judgment rendered against Sammy Maron in favor of the Manila
Trading Company was void and of no effect. (Buson vs. Licauco 13 Phil. 357-358; Landig
vs. U. S. Commercial Company, 89 Phil. 638). Needless to say, the unregistered sale and
the consequent conveyance of title and ownership in favor of appellee could not have
been cancelled and rendered of no effect upon the subsequent issuance of the Torrens
title over the entire parcel of land. We can not, therefore, but agree with the following
statement contained in the appealed decision:
". . . Separate and apart from this, however, we believe that in the inevitable conflict
between a right of ownership already fixed and established under the Civil Law and/or the
Spanish Mortgage Law which cannot be affected by any subsequent levy or
attachment or executions and a new law or system which would make possible the
overthrowing of such ownership on admittedly artificial and technical grounds, the former
must be upheld and applied."
But to the above considerations must be added the important circumstance that, as
already stated before, upon the execution of the deed of sale in his favor by Sammy
Maron, appellee took possession of the land conveyed as owner thereof, and introduced
considerable improvements therein. To deprive him now of the same by sheer force of
technicality would be against both justice and equity.
IN VIEW OF ALL THE FOREGOING, the decision appealed from is affirmed, with costs.
||| (Dagupan Trading Co. v. Macam, G.R. No. L-18497, May 31, 1965)

3.

DAVID

VS.

BANDIN

SYLLABUS
1. CIVIL LAW; PRESCRIPTION, DOES NOT RUN IN FAVOR OF CO-OWNER AS LONG
AS CO-OWNERSHIP; GENERALLY, IMPLIED TRUST PRESCRIBES IN TEN (10)
YEARS; CASE AT BAR. Under Article 494 of the new Civil Code (Article 400 of the old
Civil Code), prescription generally does not run in favor of a co-heir or co-owner as long
as he expressly or impliedly recognizes the co-ownership. While an implied or
constructive trust prescribes in ten years, the rule does not apply where a fiduciary
relation exists and the trustee recognizes the trust. In the case at bar, there is no showing

that the rights of the plaintiffs as co-owners were repudiated by Candida Ramos in her
lifetime; in fact, the evidence as found by the trial court show the contrary.
2. REMEDIAL LAW; DISMISSAL; RES JUDICATA; DOES NOT APPLY WHERE THERE
ARE NO IDENTITY OF PARTIES TO THE CASE; CASE AT BAR. Petitioners further
invoke the doctrine of res judicata in that the decree of registration of the property in the
name of Juanita Martin as owner by the land registration court was affirmed by the Court
of Appeals in its decision dated July 16, 1969 in CA G.R. No. 35191-R, which had already
become final and executory. Both the respondent Court of Appeals and the trial court
correctly rejected the petitioners' contention. There can be no res judicata since private
respondents were not parties to the above.
3. CIVIL LAW; LAND REGISTRATION ACT; PURPOSE; NOT INTENDED TO CREATE
OR VEST TITLE; CASE AT BAR. Neither can it be claimed that the decree of
registration vested ownership in Juanita Martin. The appellate court, citing jurisprudence
established by this Court, held that the purpose of the Land Registration Act is not to
create or vest title, but to confirm and register title already vested and existing in the
applicant for a title.
4. ID.; ID.; DOCTRINE OF INCONTROVERTIBILITY OF DECREE OF REGISTRATION
AND CONCLUSIVENESS OF TORRENS TITLE; APPLIES IN PURCHASES OF
REGISTERED PROPERTY FROM REGISTERED OWNER AFTER ISSUANCE OF
DECREE; CASE AT BAR. In assailing the decision of the appellate court, petitioners
invoke the doctrine of incontrovertibility of the decree of registration after one year from
issuance, and the doctrine of conclusiveness and indivisibility of titles issued under the
Torrens system. Petitioners might have stood on solid ground in invoking the above
doctrines if they had purchased the property from the registered owner after the issuance
of the decree of registration and the corresponding certificate of title in his name.
5. ID.; SALES; UNREGISTERED LAND; DEFENSE OF BUYER IN GOOD FAITH
CANNOT BE AVAILED IN PURCHASES OF UNREGISTERED LAND; CASE AT BAR.
As the record shows, petitioners bought the property when it was still unregistered land.
The defense of having purchased the property in good faith may be availed of only where
registered land is involved and the buyer had relied in good faith on the clear title of the
registered owner. One who purchases an unregistered land does so at his peril. His claim
of having bought the land in good faith, i.e. without notice that some other person has a
right to, or interest in, the property, would not protect him if it turns out that the seller does
not actually own the property. This is what happened in the case at bar.
6. ID.; ID.; ID.; ID.; CONVERSELY, PROTECTION ACCORDED TO PURCHASES IN
GOOD FAITH WHERE SUBJECT OF SALE IS REGISTERED LAND; NOT THE
SITUATION AT BAR. The appellate court held that Jose Ramirez and his father Sotero
Ramirez were not purchasers in good faith, not having made diligent investigation of the
true ownership of the properties they bought, but relied merely on the tax declaration
shown to them by the seller, Rufino Miranda. We have no reason to disturb the foregoing
findings of the respondent appellate court. Besides, as mentioned earlier, the issue of
good faith or bad faith of the buyer is relevant only where the subject of the sale is

registered land and the purchaser is buying the same from the registered owner, whose
title to the land is clean. In such case, the purchaser who relies on the clean title of the
registered owner is protected if he is a purchaser in good faith for value. However, this is
not the situation before us in the instant case. What petitioners bought were unregistered
lands.

in Las Pias, Rizal: 1) A parcel of land situated in Barrio Talon, with an area of 39,887
square meters, under Tax Declaration No. 9614 (Talon property for short); and 2) A parcel
of land situated in Barrio Laong, with an area of 15,993 square meters, under Tax
Declaration No. 4005, although the actual area when surveyed was 22,285 square
meters (Laong property for short).

7. ID.; ID.; REGISTERED LAND; PURCHASER IN GOOD FAITH FOR VALUE

PROTECTED BY THE LAW; ABSENT ANY SHOWING OF ACTUAL NOTICE OF
DEFECT IN TITLE, SALE AND TITLE CANNOT BE CANCELLED; CASE AT BAR. The
case of Magno de la Cruz stands on different footing from the other petitions. The
property purchased by him from Victoria Martin and Maximina Martin were registered
lands, covered by Torrens title. Being a purchaser in good faith for value, Magno de la
Cruz is protected by the law. In the absence of a showing that he had actual notice of the
defect in the title of the vendors or that he is a buyer in bad faith, the deed of sale in his
favor and the corresponding certificate of title issued in his name can not be nullified and
cancelled. Hence, it was error for the respondent court to invalidate the sale made by
Victoria and Maximina Martin in favor of Magno de la Cruz to the extent that it prejudiced
the two-third (2/3) pro-indiviso share of respondents in the property and to order
petitioner to reconvey said share to respondents. The petition of Magno de la Cruz is
meritorious, and the decision appealed from should be modified accordingly.

Both spouses died intestate, leaving as heirs two legitimate children, Candida and
Victoriana Ramos, and granddaughter, Agapita Ramos, daughter of their deceased son,
Anastacio. Upon the death of the said spouses, their daughter, Candida Ramos,
assumed administration of the properties until her death on February 16, 1955. Victoriana
Ramos died on December 12, 1931.

DECISION
These petitions, which were consolidated by resolution of this Court dated February 20,
1980, stemmed from a complaint filed by the herein respondents with the Court of First
Instance of Rizal, Branch VII, Pasay City, on June 14, 1963, for the recovery and partition
of property. The complaint was amended twice to reflect additional pertinent and material
facts, such as transfers, partitions, subdivisions and registration of portions of the
properties involved, and to bring in other indispensable parties to the case.
On April 12, 1975, a decision was rendered by the trial court, in favor of the plaintiffs,
declaring, however, that certain properties could no longer be reconveyed to plaintiffs
since they had been transferred to purchasers who bought them in good faith for value.
Not satisfied with the decision, both plaintiffs and defendants appealed to the Court of
Appeals. The plaintiffs' appeal was docketed as CA-G.R. No. 58647-R, while that of
defendants as CA-G.R. No. 60511-R. Both appeals were consolidated, and a decision
was rendered by the Court of Appeals on May 19, 1978, which modified the decision of
the trial court in that it nullified the transfers made to the defendants who were declared
by the trial court as purchasers in good faith.
From the decision of the Court of Appeals, an appeal was taken by the parties adversely
affected thereby to this Court. Except for petitioners in G.R. No. L-49716 who seek
restoration of the status quo ante, all other petitioners pray that the decision of the trial
court be reinstated.
FACTS:
During their lifetime, the spouses Juan Ramos, who died on March 5, 1919, and
Fortunata Calibo, who died before 1919, were the owners of two parcels of land situated

Both Candida and Victoriana Ramos died intestate. Candida Ramos was survived by the
following heirs: 1) Victoria Martin-Omanbac, 2) Antonio Martin, 3) Juanita Martin Vda. de
Lucena, 4) Maximina Martin Vda. de Cosme, 5) Raymundo Martin, 6) Aquilina de la Cruz,
and 7) Leonora de la Cruz. Victoriana's heirs are her children from her two marriages,
namely: 1) Eulogio Bandin, 2) Gregorio Bandin, 3) Raymunda Bandin, 4) Valentin
Briones, and 5) Sofio Briones.
The record shows that sometime in 1943, Candida Ramos prevailed upon her niece,
Agapita Ramos, and her nephew, Eulogio Bandin, to sell a portion of the Talon property
to the spouses Rufino O. Miranda and Natividad Guinto. This portion was divided into
three lots: Parcel 1, containing an area of 24,363 square meters, declared under Tax
Declaration No. 2996 (1948). The spouses Rufino Miranda and Natividad Guinto
subsequently sold the said lot to Narciso Velasquez and Albino Miranda. These two later
sold the same property to Velasquez Realty Company, Inc., which registered the property
and obtained OCT No. 1756 (later cancelled and replaced by TCT No. 165335); Parcel 2
containing an area of 752 square meters, declared under Tax Declaration No. 3358
(1949); and Parcel 3, containing an area of 516 square meters under Tax Declaration No.
3359 (1949). Parcels 2 and 3 were subsequently sold by Rufino Miranda and Natividad
Guinto to Jose Ramirez and Sotero Ramirez (survived by Ambrocia Vda. de Martin),
respectively, who registered these properties and obtained OCT Nos. 2027 and 2029 in
their respective names.
The remaining portion of the Talon property was extra-judicially partitioned on September
17, 1955 among the heirs of Candida Ramos, namely: Juanita Martin, Victoria Martin,
Maximina M. Vda. de Cosme, Antonio Martin and Raymundo Martin. In 1959, this
property was subdivided (Subdivision Plan PSU-173299) into seven lots and adjudicated
as follows:
1) To the heirs of Raymundo Martin, namely, Juan, Antonio, Rodrigo, Norma, Bernardo,
Rufina and Nieves, all surnamed Martin, and Trinidad Bunag Vda. de Martin Lot 1,
containing an area of 774 square meters, declared under Tax Declaration No. 5588
(1960). This lot was subsequently sold to Consolacion de la Cruz who was able to
register the property in her name under OCT No. 4731 (later cancelled and replaced by
TCT Nos. 227470 and 227471).

2) To Juanita Martin Lot 2, containing an area of 774 square meters, declared under
Tax Declaration No. 4831, and subsequently titled in her name under OCT No. 10002,
issued on December 18, 1973.
3) To Leonora de la Cruz, granddaughter of Candida Ramos by her son Meliton de la
Cruz by her first husband Lot 3, containing an area of 346 square meters, declared
under Tax Declaration No. 5526 (1960) and subsequently registered under OCT No.
6102, issued on January 29, 1967.
4) To Antonio Martin Lot 4, containing an area of 774 square meters, declared under
Tax Declaration No. 4833. The property was subsequently sold by the heirs of Antonio
Martin to Nemesio Martin.
5) To Victoria Martin Lot 5, containing an area of 773 square meters, declared under
Tax Declaration No. 5590. This lot was later registered by Victoria, to whom OCT No.
3706 was issued on August 22, 1963. She subsequently sold a portion of 300 square
meters to Magno de la Cruz on September 25, 1963, to whom was issued TCT No.
116450.
6) To Maximina Martin Lot 6, containing an area of 773 square meters, under Tax
Declaration No. 5591 (1960). Maximina was able to register the land and was issued
OCT No. 3707 on August 22, 1963. She later sold a portion of 300 square meters to
Magno de la Cruz, to whom was issued TCT No. 116450.
7) To Aquilina de la Cruz Lot 7, with an area of 428 square meters, declared under Tax
Declaration No. 5592 (1960). Aquilina is the granddaughter of Candida Ramos by her son
Meliton de la Cruz by her first marriage. Aquilina registered the land in her name in 1967
and was issued OCT No. 6103.
The Laong property was sold by Candida Ramos and her children on December 19, 1943
to Hermogenes Lucena, husband of Juanita Martin, one of the daughters of Candida. On
September 23, 1959, Juanita (then widowed) sold the property to the spouses Gregorio
and Mary Venturanza for P43,236.00 of which P10,000 was paid as down payment, the
balance to be paid upon the vendor obtaining Torrens title to the land. On January 21,
1965, the Venturanzas, in a deed of sale also signed by Juanita Martin, conveyed a
portion of the property with an area of 15,000 square meters to the spouses Felipe and
Antonia David, in liquidation of the latter's investment in the joint real estate venture
which they had entered into with the Venturanzas in April 1959. Juanita Martin Vda. de
Lucena was able to register the property in her name and was issued OCT No. 8916 on
July 1, 1971. The portion sold to the spouses Felipe and Antonia David is presently
covered by TCT No. 372092.
From the foregoing facts as established by the evidence, the trial court held that the Talon
and Laong properties formed part of the estate of the spouses Juan Ramos and
Fortunata Calibo, which after their death devolved by right of succession upon their heirs,
namely, Candida Ramos, Victoriana Ramos and Agapita Ramos, each of whom was
entitled to one-third (1/3) pro-indiviso share of the properties. The estate of the deceased
spouses was never judicially or extrajudicially settled among their heirs, who, therefore,

remained pro-indiviso co-owners of the said properties, and upon the death of Victoriana
and Candida, their respective shares in turn passed to their heirs. Accordingly, the trial
court declared the plaintiffs, Agapita Ramos, and the heirs of Victoriana Ramos, entitled
to two-thirds (2/3) pro-indiviso share of the Talon and Laong properties, and ordered the
defendants heirs of Candida Ramos to reconvey to plaintiffs their shares in those
properties. However, such reconveyance was no longer possible with respect to the
portions which, in the meantime, had been sold and disposed of to third parties who were
purchasers in good faith and for value.
The following parties were held to be purchasers in good faith: 1) defendants Rufino
Miranda, Narciso Velasquez, Albina Miranda and Velasquez Realty Co., with respect to
24,636 square meters (Parcel 1) of the Talon property sold by Candida Ramos, Eulogio
Bandin and Agapita Ramos in 1943; 2) defendants Jose Ramirez and Ambrocia Vda. de
Ramirez (widow of Sotero Ramirez), with respect to 752 square meters (Parcel 2) and
516 square meters (Parcel 3), respectively, of the Talon property, 3) defendant
Consolacion de la Cruz, with respect to 774 square meters (Lot 1 of Subdivision Plan
PSU-173299); 4) defendant Nemesio Martin, with respect to 774 square meters (Lot 2 of
Subdivision Plan); 5) defendant Magno de la Cruz, with respect to 300 square meters
sold by Victoria Martin and 300 square meters sold by Maximina Martin (portions of Lots
5 and 6 of Subdivision Plan); 6) defendant spouses Felipe and Antonia David, with
respect to 15,000 square meters of the Laong property. Since the foregoing properties
could not be reconveyed to the plaintiffs, the defendants heirs who sold them were
ordered to pay the plaintiffs two-thirds (2/3) of the present value of such properties.
As stated heretofore, the trial court's decision was upheld by the respondent Court of
Appeals, except with respect to the finding that third parties who bought portions of the
properties from the defendants heirs were purchasers in good faith. This finding was
reversed by the respondent appellate court. In fine, the appellate court: a) nullified the
sale of the Laong property by Candida Ramos Vda. de Martin and her children in 1943 in
favor of Hermogenes Lucena, the husband of Juanita Martin, one of the daughters of
Candida, as well as all subsequent sales, transfers and conveyances of said property,
insofar as they affected the two-thirds (2/3) pro-indiviso share of Agapita Ramos and the
heirs of Victoriana Ramos; b) nullified the sale of portions of the Talon property by
Candida Ramos, Eulogio Bandin and Agapita Ramos in 1943 in favor of the spouses
Rufino Miranda and Natividad Guinto, and all the subsequent transfers of said properties,
insofar as the four-fifteenth (4/15) share of Gregorio Bandin, Raymundo Bandin, Sofio
Briones and Valentin Briones were affected; and c) invalidated the deed of extrajudicial
partition among the heirs of Candida Ramos over the remaining portion of the Talon
property in 1955 and the subdivision thereof into individual lots among said heirs, as well
as all subsequent transfers and conveyances of some of said lots, or portions thereof, to
third parties, insofar as they affected the two-third (2/3) pro-indiviso share pertaining to
Agapita Ramos and the heirs of Victoriana Ramos.
From the above decision of the Court of Appeals, the petitioners have come to us on
separate petitions for review by certiorari.
G.R. No. L-49716:

The petitioners are the heirs of Candida Ramos, led by Juanita Martin Vda. de Lucena
and joined in by her brothers and sisters who are the children of Candida by her first and
second marriages. Primarily, petitioners alleged that the Court of Appeals erred in not
declaring that private respondents' claim, if any, is barred by prescription; and in annulling
and ordering the cancellation of Original Certificate of Title No. 8916 issued in the name
of Juanita Martin pursuant to a decision by the land registration court, affirmed by the
Court of Appeals in CA G.R. No. 35191-R, which had already become final and
executory.
Petitioners claim in their brief, apparently referring to the Laong property only, that
Juanita Martin, widow of Hermogenes Lucena and daughter of Candida Ramos, had
been in possession of the property since 1943 to the exclusion of private respondents.
The trial court, however, found that Candida Ramos, until her death on February 15,
1955, administered the Laong property, and that plaintiffs-appellants were given their
shares of the fruits thereof, though irregular and at times little, depending on the amount
of the harvest. Under Article 494 of the new Civil Code (Article 400 of the old Civil Code),
prescription generally does not run in favor of a co-heir or co-owner as long as he
expressly or impliedly recognizes the co-ownership. While an implied or constructive trust
prescribes in ten years, the rule does not apply where a fiduciary relation exists and the
trustee recognizes the trust.
In the case at bar, there is no showing that the rights of the plaintiffs as co-owners were
repudiated by Candida Ramos in her lifetime; in fact, the evidence as found by the trial
court show the contrary.
The court a quo did not sustain the defense of laches and prescription put up by the
defendants (herein petitioners) since it was not shown that the plaintiffs were guilty of
negligence or slept on their rights. They sent a letter of demand to the heirs of Candida
Ramos on April 23, 1963, and filed their complaint against them on June 14, 1963, or
within a period of approximately eight (8) years from Candida's death.
In sustaining the findings of the trial court, the Court of Appeals did not commit any
reversible error.
Petitioners further invoke the doctrine of res judicata in that the decree of registration of
the property in the name of Juanita Martin as owner by the land registration court was
affirmed by the Court of Appeals in its decision dated July 16, 1969 in CA G.R. No.
35191-R, which had already become final and executory. Both the respondent Court of
Appeals and the trial court correctly rejected the petitioners' contention. There can be no
res judicata since private respondents were not parties to the above case. Neither can it
be claimed that the decree of registration vested ownership in Juanita Martin. The
appellate court, citing jurisprudence established by this Court, held that the purpose of
the Land Registration Act is not to create or vest title, but to confirm and register title
already vested and existing in the applicant for a title. 2
G.R. No. L-48322:

The petitioners spouses Felipe David and Antonia G. David purchased portions of the
Laong property, consisting of 15,000 square meters, on February 21, 1965 from the
spouses Gregorio and Mary Venturanza, who, in turn, purchased the property from
Juanita Martin Vda. de Lucena, on September 23, 1959. At the time both purchases took
place, the property in question was still an unregistered land. The land was registered in
the name of Juanita Martin only on July 1, 1971, to whom was issued OCT No. 8916.
Petitioners contend that the Court of Appeals erred in holding that they are buyers in bad
faith, in ordering the cancellation of OCT No. 8916 and all subsequent transfer
certificates of title derived therefrom, and in ordering petitioners to reconvey to
respondents their two-third (2/3) pro-indiviso share of the land and to segregate
therefrom 10,000 square meters for reconveyance to respondents.
In assailing the decision of the appellate court, petitioners invoke the doctrine of
incontrovertibility of the decree of registration after one year from issuance, and the
doctrine of conclusiveness and indivisibility of titles issued under the Torrens system.
Petitioners might have stood on solid ground in invoking the above doctrines if they had
purchased the property from the registered owner after the issuance of the decree of
registration and the corresponding certificate of title in his name. 3
As the record shows, petitioners bought the property when it was still unregistered land.
The defense of having purchased the property in good faith may be availed of only where
registered land is involved and the buyer had relied in good faith on the clear title of the
registered owner. One who purchases an unregistered land does so at his peril. His claim
of having bought the land in good faith, i.e. without notice that some other person has a
right to, or interest in, the property, would not protect him if it turns out that the seller does
not actually own the property. This is what happened in the case at bar.
G.R. No. L-49867:
In this petition, petitioners Jose Ramirez and the heirs of Ambrocia P. Vda. de Ramirez
(widow of Sotero Ramirez), assail the decision of the respondent Court of Appeals
declaring them purchasers in bad faith and ordering them to reconvey to the plaintiffs
Gregorio Bandin, Raymunda Bandin, Valentin Briones and Sofio Briones, four-fifteenth
(4/15) share pro-indiviso of the properties they purchased from the spouses Rufino
Miranda and Natividad Guinto. The land in question, containing an area of 516 square
meters, more or less, was purchased by Jose Ramirez on June 4, 1949. Sotero Ramirez
purchased his land, with an area of 752 square meters on July 9, 1948 and May 10,
1949. These parcels of land purchased by the Ramirezes were part of the portion of the
Talon property bought by the spouses Rufino and Natividad Miranda from Candida
Ramos, Eulogio Bandin and Agapita Ramos in 1943.
The appellate court held that Jose Ramirez and his father Sotero Ramirez were not
purchasers in good faith, not having made diligent investigation of the true ownership of
the properties they bought, but relied merely on the tax declaration shown to them by the
seller, Rufino Miranda. We have no reason to disturb the foregoing findings of the
respondent appellate court. Besides, as mentioned earlier, the issue of good faith or bad
faith of the buyer is relevant only where the subject of the sale is registered land and the

purchaser is buying the same from the registered owner, whose title to the land is clean.
In such case, the purchaser who relies on the clean title of the registered owner is
protected if he is a purchaser in good faith for value. However, this is not the situation
before us in the instant case. What petitioners bought were unregistered lands.
Petitioners contend that the respondents are barred by estoppel and laches from
recovering the property in question. We have already dealt with this issue above. We find
the contention without merit.
Petitioners suggest that the portion ordered to be taken from the properties of Jose and
Sotero Ramirez should be taken instead from the shares which pertain to and are held by
the heirs of Candida Ramos. We do not find the suggestion meritorious. The respondents
are entitled to their pro-indiviso share of the property unlawfully sold by Candida Ramos,
Agapita Ramos and Eulogio Bandin to the Miranda spouses from whom the petitioners
bought the parcels of land in question. Hence, it would not be proper for the court to limit
respondents' right to recover their pro-indiviso share of the property only from the
remaining portion still in the possession of the heirs of Candida Ramos.
G.R. No. L-49712:
The case of Magno de la Cruz stands on different footing from the other petitions. The
property purchased by him from Victoria Martin and Maximina Martin were registered
lands, covered by Torrens title. Being a purchaser in good faith for value, Magno de la
Cruz is protected by the law. In the absence of a showing that he had actual notice of the
defect in the title of the vendors or that he is a buyer in bad faith, the deed of sale in his
favor and the corresponding certificate of title issued in his name can not be nullified and
cancelled. Hence, it was error for the respondent court to invalidate the sale made by
Victoria and Maximina Martin in favor of Magno de la Cruz to the extent that it prejudiced
the two-third (2/3) pro-indiviso share of respondents in the property and to order
petitioner to reconvey said share to respondents. The petition of Magno de la Cruz is
meritorious, and the decision appealed from should be modified accordingly.
WHEREFORE, in view of all the foregoing, judgment is hereby rendered:
1. Dismissing the petitions in G.R. Nos. L-48322, L-49716 and L-49687;
2. Granting the petition in G.R. No. L-49712, declaring valid the deeds of sale executed
by Victoria Martin (Exh. 8-Magno de la Cruz) and Maximina Martin (Exh 4-Magno de la
Cruz) in favor of petitioner Magno de la Cruz, as well as Transfer Certificate of Title No.
116450 issued in the latter's name, ordering Victoria Martin and Maximina Martin to pay
the respondents two-third (2/3) of the present value of the property sold by them to
Magno de la Cruz, and modifying the appealed decision accordingly; and
3. Affirming the appealed decision, except as modified above.
No pronouncement as to costs.
4.

OLIVARES

SYLLABUS

VS.

1. REMEDIAL LAW; CIVIL PROCEDURE; BAR BY PRIOR JUDGMENT; NOT APPLIED

IN THE INTEREST OF SUBSTANTIAL JUSTICE. It would be more in keeping with
substantial justice if the controversy between the parties be resolved on the merits rather
than on a procedural technicality in the light of the express mandate of the Rules that
they be "liberally construed in order to promote their object and to assist the parties in
obtaining just, speedy and inexpensive determination of every action and proceeding."
2. ID.; SPECIAL CIVIL ACTION; CERTIORARI; FAILURE OF COURT TO ACT
JUDICIOUSLY AND WITH PRUDENCE IN DISMISSING A CASE CONSTITUTES
GRAVE ABUSE OF DISCRETION. The dismissal of actions is based on sound judicial
discretion and such discretion "must be exercised wisely and prudently, never
capriciously, with a view to substantial justice." For having failed to meet that standard it
will have to be held that respondent Judge acted with grave abuse of discretion (see
Tandoc vs. Tensuan, L-50835, October 30, 1979, 93 SCRA 880).
DECISION
The Disputed Property is a piece of unregistered land located at Tigbauan, Iloilo,
identified as Assessor's Lot No. 343. It was previously owned by respondents-appellees
Jacinto Tuvilla and Ceferino Tuvilla (the Tuvillas, for short) both of Tigbauan, Iloilo.
Sometime in 1955, the Tuvillas executed a "Deed of Sale with Right to Repurchase" in
favor of respondent-appellee Juan Tumabini, over the Disputed Property in consideration
of the sum of P1,350.00. The document was duly acknowledged before a Notary Public
but was not recorded in the Registry of Property.
Sometime in 1959, the Tuvillas executed a "Deed of Sale with Pacto de Retro" over the
Disputed Property in favor of petitioners-appellants, Moises Olivares and Juanito T.
Olivares (the Olivareses, for short). This document was acknowledged before a Notary
Public and registered with the Registry of Deeds. In 1966, the Tuvillas also executed in
favor of the Olivareses a "Deed of Absolute Sale" covering the Disputed Property.
Petitioners-appellants have been in possession of the Disputed Property since 1959.
On October 11, 1967, respondent-appellee, Juan Tumabini, filed Civil Case No. 7410
before Branch I of the then Court of First Instance of Iloilo against the Tuvillas for the
consolidation of ownership over the Disputed Property by reason of the alleged failure of
the Tuvillas to redeem the property from Tumabini (hereinafter referred to as the
Consolidation Case). The Olivareses, however, were not included as parties to the said
case.
During the pre-trial of the Consolidation Case, counsel for the parties agreed to consider
the pacto de retro sale as one of equitable mortgage. Thus, the Trial Court rendered
judgment in favor of Tumabini in the amount of P1,350.00, pursuant to which, the Court
subsequently issued a Writ of Execution on October 23, 1968.

GONZALES
On November 23, 1968, the Olivareses instituted Civil Case NO. 7777 before Branch VI
of the former Court of First Instance of Iloilo, for Quieting of Title, against the Tuvillas,
Juan Tumabini, the Provincial Sheriff and Pyramid Surety (hereinafter, the Quieting of
Title Case). The said Court issued a Restraining Order to stop the sale in the

Consolidation Case (No. 7410) pending in Branch I, but the said Order was lifted on
February 6, 1969.
Subsequently, the Consolidation Case (No. 7410), the Disputed Property was sold at
public auction and a Writ of Possession was issued in Tumabini's favor. However, the
tenant of the Olivareses refused to surrender possession, prompting a citation for
contempt. Action thereon was deferred, however, pending termination of Civil Case NO.
7777. prcd
On July 7, 1970, in the Quieting of Title Case (No. 7777), the Trial Court issued an Order
dismissing said case, as follows:
"Acting upon the motion for dismissal of this case filed by Atty. Enrique Arguelles, counsel
for the defendants, it appearing that the instant action has been filed since November 23,
1968 and up to this time plaintiffs failed to exert effort to have the defendants summoned,
for failure to prosecute and lack of interest on the part of the plaintiffs for such
unreasonable length of time, as prayed, let this case be dismissed."
No reconsideration was sought nor any appeal taken by the Olivareses.
On July 14, 1971, the same case was refiled, also in Branch VI, docketed a Civil Case
No. 8698 (the Refiled Case) which, however, was dismissed by the Court on September
6, 1971 "it appearing that Civil Case No. 7777 previously filed and dismissed by the Court
embraces the same subject matter and the same party litigants as the case at bar."
On September 20, 1971, the Court denied the Motion for Reconsideration filed by the
Olivareses. Hence, this appeal by certiorari.
The question posed is whether the dismissal of the Quieting of Title Case (No. 7777) "for
failure to prosecute" barred the institution of a subsequent suit, Civil Case NO. 8698, by
the same plaintiff against the same defendants on the same cause of action.
Section 3, Rule 17 of the Rules of Court specifically provides:
"Sec. 3. Failure to prosecute If plaintiff fails to appear at the time of the trial, or to
prosecute his action for an unreasonable length of time, or to comply with these rules or
any order of the court, the action may be dismissed upon motion of the defendant or
upon the court's own motion. This dismissal shall have the effect of an adjudication upon
the merits, unless otherwise provided by the court."
Procedurally speaking, therefore, since the dismissal by the Trial Court was unqualified, it
had the effect of an adjudication upon the merits.
However, the equities of the case are with the Olivareses. The first sale with pacto de
retro by the Tuvillas to Tumabini was unregistered; in contrast, the sale in favor of the
Olivareses was duly recorded. The Consolidation Case (Case No. 7410) instituted by
Tumabini against the Tuvillas for consolidation of his ownership did not include the

Olivareses as parties defendants even though they were then in possession of the
Disputed Property. Justice and equity demand, therefore, that their side be heard in the
Refiled Case (No. 8698). Then, too, the contempt incident and the matter of the Writ of
Possession in the Consolidation Case (No. 7410) were left unresolved pending the
outcome of the Quieting of Title Case (No. 7777).
In other words, it would be more in keeping with substantial justice if the controversy
between the parties to be resolved on the merits rather than on a procedural technicality
in the light of the express mandate of the Rules that they be "liberally construed in order
to promote their object and to assist the parties in obtaining just, speedy and inexpensive
determination of every action and proceeding." The dismissal of actions is based on
sound judicial discretion and such discretion "must be exercised wisely and prudently,
never capriciously, with a view to substantial justice." For having failed to meet that
standard it will have to be held that respondent Judge acted with grave abuse of
discretion (see Tandoc vs. Tensuan, L-50835, October 30, 1979, 93 SCRA 880).
WHEREFORE, the questioned Order of dismissal, dated September 6, 1971, in Civil
Case NO. 8698, is hereby SET ASIDE and the said case REMANDED for prompt hearing
and determination on the merits. This Decision shall be immediately executory upon
promulgation. No costs.
5.

CARAM

VS.

LAURETA

This is a petition for certiorari to review the decision of the Court of Appeals promulgated
on January 29, 1968 in CA-G.R. NO. 35721-R entitled "Claro L. Laureta, plaintiff-appellee
versus Marcos Mata, Codidi Mata and Fermin Caram, Jr., defendants-appellant; Tampino
(Mansaca), et al. Intervenors-appellants," affirming the decision of the Court of First
Instance of Davao in Civil Case No. 3083. 1
On June 25, 1959, Claro L. Laureta filed in the Court of First Instance of Davao an action
for nullity, recovery of ownership and/or reconveyance with damages and attorney's fees
against Marcos Mata, Codidi Mata, Fermin Z. Caram Jr. and the Register of Deeds of
Davao City. 2
On June 10, 1945, Marcos Mata conveyed a large tract of agricultural land covered by
Original Certificate of Title No. 3019 in favor of Claro Laureta, plaintiff, the respondent
herein. The deed of absolute sale in favor of the plaintiff was not registered because it
was not acknowledged before a notary public or any other authorized officer. At the time
the sale was executed, there was no authorized officer before whom the sale could be
acknowledged inasmuch as the civil government in Tagum, Davao was not as yet
organized. However, the defendant Marcos Mata delivered to Laureta the peaceful and
lawful possession of the premises of the land together with the pertinent papers thereof
such as the Owner's Duplicate Original Certificate of Title No. 3019, sketch plan, tax
declaration, tax receipts and other papers related thereto. 3 Since June 10, 1945, the
plaintiff Laureta had been and is still in continuous, adverse and notorious occupation of
said land, without being molested, disturbed or stopped by any of the defendants or their

representatives. In fact, Laureta had been paying realty taxes due thereon and had
introduced improvements worth not less than P20,000.00 at the time of the filing of the
complaint. 4

"1. Declaring that the deed of sale, Exhibit A, executed by Marcos Mata in favor of Claro
L. Laureta stands and prevails over the deed of sale, Exhibit F, in favor of Fermin Caram
Jr.;

On May 5, 1947, the same land covered by Original Certificate of Title No. 3019 was sold
by Marcos Mata to defendant Fermin Z. Caram Jr., petitioner herein. The deed of sale in
favor of Caram was acknowledged before Atty. Abelardo Aportadera. On May 22, 1947,
Marcos Mata, through Attys. Abelardo Aportadera and Gumercindo Arcilla, filed with the
Court of First Instance of Davao a petition for the issuance of a new Owner's Duplicate of
Original Certificate of Title No. 3019, alleging as ground therefor the loss of said title in
the evacuation place of defendant Marcos Mata in Magugpo, Tagum, Davao. On June 5,
1947, the Court of First Instance of Davao issued an order directing the Register of
Deeds of Davao to issue a new Owner's Duplicate Certificate of Title No. 3019 in favor of
Marcos Mata and declaring the lost title as null and void. On December 9, 1947, the
second sale between Marcos Mata and Fermin Caram Jr. was registered with the
Register of Deeds. On the same date, Transfer Certificate of Title No. 140 was issued in
favor of Fermin Caram Jr. 5

"2. Declaring as null and void the deed of sale Exhibit F, in favor of Fermin Caram Jr.;

On August 29, 1959, the defendants Marcos Mata and Codidi Mata filed their answer with
counterclaim admitting the existence of a private absolute deed of sale of his only
property in favor of Claro L. Laureta but alleging that he signed the same as he was
subjected to duress, threat and intimidation for the plaintiff was the commanding officer of
the 10th division USFIP, operating in the unoccupied areas of Northern Davao with its
headquarters at Project No. 7 (Km. 60 Davao-Agusan Highways), in the Municipality of
Tagum, Province of Davao; that Laureta's words and requests were laws; that although
the defendant Mata did not like to sell his property or sign the document without even
understanding the same, he was ordered to accept P650.00 Mindanao Emergency
Notes; and that due to his fear of harm or danger that will happen to him or to his family, if
he refused, he had no other alternative but to sign the document. 6

"3. Directing Marcos Mata to acknowledge the deed of sale, Exhibit A, in favor of Claro L.
Laureta;.
"4. Directing Claro L. Laureta to secure the approval of the Secretary of Agriculture and
Natural Resources on the deed, Exhibit A, after Marcos Mata shall have acknowledged
the same before a notary public;.
"5. Directing Claro L. Laureta to surrender to the Register of Deeds for the City and
Province of Davao the Owner's Duplicate of Original Certificate of Title No. 3019 and the
latter to cancel the same;.
"6. Ordering the Register of Deeds for the City and Province of Davao to cancel Transfer
Certificate of Title No. T-140 in the name of Fermin Caram Jr.;
"7. Directing the Register of Deeds for the City and Province of Davao to issue a title in
favor of Claro L. Laureta, Filipino, resident of Quezon City, upon presentation of the deed
executed by Marcos Mata in his favor, Exhibit A, duly acknowledged by him and
approved by the Secretary of Agriculture and Natural Resources, and.
"8. Dismissing the counterclaim and cross claim of Marcos Mata and Codidi Mata, the
counterclaim of Caram, Jr., the answer in intervention, counterclaim and cross-claim of
the Mansacas.
"The Court makes no pronouncement as to costs.

The defendants Marcos Mata and Codidi Mata also admit the existence of a record in the
Registry of Deeds regarding a document allegedly signed by him in favor of his codefendant Fermin Caram Jr. but denies that he ever signed the document for he knew
before hand that he had signed a deed of sale in favor of the plaintiff and that the plaintiff
was in possession of the certificate of title; that if ever his thumb mark appeared in the
document purportedly alienating the property to Fermin Caram Jr., his consent was
obtained through fraud and misrepresentation for the defendant Mata is illiterate and
ignorant and did not know what he was signing; and that he did not receive a
consideration for the said sale. 7

"SO ORDERED."
The defendants appealed from the judgment to the Court of Appeals. 10 The appeal was
docketed as CA-G.R. NO. 35721-R.
The Court of Appeals promulgated its decision on January 29, 1968 affirming the
judgment of the trial court. LexLib
In his brief, the petitioner assigns the following errors. 11

The defendant Fermin Caram Jr. filed his answer on October 23, 1959 alleging that he
has no knowledge or information about the previous encumbrances, transactions, and
alienations in favor of plaintiff until the filing of the complaints. 8
The trial court rendered a decision dated February 29, 1964, the dispositive portion of
which reads: 9

"I
"THE RESPONDENT COURT OF APPEALS ERRED IN CONCLUDING THAT IRESPE
AND APORTADERA WERE ATTORNEYS-IN-FACT OF PETITIONER CARAM FOR THE
PURPOSE OF BUYING THE PROPERTY IN QUESTION.
"II

"THE RESPONDENT COURT OF APPEALS ERRED IN CONCLUDING THAT THE

EVIDENCE ADDUCED IN THE TRIAL COURT CONSTITUTE LEGAL EVIDENCE OF
FRAUD ON THE PART OF IRESPE AND APORTADERA ATTRIBUTABLE TO
PETITIONER.
"III
"THE RESPONDENT COURT OF APPEALS COMMITTED GRAVE ERROR OF LAW IN
HOLDING THAT KNOWLEDGE OF IRESPE AND APORTADERA OF A PRIOR
UNREGISTERED SALE OF A TITLED PROPERTY ATTRIBUTABLE TO PETITIONER
AND EQUIVALENT IN LAW OF REGISTRATION OF SAID SALE.
"IV
"THE RESPONDENT COURT OF APPEALS ERRED IN NOT HOLDING THAT AN
ACTION FOR RECONVEYANCE ON THE GROUND OF FRAUD PRESCRIBES WITHIN
FOUR (4) YEARS."
The petitioner assails the finding of the trial court that the second sale of the property was
made through his representatives, Pedro Irespe and Atty. Abelardo Aportadera. He
argues that Pedro Irespe was acting merely as broker or intermediary with the specific
task and duty to pay Marcos Mata the sum of P1,000.00 for the latter's property and to
see to it that the requisite deed of sale covering the purchase was properly executed by
Marcos Mata; that the identity of the property to be bought and the price of the purchase
had already been agreed upon by the parties; and that the other alleged representative,
Atty. Aportadera, merely acted as a notary public in the execution of the deed of sale.
The contention of the petitioner has no merit. The facts of record show that Mata, the
vendor, and Caram, the second vendee had never met. During the trial, Marcos Mata
testified that he knows Atty. Aportadera but did not know Caram. 12 Thus, the sale of the
property could have only been through Caram's representatives, Irespe and Aportadera.
The petitioner, in his answer, admitted that Atty. Aportadera acted as his notary public and
attorney-in-fact at the same time in the purchase of the property. 13
The petitioner contends that he cannot be considered to have acted in bad faith because
there is no direct proof showing that Irespe and Aportadera, his alleged agents, had
knowledge of the first sale to Laureta. This contention is also without merit.
The Court of Appeals, in affirming the decision of the trial court, said: 14
"The trial court, in holding that appellant Caram, Jr. was not a purchaser in good faith, at
the time he bought the same property from appellant Mata, on May 5, 1947, entirely
discredited the testimony of Aportadera. Thus it stated in its decision:
'The testimony of Atty. Aportadera quoted elsewhere in this decision is hollow. There is
every reason to believe that Irespe and he had known of the sale of the property in
question to Laureta on the day Mata and Irespe, accompanied by Leoning Mansaca,
went to the office of Atty. Aportadera for the sale of the same property to Caram, Jr.,
represented by Irespe as attorney-in-fact. Leoning Mansaca was with the two Irespe

and Mata to engage the services of Atty. Aportadera in the annulment of the sale of his
land to Laureta. When Leoning Mansaca narrated to Atty. Aportadera the circumstances
under which his property had been sold to Laureta, he must have included in the
narration the sale of the land of Mata, for the two properties had been sold on the same
occasion and under the same circumstances. Even as early as immediately after
liberation, Irespe, who was the witness in most of the cases filed by Atty. Aportadera in
his capacity as Provincial Fiscal of Davao against Laureta, must have known on the
purchases of lands made by Laureta when he was regimental commander, one of which
was the sale made by Mata. It was not a mere coincidence that Irespe was made
guardian ad litem of Leoning Mansaca, at the suggestion of Atty. Aportadera and
attorney-in-fact of Caram, Jr.

'The Court cannot help being convinced that Irespe, attorney-in-fact of Caram, Jr., had
knowledge of the prior existing transaction, Exhibit A, between Mata and Laureta over the
land, subject matter of this litigation, when the deed, Exhibit F, was executed by Mata in
favor of Caram, Jr. And this knowledge has the effect of registration as to Caram, Jr.'
(R.A. pp. 123-124).
"We agree with His Honor's conclusion on this particular point, on two grounds the
first, the same concerns matters affecting the credibility of a witness of which the findings
of the trial court command great weight, and second, the same is borne out by the
testimony of Atty. Aportadera himself. (t.s.n. pp. 187-190, 213-215, Restauro)."
Even if Irespe and Aportadera did not have actual knowledge of the first sale, still, their
actions have not satisfied the requirement of good faith. Bad faith is not based solely on
the fact that a vendee had knowledge of the defect or lack of title of his vendor. In the
case of Leung Yee vs. F.L. Strong Machinery Co. and Williamson, this Court held: 15
"One who purchases real estate with knowledge of a defect or lack of title in his vendor
can not 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."
In the instant case, Irespe and Aportadera had knowledge of circumstances which ought
to have put them on inquiry. Both of them knew that Mata's certificate of title together with
other papers pertaining to the land was taken by soldiers under the command of Col.
Claro L. Laureta. 16 Added to this is the fact that at the time of the second sale Laureta
was already in possession of the land. Irespe and Aportadera should have investigated
the nature of Laureta's possession. If they failed to exercise the ordinary care expected of
a buyer of real estate they must suffer the consequences. 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. 17

The principle that a person dealing with the owner of the registered land is not bound to
go behind the certificate and inquire into transactions the existence of which is not there
intimated 18 should not apply in this case. It was of common knowledge that at the time
the soldiers of Laureta took the documents from Mata, the civil government of Tagum was
not yet established and that there were no officials to ratify contracts of sale and make
them registrable. Obviously, Aportadera and Irespe knew that even if Mata previously had
sold the disputed property such sale could not have been registered. cdrep
There is no doubt then that Irespe and Aportadera, acting as agents of Caram, purchased
the property of Mata in bad faith. Applying the principle of agency, Caram, as principal,
should also be deemed to have acted in bad faith.

The petitioner's conclusion that the second deed of sale, "Exhibit F", is a voidable
contract is not correct. In order that fraud can be a ground for the annulment of a
contract, it must be employed prior to or simultaneous to the consent or creation of the
contract. The fraud or dolo causante must be that which determines or is the essential
cause of the contract. Dolo causante as a ground for the annulment of contract is
specifically described in Article 1338 of the New Civil Code of the Philippines as
"insidious words or machinations of one of the contracting parties" which induced the
other to enter into a contract, and "without them, he would not have agreed to."
The second deed of sale in favor of Caram is not a voidable contract. No evidence
whatsoever was shown that through insidious words or machinations, the representatives
of Caram, Irespe and Aportadera had induced Mata to enter into the contract.

Article 1544 of the New Civil Code provides that:

"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. (1973)".
Since Caram was a registrant in bad faith, the situation is as if there was no registration
at all. 19
The question to be determined now is, who was first in possession in good faith? A
possessor in good faith is one who is not aware that there exists in his title or mode of
acquisition any flaw which invalidates it. 20 Laureta was first in possession of the
property. He is also a possessor in good faith. It is true that Mata had alleged that the
deed of sale in favor of Laureta was procured by force. 21 Such defect, however, was
cured when, after the lapse of four years from the time the intimidation ceased, Marcos
Mata lost both his rights to file an action for annulment or to set up nullity of the contract
as a defense in an action to enforce the same.
Anent the fourth error assigned, the petitioner contends that the second deed of sale,
Exhibit "F" is a voidable contract. Being a voidable contract, the action for annulment of
the same on the ground of fraud must be brought within four (4) years from the discovery
of the fraud. In the case at bar, Laureta is deemed to have discovered that the land in
question has been sold to Caram to his prejudice on December 9, 1947, when the Deed
of Sale, Exhibit "F" was recorded and entered in the Original Certificate of Title by the
Register of Deeds and a new Certificate of Title No. 140 was issued in the name of
Caram. Therefore, when the present case was filed on June 29, 1959, plaintiff's cause of
action had long prescribed.

Since the second deed of sale is not a voidable contract, Article 1391, Civil Code of the
Philippines which provides that the action for annulment shall be brought within four (4)
years from the time of the discovery of fraud does not apply.
Moreover, Laureta has been in continuous possession of the land since he bought it in
June 1945.
A more important reason why Laureta's action could not have prescribed is that the
second contract of sale, having been registered in bad faith, is null and void. Article 1410
of the Civil Code of the Philippines provides that any action or defense for the declaration
of the inexistence of a contract does not prescribe.
In a memorandum of Authorities 22 submitted to this Court on March 13, 1978, the
petitioner insists that the action of Laureta against Caram has prescribed because the
second contract of sale is not void under Article 1409 23 of the Civil Code of the
Philippines which enumerates the kinds of contracts which are considered void.
Moreover, Article 1544 of the New Civil Code of the Philippines does not declare void a
second sale of immovable registered in bad faith.
The fact that the second contract is not considered void under Article 1409 and that
Article 1544 does not declare void a deed of sale registered in bad faith does not mean
that said contract is not void. Article 1544 specifically provides who shall be the owner in
case of a double sale of an immovable property. To give full effect to this provision, the
status of the two contracts must be determined and clarified. One contract must be
declared valid so that one vendee may exercise all the rights of an owner, while the other
contract must be declared void to cut off all rights which may arise from said contract.
Otherwise, Article 1544 will be meaningless. llcd
The first sale in favor of Laureta prevails over the sale in favor of Caram.
WHEREFORE, the petition is hereby denied and the decision of the Court of Appeals
sought to be reviewed is affirmed, without pronouncement as to costs.

6.

CRUZ

VS.

CABANA

SYLLABUS
1. CIVIL LAW; OBLIGATIONS AND CONTRACTS; SALES; DOUBLE SALE OF REAL
PROPERTY; OWNERSHIP OF PROPERTY ACQUIRED BY VENDEE WHO FIRST
REGISTERS SALE IN GOOD FAITH. As the Court held in Carbonell vs. Court of
Appeals, 69 SCRA 99 (1976), "it is essential that the buyer of realty must act in good faith
in registering his deed of sale to merit the protection of the second paragraph of Article
1544 of the Civil Code." As the writer stressed in his concurring opinion therein, "The
governing principle here is prius 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 only as provided by the Civil Code and that is where the second buyer first
registers in good faith the second sale ahead of the first. 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 rights 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 of 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 rights) from the time of acquisition until the title is transferred to him by
registration or failing registration, by delivery of possession. The second buyer must show
continuing good faith and innocence or lack of knowledge of the first sale until his
contract ripens into full ownership through prior registration as provided by law."
2. ID.; ID.; ID.; ID.; ID.; KNOWLEDGE OF PRIOR SALE TAINTS SECOND
PURCHASER'S PRIOR REGISTRATION WITH BAD FAITH; CASE AT BAR. When
petitioner Cruz succeeded in registering the later sale in his favor, he knew and was
informed of the prior sale in favor of respondents-spouses. Respondents appellate court
correctly held that such "knowledge of a prior transfer of a registered property by a
subsequent purchasers makes him a purchaser in bad faith and his knowledge of such
transfer vitiates his title acquired by virtue of the latter instruments of conveyance with
creates no right as against the first purchaser."
DECISION
The Court affirms the questioned decision of the now defunct Court of Appeals which
affirmed that of the Court of First Instance of Quezon Province, but directs that the seller,
respondent Leodegaria Cabana who sold the property in question twice, first to her corespondents Teofilo Legaspi and Iluminada Cabana and later to petitioner Abelardo Cruz
(now deceased), should reimburse to petitioner's heirs the amounts of P2,352.50, which
the late petitioner Abelardo Cruz paid to the Philippine National Bank to discharge the
mortgage obligation of said respondent Leodegaria Cabana in favor of said bank, and of
P3,397.50, representing the amount paid by said Abelardo Cruz to her as consideration
of the sale with pacto de retro of the subject property.

This is a simple case of double sale of real property. Respondent appellate court in its
decision of August 13, 1980 stated the background facts and resolved the issue in favor
of defendants-appellees, first buyers-respondents herein, and against plaintiff-appellant
Abelardo Cruz, petitioner herein (substituted by his heirs), as follows:
"Defendants' evidence shows that on October 21, 1968, defendant Leodegaria Cabaa
sold the land in question to defendants-spouses Teofilio Legaspi and Iluminada Cabaa
(Exh. 1). The said defendants-spouses attempted to register the deed of sale but said
registration was not accomplished because they could not present the owner's duplicate
of title which was at that time in the possession of the PNB as mortgage.
"Likewise, when plaintiff tried to register the deed of sale executed by Leodegaria
Cabaa on September 3, 1970, said plaintiff was informed that the owner thereof had
sold the land to defendants-spouses on October 21, 1968. Plaintiff was able to register
the land in his name on February 9, 1971 (Exh. A). With the admission of both parties
that the land in question was sold to two persons, the main issue to be resolved in this
appeal is as to who of said vendees has a better title to said land.
"There is no dispute that the land in question was sold with right of repurchase on June 1,
1965 to defendants-spouses Teofilo Legaspi and Iluminada Cabaa (Exh. 1). The said
document `Bilihang Muling Mabibili' stipulated that the land can be repurchased by the
vendor within one year from December 31, 1966 (see par. 5, Exh. 1). Said land was not
repurchased and in the meantime, however, said defendants-spouses took possession of
the land.
"Upon request of Leodegaria Cabaa, the title of the land was lent to her in order to
mortgage the property to the Philippine National Bank. Said title was, forthwith, deposited
with the PNB. On October 21, 1968, defendant Leodegaria Cabaa sold the land by way
of absolute sale to the defendants-spouses (Exh. 2). However, on November 29, 1968
defendant sold the same property to herein plaintiff and the latter was able to register it in
his name.
"The transaction in question is governed by Article 1544 of the Civil Code. True it is that
the plaintiff was able to register the sale in his name but was he in good faith in doing so?
"While the title was registered in plaintiff-appellant's name on February 9, 1971 (Exh. A),
it appears that he knew of the sale of the land to defendants-spouses Legaspi as he was
informed in the Office of the Register of Deeds of Quezon. It appears that the
defendants-spouses registered their document of sale on May 13, 1965 under Primary
Entry No. 210113 of the Register of Deeds (Exh. 2).
"Under the foregoing circumstances, the right of ownership and title to the land must be
resolved in favor of the defendants-spouses Legaspi on three counts. First, the plaintiffappellant was not in good faith in registering the title in his name. Consistent is the
jurisprudence in this jurisdiction that in order that the provisions of Article 1544 of the new
Civil Code may be invoked, 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 (10 Manresa

170, 171). It cannot be set up by a second purchaser who comes into possession of the
property that has already been acquired by the first purchaser in full dominion (Bautista
vs. Sison, 39 Phil. 615), this notwithstanding that the second purchaser records his title in
the public registry, if the registration be done in bad faith, the philosophy underlying this
rule being that the public records cannot be covered into instruments of fraud and
oppression by one who secures an inscription therein in bad faith (Chupinghong vs.
Borreros, 7 CA Rep. 699).
"A purchaser who has knowledge of fact which would put him upon inquiry and
investigation as to possible defects of the title of the vendor and fails to make such
inquiry and investigation, cannot claim that he is a purchaser in good faith. Knowledge of
a prior transfer of a registered property by a subsequent purchaser makes him a
purchaser in bad faith and his knowledge of such transfer vitiates his title acquired by
virtue of the latter instrument of conveyance which creates no right as against the first
purchaser (Reylago vs. Jarabe, L-20046, March 27, 1968, 22 SCRA 1247).
"In the second place, the defendants-spouses registered the deed of absolute sale ahead
of plaintiff-appellant. Said spouses were not only able to obtain the title because at that
time, the owner's duplicate certificate was still with the Philippine National Bank.
"In the third place, defendants-spouses have been in possession all along of the land in
question. If immovable property is sold to different vendees, the ownership shall belong
to the person acquiring it who in good faith first recorded it in the registry of property; and
should there be no inscription, the ownership shall pertain to the person who in good faith
was first in the possession (Soriano, et al. vs. The Heirs of Domingo Magali, et al., L15133, July 31, 1963, 8 SCRA 489). Priority of possession stands good in favor of herein
defendants-spouses (Evangelista vs. Abad, [CA] 36 O.G. 2913; Sanchez vs. Ramos, 40
Phil. 614; Quimson vs. Rosete, 87 Phil. 159)."
The Court finds that in this case of double sale of real property, respondent appellate
court, on the basis of the undisputed facts, correctly applied the provisions of Article 1544
of the Civil Code that
"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."
There is no question that respondents-spouses Teofilo Legaspi and Iluminada Cabana
were the first buyers, first on June 1, 1965 under a sale with right of repurchase and later
on October 21, 1968 under a deed of absolute sale and that they had taken possession

of the land sold to them; that petitioner was the second buyer under a deed of sale dated
November 29, 1968, which to all indications, contrary to the text, was a sale with right of
repurchase for ninety (90) days. 1 There is no question either that respondents Legaspi
spouses were the first and the only ones to be in possession of the subject property.
Said respondents spouses were likewise the first to register the sale with right of
repurchase in their favor on May 13, 1965 under Primary Entry No. 210113 of the
Register of Deeds. They could not register the absolute deed of sale in their favor and
obtain the corresponding transfer certificate of title because at that time the seller's
duplicate certificate was still with the bank. But there is no question, and the lower courts
so found conclusively as a matter of fact, that when petitioner Cruz succeeded in
registering the later sale in his favor, he knew and he was informed of the prior sale in
favor of respondents-spouses. Respondent appellate court correctly held that such
"knowledge of a prior transfer of a registered property by a subsequent purchaser makes
him a purchaser in bad faith and his knowledge of such transfer vitiates his title acquired
by virtue of the latter instrument of conveyance which creates no right as against the first
purchaser." cdll
As the Court held in Carbonell vs. Court of Appeals 2 "it is essential that the buyer of
realty must act in good faith in registering his deed of sale to merit the protection of the
second paragraph of [the above quoted] Article 1544." As the writer stressed in his
concurring opinion therein, "(T)he governing principle here is prius 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 rights except only as provided by the Civil Code and that is
where the second buyer first registers in good faith the second sale ahead of the first.
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 rights 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 rights) from the time of acquisition
until the title is transferred to him by registration or failing registration, by delivery of
possession. The second buyer must show continuing good faith and innocence or lack of
knowledge of the first sale until his contract ripens into full ownership through prior
registration as provided by law." cdphil
Petitioner's prayer for alternative relief for reimbursement of the amount of P2,352.50
paid by him to the bank to discharge the existing mortgage on the property and of the
amount of P3,397.50 representing the price of the second sale are well taken insofar as
the seller Leodegaria Cabana is concerned. These amounts have been received by the
said seller Leodegaria Cabana on account of a void second sale and must be duly
reimbursed by her to petitioner's heirs, but the Legaspi spouses cannot be held liable
therefor since they had nothing to do with the said second sale nor did they receive any
benefit therefrom. Petitioner's claim for reimbursement of the amount of P102.58 as real

estate taxes paid on the property is not well taken because the respondents Legaspi
spouses had been paying the real estate taxes on the same property since June 1, 1969.
ACCORDINGLY, the appealed judgment of respondent appellate court, upholding
respondents-spouses Teofilo Legaspi and Iluminada Cabana as the true and rightful
owners of the property in litigation and ordering the issuance of a new title with the
cancellation as null and void of Title No. T-99140 obtained by petitioner Abelardo C. Cruz,
is hereby affirmed in toto. In accordance with the partial grant of petitioner's prayer for
alternative relief as stated in the preceding paragraph hereof, the Court hereby orders
and sentences respondent Leodegaria Cabana to reimburse and pay to petitioner's heirs
the total sum of P5,750.00.
7.

SPS

VALDEZ

VS.

CA

his is a case of double sale of real property where both vendees registered the sales with
the Register of Deeds and each produced their respective owner's duplicate copy of the
certificate of title to the property. prLL
Spouses Francisco Ante and Manuela Ante were the registered owners of a parcel of
land located at 20th Avenue, Murphy, Quezon City, with an area of approximately 625.70
square meters as evidenced by Transfer Certificate of Title (TCT) No. 141582 issued by
the Register of Deeds of Quezon City. Said spouses executed a special power of
attorney in favor of their son, Antonio Ante, a lawyer, authorizing him to execute any
document conveying by way of mortgage or sale a portion or the whole of said property,
to receive payment and dispose of the same as he may deem fit and proper under the
premises. 1
Antonio Ante offered to sell the lot to Eliseo Viernes, who was occupying the same with
the permission of Ante. Viernes, however, turned down the offer as he did not have
money. Antonio Ante then told Viernes that he will instead sell the property to Pastor
Valdez and Virginia Valdez. 2
Antonio Ante had the said lot subdivided into Lot A with an area of 280 square meters and
Lot B with an area of 345.70 square meters, each lot having its corresponding technical
description.
On June 15, 1980, Antonio Ante, as attorney in fact, executed a deed of sale of Lot A in
favor of spouses Pastor Valdez and Virginia Valdez, for and in consideration of the
amount of P112,000.00. 3
On February 12, 1987, in the same capacity, Antonio Ante sold to said Valdez spouses,
Lot B for the amount of P138,000.00. 4
The Valdez spouses demanded from Antonio Ante the delivery of the owner's duplicate
copy of TCT No. 141582 covering said two (2) lots. Ante promised them that he will
deliver the title to them in a few days.

In the meanwhile petitioners started fencing the whole lot with cement hollow blocks in
the presence of spouses Eliseo and Felicidad Viernes. Except for the gate, it took them
two weeks to finish fencing the whole lot. On said occasion the Viernes spouses were
informed by the Valdez spouses that they were fencing the same as they purchased the
land from Antonio Ante.
As Ante failed to deliver the owner's duplicate certificate of title demanded by the Valdez
spouses, the latter filed their affidavit of adverse claim over the subject lot with the
Register of Deeds of Quezon City on September 6, 1982 as the vendees of the property.
5
Upon inquiries made, the Valdez spouses learned that Antonio Ante had delivered the
owner's duplicate certificate of title as a collateral to one Dr. Camilo Garma of Purdue
Street., Cubao Quezon City to secure his rentals in arrears in the amount of P9,000.00.
On September 13, 1983, upon the prodding of the Valdez spouses, Antonio Ante wrote to
Dr. & Mrs. Garma to request them to entrust the owner's duplicate copy of the title of the
questioned lot to the Valdez spouses with the assurance that Ante will pay his
indebtedness to them. 6 The Garma spouses turned over to the Valdez spouses the said
owner's duplicate certificate of title after said Valdez spouses paid for the obligation of
Antonio Ante to the Garma spouses. llcd
The Valdez spouses then proceeded to register the two deeds of sale dated June 15,
1980 and February 12, 1981 7 with the Register of Deeds of Quezon City by presenting
the owner's duplicate copy of the title. They were, however, informed that the said
owner's duplicate certificate of title had been declared null and void per order of Judge
Tutaan dated November 10, 1982. They also found out that spouses Francisco and
Manuela Ante earlier filed a petition for the issuance of a new owner's duplicate certificate
of title and to declare null and void the lost owner's duplicate certificate of title.
The Valdez spouses also discovered that the Register of Deeds cancelled TCT No.
141582 and in lieu thereof issued TCT No. 293889 in the name of Felicidad Viernes on
the basis of a deed of assignment of the same property dated February 17, 1982
executed by Antonio Ante in her favor.
When Virginia Valdez inquired from Antonio Ante why he executed the said deed of
assignment when he had previously sold the same lot to them, Ante replied that they
could sue him in court.
Thus, the Valdezes filed their adverse claim over the lot covered by TCT No. 293889 in
the name of Felicidad Viernes. They filed the complaint in Barangay office of San Roque,
Quezon City against Felicidad Viernes but as no amicable settlement was reached, the
Valdezes filed a complaint in the Regional Trial Court of Quezon City seeking among
others, that the order dated November 10, 1982 of the Court of First Instance of Quezon
City authorizing the issuance of a new owner's duplicate certificate of title in the name of
Francisca Ante be declared null and void; that the deed of assignment dated February
17, 1982 executed by Antonio Ante in favor of Felicidad Viernes be cancelled and

revoked; that TCT No. 293889 in the name of Felicidad Viernes in the Register of Deeds
of Quezon City be cancelled and declared null and void; that the Register of Deeds of
Quezon City be ordered to reinstate, revalidate and give full force and effect to the
owner's duplicate copy of TCT No. 141582 in the name of spouses Francisco and
Manuela Ante and declare petitioners as the true and lawful owners of the property;
ordering respondents Viernes and all persons claiming right under them to vacate the
property, and to pay damages and costs to petitioners. llcd
After trial on the merits before which the Antes were declared in default, a decision was
rendered by the trial court on April 9, 1986, the dispositive part of which reads as follows:
"WHEREFORE, the complaint is dismissed as against defendants Vierneses, and
defendants Antes are hereby ordered to pay to plaintiff, as prayed for in their complaint,
as follows:
Defendants Antes are hereby ordered to pay actual damages in the amount of
P250,000.00 to plaintiffs.
Defendants Antes are hereby ordered to pay moral and exemplary damages in the
amount of P15,000.00 and exemplary damages in the amount of P5,000.00.
Defendants Antes, are hereby ordered to pay P5,000.00 for attorney's fees.
SO ORDERED." 8
Not satisfied therewith the Valdezes interposed an appeal therefrom to the Court of
Appeals wherein in due course a decision was rendered on September 12, 1988,
affirming in toto the appealed decision, with costs against the appellants.
Hence this petition for review on certiorari filed by the Valdezes wherein the following
issues are raised:
"1. Whether the Order dated November 10, 1983 declaring as null and void the Owner's
copy of Transfer Certificate of Title No. 141582 and ordering the issuance of a new
Owner's copy of said title should be set aside having been secured fraudulently and in
bad faith by Francisco Ante and Antonio Ante who had already sold the property to the
spouses Pastor and Virginia Valdez and who knew fully well that the said Owner's copy of
said title has never been lost.
2. As between plaintiff-spouses Pastor and Virginia Valdez, petitioners in this case and
defendant Felicidad Viernes, one of the private respondents, who is entitled to the subject
lot?
3. Who is entitled to damages? 9
The petition is impressed with merit.
Article 1544 of the Civil Code provides as follows:

"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."
From the aforesaid provision of the law, it is clear that if movable property is sold to
different vendees, the ownership shall be transferred to the person who may have first
taken possession thereof in good faith. However, should the subject of the sale be
immovable property, the ownership shall vest in the person acquiring it who in good faith
first recorded it in the registry of property. Should none of the vendees inscribe the sale in
the Registry of Property, then the ownership of the subject real property 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. prLL
In this case, Lot A of the subject property was sold to the petitioners by Antonio Ante, as
attorney-in-fact, on June 15, 1980, while Lot B was sold by the same attorney-in-fact to
petitioners on February 12, 1981. 10 Since the owner's copy of TCT No. 141582 was not
delivered in due time to the petitioners by Antonio Ante despite his promise to deliver the
same in a few days, petitioners registered their notice of adverse claim over the said
property on September 6, 1982 with the Register of Deeds of Quezon City wherein it was
duly annotated as follows:
"PE-3004/T-141582 Affidavit of Adverse Claim
Filed under sworn statement of Pastor Valdez & Virginia C. Valdez claiming that they are
the vendees of the property described herein, but the title was not delivered (Doc. 253,
Page 51, Bk. I of the Not. Pub. of Q. City, Prudencio W. Valido)
Date of Instrument August 19, 1982
Date of Inscription Sept. 6, 1982'" 11
However, earlier, that is on February 17, 1982, a Deed of Assignment of the same
property was executed by Antonio Ante in favor of respondent Felicidad Viernes. 12 Ante
filed a petition for the issuance of another owner's duplicate copy of TCT No. 141582 with
the then Court of First Instance of Quezon City on the ground that the owner's duplicate
copy had been lost. The petition was granted in an order dated November 10, 1983
declaring null and void the lost owner's duplicate copy of the title and ordering the
issuance of a new owner's duplicate copy of the title in favor of the Antes. Said owner's
duplicate copy was delivered by Ante to respondent Viernes who thereafter together with
the Deed of Assignment presented the same to the Register of Deeds of Quezon City for

registration on November 11, 1982. Thus, on the basis thereof, TCT No. 141582 was
cancelled and TCT No. 293889 was issued in the name of respondent Felicidad Viernes.
prcd
Petitioners again filed an adverse claim this time on the property covered by TCT No.
293889 in the name of respondent Viernes.
From the foregoing set of facts there can be no question that the sale of the subject lot to
petitioners was made long before the execution of the Deed of Assignment of said lot to
respondent Viernes and that petitioners annotated their adverse claim as vendees of the
property as early as September 6, 1982 with the Register of Deeds of Quezon City. On
the other hand the deed of Assignment in favor of Viernes of the said lot was registered
with the Register of Deeds of Quezon City only on November 11, 1982 whereby a new
title was issued in the name of Viernes as above stated.
The rule is clear that a prior right is accorded to the vendee who first recorded his right in
good faith over an immovable property. 13 In this case, the petitioners acquired subject
lot in good faith and for valuable consideration from the Antes and as such owners
petitioners fenced the property taking possession thereof. Thus, when petitioners
annotated their adverse claim in the Register of Deeds of Quezon City they thereby
established a superior right to the property in question as against respondent Viernes. 14
On the other hand, respondent Viernes cannot claim good faith in the purchase of the
subject lot and the subsequent registration of the Deed of Assignment in her favor. Even
before the petitioners purchased the lot from the Antes respondent Viernes' husband was
first given the option to purchase the same by Antonio Ante but he declined because he
had no money and so he was informed that it would be sold to petitioners. After
petitioners purchased the lot they immediately fenced the same with the knowledge and
without objection of respondent Viernes and her husband and they were informed by the
petitioners about their purchase of the same. Moreover, when petitioners annotated their
adverse claim as vendees of the property with the Register of Deeds of Quezon City, it
was effectively a notice to the whole world including respondent Viernes.
Respondent Ante obviously in collusion with respondent Viernes sold the same property
to Viernes which was earlier sold to petitioners, by virtue of a subsequent Deed of
Assignment. It was fraudulently made to appear that the owner's duplicate copy of TCT
No. 141582 was lost through a petition filed with the trial court to nullify the said owner's
duplicate copy and for the issuance of another owner's duplicate copy.
Unfortunately, such fraud was unmasked as early as July 14, 1981 when respondent
Francisco Ante, in Civil Case No. 29617, filed an urgent motion for the issuance of a
subpoena and subpoena duces tecum to require Paz Garma of 8 Purdue Street, Cubao,
Quezon City to produce before the court on July 16, 1981 at 2:00 o'clock p.m. at the
scheduled pre-trial of the case, the owner's duplicate copy of TCT No. 141582 issued by
the Register of Deeds in the name of the Antes as the same was entrusted to Paz Garma
as a realtor for the proposed sale of the property which did not materialize. 15
Respondent Viernes admitted in her answer dated January 7, 1984 that she knew of the

filing in court of said urgent motion and that the branch clerk of court issued the
corresponding subpoena. 16 Thus, respondent Ante, as well as respondent Viernes,
knew that the owner's duplicate copy of certificate of title No. 141582 was never lost,
consequently the filing of the petition in court for the issuance of a new one was attended
with fraud and gross misrepresentation.
As a matter of fact, as hereinabove discussed, upon the urging of petitioners, respondent
Antonio Ante wrote to the Garma spouses to entrust the TCT to petitioners on September
30, 1983 17 and when petitioners paid the standing account of Ante to the Garmas said
owner's duplicate copy was delivered by the Garmas to the petitioners. The bad faith of
respondents Viernes and Ante is obvious.
Further, even while the notice of adverse claim of September 6, 1982 filed by the
petitioners on TCT No. 141582 in the Register of Deeds was still existing and had not
been cancelled, on November 11, 1982 the Register of Deeds nevertheless cancelled
said TCT and issued a new title in favor of respondent Viernes. The annotation was not
even carried over nor was it ordered cancelled under the new title issued to respondent
Viernes. The Register of Deeds and/or his subordinates apparently yielded to the
fraudulent design of respondents Viernes and Ante.
An examination of the decision of the trial court dated April 9, 1986 shows that there are
no findings of facts to serve as basis for its conclusions. 18 Section 14, Article VIII of the
Constitution mandates as follow:
"No decision shall be rendered by any court without expressing therein clearly and
distinctly the facts and the law on which it is based.
No petition for review or motion for reconsideration of a decision shall be refused due
course or denied without stating the legal basis therefor." (Emphasis supplied.)
Section 1, Rule 36 of the Rules of Court also provides clearly as follows:
"SECTION 1. Rendition of judgments. All judgments determining the merits of cases
shall be in writing personally and directly prepared by the judge, stating clearly and
distinctly the facts and the law on which it is based, signed by him, and filed with the clerk
of the court." (Emphasis supplied.)
That is the reason why this Court, through Administrative Circular No. 1 dated January
28, 1988 reminded all judges "to make complete findings of facts in their decisions, and
scrutinize closely the legal aspects of the case in the light of the evidence presented.
They should avoid the tendency to generalize and form conclusions without detailing the
facts from which such conclusions are deduced."
Of course, when a petition for review or motion for reconsideration of a decision of the
court is denied due course, or is otherwise denied, it is not necessary that such findings
of facts be made. However, the denial must state the legal basis thereof.

In the present case, the three-paged decision of the trial court contained in the first two
pages a statement of the allegations of the pleadings of the parties and enumerates the
witnesses presented and the exhibits marked during the trial. Thereafter, the trial court
arrived at the following conclusion:
"After considering the evidence on record, this Court finds that plaintiffs have failed to
prove their case as against defendant Felicidad Viernes, but proved their case against
defaulted defendants Antes. The Court finds that there is no sufficient proof of knowledge
or bad faith on the part of defendant Vierneses, and on the basis of existing
jurisprudence, a third person who in good faith purchases and registers a property cannot
be deprived of his title as against plaintiff who had previously purchased same property
but failed to register the same. 19
This is not what is contemplated under the Constitution and the Rules as a clear and
distinct statement of the facts on the basis of which the decision is rendered. The
foregoing one-paragraph statement constitutes a mere conclusion of facts and of law
arrived at by the trial court without stating the facts which serve as the basis thereof.
Indeed the conclusion of fact therein that petitioners had not registered the sale to them
is traversed by the records which show on the contrary, petitioners earlier registered the
sale to them. The curt statement in the decision that a party has proven his case while
the other has not, is not the findings of facts contemplated by the Constitution and the
rules to be clearly and distinctly stated. llcd
Unfortunately, the appellate court overlooked this fatal defect in the appealed decision. It
merely adopted the alleged findings of facts of the trial court. Although it made some
findings on how the deed of assignment in favor of respondent Viernes came about, it is
far from complete and is hardly a substantial compliance with the mandate aforestated.
As it is now, this Court has before it a challenged decision that failed to state clearly and
distinctly the facts on which it is predicated. This Court has said again and again that it is
not a trier of facts and that it relies, on the factual findings of the lower court and the
appellate court which are conclusive. But as it is, in this case, the Court has to wade
through the records and make its own findings of facts, rather than further delay the
disposition of the case by remanding the records for further proceedings.
Hence, the appealed decision should be struck down.
WHEREFORE, the petition is GRANTED. The appealed decision of the appellate court
dated September 12, 1988 is hereby SET ASIDE and another judgment is hereby
rendered declaring the order of the trial court dated November 10, 1982 null and void and
reinstating the owner's duplicate copy of TCT No. 141582 in the possession of the
petitioners; declaring the petitioners to have the superior right to the property in question
and to be the true and lawful owners of the same; directing the Register of Deeds of
Quezon City to cancel TCT No. 293889 in the name of respondent Felicidad Viernes and
to issue a new title in favor of petitioners spouses Pastor and Virginia Valdez upon the
presentation of the owner's duplicate copy of TCT No. 141582; directing respondent
Felicidad Viernes and other persons claiming rights under her residing in the premises of

the land in question to vacate the same immediately and to remove whatever
improvement she has placed in the premises; and ordering private respondents to jointly
and severally pay the petitioners the amounts of P15,000.00 as moral damages,
P5,000.00 exemplary damages, and P20,000.00 as attorney's fees. The docket fees for
the amount of damages and attorney's fees awarded to the petitioners, if not yet duly
paid, shall constitute a prior lien in favor of the government, before the satisfaction of the
judgment in favor of the petitioners. Costs against private respondents.
8.

NUGUID VS. CA

SYLLABUS
1. REMEDIAL LAW; EVIDENCE; BURDEN OF PROOFS AND PRESUMPTIONS;
DOCUMENT EXECUTED WITH ALL THE FORMALITIES OF LAW, PRESUMED
REGULAR. Respondent Marciana dela Rosa is bound by her signature appearing on
Exhibit "D". This public document evidencing the sale of the subject property to the
petitioners was executed with all the legal formalities of a public document. Indeed, the
legal presumption of the regularity of the above notarized contract was not rebutted
successfully.
2. CIVIL LAW; CONTRACTS; CONSIDERATION; PRESUMED EXISTING AND
UNLAWFUL. The private respondents' allegation of absence of consideration of the
contract was not substantiated. Under Art. 1354 of the Civil Code, it is presumed that
consideration exists and is lawful, unless the debtor proves the contrary.
3. REMEDIAL LAW; EVIDENCE; FORGERY; MUST BE PROVED. Forgery cannot be
presumed. It must be proved.
4. CIVIL LAW; SALE; RECONVEYANCE; NOT POSSIBLE WHERE PROPERTY WAS
TRANSFERRED TO AN INNOCENT PURCHASER FOR VALUE. An innocent
purchaser for value is protected such that when land has already passed into the hands
of an innocent purchaser for value, reconveyance of the same can no longer be made.
5. ID.; ID.; SALE OF IMMOVABLE PROPERTY TO DIFFERENT VENDEES;
OWNERSHIP BELONGS TO VENDEE WHO FIRST RECORDED THE SALE. It is an
established fact that the first sale to Juliana Salazar was not registered while the sale to
the petitioners was registered. The disputed property being immovable property, the
ownership should belong to the vendee who in good faith first recorded it in the Registry
of Property, pursuant to the same article.
6. LAND TITLES AND DEEDS; TORRENS SYSTEM OF LAND REGISTRATION;
PURCHASER HAS A RIGHT TO RELY ON THE CERTIFICATE OF TITLE. If the
property sold is registered land, the purchaser in good faith has a right to rely on the
certificate of title and is under no duty to go behind it to look for flaws.
7. REMEDIAL LAW; EVIDENCE; FINDINGS OF FACT OF THE TRIAL COURT, NOT
DISTURBED ON APPEAL. As regards the spouses Guevarra, we find no reason to

disturb the trial court's finding that they themselves requested that they be allowed to
remain on the property until such time that the petitioners would need the entire
premises; and in lieu of rentals to the petitioners, they offered to continue paying the real
estate taxes for one-half of the property as this was their arrangement with the previous
owners to which request the petitioners acceded.
DECISION
This petition seeks the reversal of the decision of the Court of Appeals declaring the
private respondents owners of one-half portion of the property subject of this case.
The petitioners were the defendants in a suit commenced by the private respondents
before the Court of First Instance (now Regional Trial Court) of Bataan. 1 The antecedent
facts may be summarized as follows:
The deceased spouses Victorino and Crisanta dela Rosa were the registered owners of a
parcel of land with an area of 231 square meters, situated in Orani, Bataan, and covered
by Original Certificate of Title No. 3778. On or about May 4, 1931, Victorino dela Rosa
(widowed by then) sold one-half of the said property to Juliana Salazar for P95.00. This
sale, though evidenced by a document, 2 was not registered. Immediately after the sale,
Juliana Salazar constructed a house on the lot she purchased.
On March 10, 1964, petitioner spouses (defendants below) caused the registration of a
document entitled "Kasulatan ng Partihan at Bilihan" (hereinafter referred to as Exhibit
"D"), 3 dated June 6, 1961. In this document, Marciana dela Rosa (who is among the
private respondents), Victoria Buenaventura, Ernesto Buenaventura, Virgilio
Buenaventura, and Felicisimo Buenaventura all heirs of Victorino and Crisanta dela
Rosa sold to the petitioners the entire area of the property abovementioned for the
sum of P300.00. Subsequently, OCT No. 3778 was cancelled by the Register of Deeds of
Bataan, and Transfer Certificate of Title No. T-12782 was issued in the names of the
petitioners.
The private respondents claim that Exhibit "D" is a forged deed in that: 1) the signature of
Marciana dela Rosa appearing therein is a forgery; 2) it is not true that, as stated in the
deed, Luisa dela Rosa (sister of Marciana), at the time of her death, was a widow; 3)
none of the heirs-signatories to the deed received any consideration for the supposed
sale; and 4) Luisa dela Rosa is survived not only by four, but by five children (the fifth
child, respondent Julieta Buenaventura, was not mentioned in the deed).
The private respondents allegedly discovered the forged deed as well as the certificate of
title in the name of the petitioners much later, that is, on February 28, 1978, when
respondents Amorita Guevarra and Teresita Guevarra thought of having the title of their
grandmother Juliana Salazar, registered.
On the other hand, the petitioners assert that sometime in the latter part of 1960, the land
subject of this case was offered to them for sale by Nicolas dela Rosa, uncle of
respondent Marciana dela Rosa and grandfather of the other heirs-signatories to Exhibit
"D". Apparently, Nicolas dela Rosa claimed that he had already purchased the shares of

the heirs over the subject property as evidenced by a private document entitled
"Kasunduan" (hereinafter referred to as Exhibit "6") dated August 31, 1955; as a matter of
fact, he had in his possession the original certificate of title covering the property in the
name of the deceased Victorino and Crisanta dela Rosa. He promised, however, that he
would arrange for a direct sale to be made by the heirs in favor of the petitioners.
Consequently, Exhibit "D", as mentioned earlier, was executed. The petitioners stress that
even before they decided to buy the subject property, they made an ocular inspection
thereof and questioned the occupants therein to verify its real ownership. They
underscore the fact that the persons whom they found occupying the property did not at
all assert adverse ownership over the same.
The trial court rendered judgment dismissing the complaint filed by the private
respondents, but on appeal, this was reversed by the Court of Appeals. 4 To quote the
dispositive portion of the appellate court's decision:
WHEREFORE, finding the decision of the lower court to be with reversible error, the
decision dated May 1, 1982 is hereby ordered REVERSED and a new one entered
declaring plaintiffs to be owners of 115.5 square meters of Lot 678. Defendants are
hereby ordered to execute a deed of reconveyance in favor of plaintiffs over the said area
within thirty (30) days from the finality of this decision, otherwise, the Register of Deeds
will be ordered to execute one in favor of the plaintiffs. With costs against the defendants
plus attorney's fees in the amount of P500.00. SO ORDERED.
From the foregoing, this petition for review was filed.
We find merit in the petition.
From the start, the respondent court erred in treating the private respondents as though
they all belong to one group of heirs whose right is derived from one ancestor, when
actually, the private respondents should be categorized into two groups.
To one group belong the respondents Amorita, Teresita and Narciso, all surnamed
Guevarra. As children of Pedro Guevarra and Pascuala Tolentino, and grandchildren of
Juliana Salazar, they claim to have succeeded to the ownership over the one-half portion
of land which was sold to Juliana Salazar. The remaining private respondents, Marciana
dela Rosa, Bernabe Buenaventura, and Julieta Buenaventura, make up the second
group of heirs who claim to have derived, by succession, their ownership over the other
half of the subject property from their predecessors-in-interest, the original registrants,
Victorino and Crisanta dela Rosa.
Analyzing the case before us in this manner, we can immediately discern another error in
the decision of the respondent court, which is that said court, with absolutely no basis,
sweepingly adjudged all of the respondents co-owners of one-half of the subject property.
Clearly, it was a glaring error for the Court of Appeals to have so ruled because as a
matter of fact, the respondent heirs of Victorino dela Rosa were claiming a half of the
entire property which is separate and distinct from the other half claimed by the
respondents Guevarras. 6

Surprisingly, none of the private respondents appealed the above decision of the Court of
Appeals. Consequently, they are deemed to have accepted the said erroneous decision
declaring them, collectively, owners of one-half of the subject property. In effect, only this
portion of the property is being presently disputed by the contending parties. As regards
the other one-half portion, it is now settled (by virtue of the private respondents'
acceptance of the Court of Appeals decision) that the same is the property of the
petitioners. LLpr

Since no evidence was introduced on the point, the trial court surmised that respondent
Julieta Buenaventura was probably a minor at the time of signing of Exhibits "D" and "6".
LLpr

Insofar as the respondent heirs of Victorino dela Rosa are concerned, undoubtedly they
are not entitled to any portion of the disputed property. Respondent Marciana dela Rosa
is bound by her signature appearing on Exhibit "D". This public document evidencing the
sale of the subject property to the petitioners was executed with all the legal formalities of
a public document, to wit:

At any rate, the question of whether or not the abovementioned signatures were forged
would become irrelevant if, on the other hand, the petitioners are able to establish that
they acquired the subject property in good faith. For, indeed, an innocent purchaser for
value is protected such that when land has already passed into the hands of an innocent
purchaser for value, reconveyance of the same can no longer be made. 12

The "Kasulatan ng Partihan at Bilihan" (Exhibit D, Exhibit 1) was duly witnessed by

Ricardo L. Santos and Pablo R. Buenaventura, proven to be relatives both of Marciana
dela Rosa and the Buenaventuras who were then at the municipal building of Orani,
Bataan, when the "Kasulatan ng Partihan at Bilihan" was notarized by Fernando J.
Rivera, Justice of the peace of Orani, Bataan, in his capacity as ex officio notary public. It
should be noted that all the parties were from Orani, Bataan, and the notary public, who
notarized the document, was the justice of the peace of Orani, Bataan, acting in his
capacity as ex officio notary public. 7

On the other hand, the claimed ownership of the respondent heirs of Pedro and Pascuala
Guevarra over the property is anchored on the prior sale thereof to their grandmother,
Juliana Salazar. The situation, in effect, is that contemplated by Article 1544 of the Civil
Code, 13 a double sale. Parenthetically, although the second sale (to the petitioners
herein) was made by the heirs of the deceased Victorino dela Rosa, the said heirs are
deemed the judicial continuation of the personality of the decedent. 14 Essentially,
therefore, the first and second sales were made by the same person, as envisioned
under Article 1544 of the Civil Code, quoted earlier (footnote No. 13). The disputed
property being immovable property, the ownership should belong to the vendee who in
good faith first recorded it in the Registry of Property, pursuant to the same article.

Indeed, the legal presumption of the regularity of the above notarized contract was not
rebutted successfully. The courts below were one in concluding that the alleged forgery of
respondent Marciana dela Rosa's signature was not proven. Likewise, the private
respondents' allegation of absence of consideration of the contract was not
substantiated. Under Art. 1354 of the Civil Code, it is presumed that consideration exists
and is lawful, unless the debtor proves the contrary. 8
Noteworthy is the fact that of the five heirs who signed Exhibit "D", only one, the
respondent Marciana dela Rosa, impugned its genuineness and due execution, as well
as the authenticity of her signature thereon; and she alone joined the other respondents
in this suit.

It must be noted that although respondent Bernabe Buenaventura disowned his signature
on Exhibit "6", there was no effort on his part to prove such claim. Forgery cannot be
presumed. It must be proved. 11

It is an established fact that the first sale to Juliana Salazar was not registered while the
sale to the petitioners was registered. However, it is contended by the respondents
Guevarras that they have a better right as against the petitioners because the element of
good faith was lacking as regards the latter.
Whether or not there was good faith in the purchase of the land and in the subsequent
registration of title acquired in the Registry of Property is, therefore, the central issue in
this case.
We agree with the trial court's finding that the petitioners are purchasers in good faith.

In the case of the respondents Bernabe Buenaventura and Julieta Buenaventura, the trial
court correctly declared that:
. . . With his signature appearing in the "Kasulatan" 9 (Exhibit 6) and his affirmation that
his wife, Luisa dela Rosa, who was a sister of Marciana dela Rosa and also a daughter of
Victorino dela Rosa and Crisanta dela Cruz, had sold her share of Lot No. 678 to Nicolas
dela Rosa, plaintiff Bernabe Buenaventura could no longer be heard to complain. And if,
plaintiff Julieta Buenaventura were prejudiced, her logical recourse would be to go after
her own kin. 10

The Original Certificate of Title No. 3778 covering the entire property was clean and free
from any annotation of an encumbrance, 15 and there was nothing whatsoever to
indicate on its face any vice or infirmity in the title of the registered owners the
spouses Victorino and Crisanta dela Rosa. Thus, the petitioners could not have known of
the prior sale to Juliana Salazar as, precisely, it was not registered. The general rule is
that if the property sold is registered land, the purchaser in good faith has a right to rely
on the certificate of title and is under no duty to go behind it to look for flaws. 16 This
notwithstanding, the petitioners did not rely solely upon the certificate of title. They
personally inspected the subject property. Undeniably, they found the same to be
occupied by two houses, one belonging to a certain Doray dela Rosa and the other to
spouses Pedro Guevarra and Pascuala Tolentino, parents of the respondents Guevarras.

Upon being informed of the petitioners' desire to purchase the land, Doray dela Rosa
apparently offered to sell her house, which offer was accepted by the petitioners. As
regards the spouses Guevarra, we find no reason to disturb the trial court's finding that
they themselves requested that they be allowed to remain on the property until such time
that the petitioners would need the entire premises; and in lieu of rentals to the
petitioners, they offered to continue paying the real estate taxes for one-half of the
property as this was their arrangement with the previous owners to which request the
petitioners acceded. 17 Evidently, neither Doray dela Rosa nor the spouses Guevarra
professed ownership over the portions of land they were occupying; on the contrary, by
their actuations they expressly acknowledged that they were not the real owners of the
said property. The spouses Guevarra, in particular, made no mention of the prior
unregistered sale to their predecessor-in-interest, Juliana Salazar. Thus, when the
petitioners registered the sale in their favor with the Register of Deeds, they did so
without any knowledge about the prior sale in favor of Juliana Salazar. The petitioners,
therefore, had acted in good faith.
The basis for the Court of Appeals' conclusion that petitioners were buyers in bad faith is,
to say the least, ambiguous. Said court appears to have relied on the singular
circumstance that the petitioners are, like the respondents, from Orani, Bataan, and as
such, according to the court, they should have personally known that the private
respondents were the persons in actual possession and not Doray dela Rosa and Pedro
Guevarra. The respondent court's premise, therefore, is that the private respondents
were the actual occupants of the property. llcd
There is, however, nothing in the record to sustain the validity of the above premise. At
the time of the purchase, the petitioners dealt with Pedro Guevarra and Pascuala
Tolentino, the latter being the actual occupants. The respondents Guevarras, children of
the said Pedro and Pascuala Guevarra, came into the picture only after their parents
died. As for the respondent heirs of Victorino dela Rosa, their being in actual possession
of any portion of the property was, likewise, simply presumed or taken for granted by the
Court of Appeals.
The private respondents can not honestly claim that they became aware of the
petitioners' title only in 1978. Ever since the petitioners bought the property in 1961, they
have occupied the same openly, publicly, and continuously in the concept of owners,
even building their house thereon. For seventeen years they were in peaceful
possession, with the respondents Guevarras occupying less than one-half of the same
property. If the petitioners are mere usurpers, why did the private respondents complain
only now? Moreover, they have not bothered to explain in what capacity are the
petitioners occupying the land, if not as legal owners. Consequently, we are more inclined
to accept the petitioners' explanation that the private respondents have initiated this suit
because of their (the petitioners') refusal to sell to the respondents Guevarras that portion
of the land which the latter are occupying, coupled with the petitioners' demand for the
said private respondents to vacate the same.
Anent the other issues raised in the petition, these do not need further discussion, being
merely subordinate to the main issue of good faith. LLjur

WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals is SET
ASIDE, and that of the Court of First Instance (now Regional Trial Court) of Bataan,
Branch I is hereby REINSTATED.
9.

RADIOWEALTH FINANCE VS. PALILEO

SYLLABUS
1. CIVIL LAW; DOUBLE SALE OF IMMOVABLE PROPERTY; REGISTRATION IS THE
OPERATIVE ACT TO CONVEY OR AFFECT REGISTERED LANDS AS FAR AS THIRD
PERSONS ARE CONCERNED. 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. 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. REMEDIAL LAW; EVIDENCE; FINDINGS OF FACT OF THE COURT OF APPEALS
CONCLUSIVE ON THE SUPREME COURT. 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.
3. CIVIL LAW; LAND REGISTRATION; PHRASE "WITHOUT PREJUDICE TO A THIRD
PARTY WITH A BETTER RIGHT", CONSTRUED; CASE OF CARUMBA V. CA, 31 SCRA
558, APPLICABLE. 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 is a case in
point. It was held therein that Article 1644 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, 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 sheriff's 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.
DECISION
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. llcd
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 for the 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. cdrep
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.
LLphil
The case of Carumba vs. Court of Appeals 6 is a case in point. It was held therein that
Article 1644 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 sheriff's 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. Cdpr
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.

10. TANEDO

VS.

CA

SYLLABUS
1. CIVIL LAW; SPECIAL CONTRACTS; SALE; MAY NOT BE ENTERED INTO UPON
FUTURE INHERITANCE; EXCEPT IN CASES EXPRESSLY AUTHORIZED BY LAW.
Pursuant to Article 1347 of the Civil Code, "(n)o contract may be entered into upon a
future inheritance except in cases expressly authorized by law." Consequently, said
contract made in 1962 conveying one hectare of his future inheritance is not valid and
cannot be the source of any right nor the creator of any obligation between the parties.
Hence, the "affidavit of conformity" dated February 28, 1980, insofar as it sought to
validate or ratify the 1962 sale, is also useless and, in the words of the respondent Court,
"suffers from the same infirmity." Even private respondents in their memorandum
concede this.
2. ID.; ID.; ID.; RULE ON PREFERENTIAL RIGHT OF VENDEES IN CASE OF DOUBLE
SALE. Petitioners contend that they were in possession of the property and that
private respondents never took possession thereof. As between two purchasers, the one
who registered the sale in his favor has a preferred right over the other who has not
registered his title, even if the latter is in actual possession of the immovable property.
3. REMEDIAL LAW; EVIDENCE; CREDIBILITY; FINDINGS OF FACT OF EXISTENCE
OF GOOD FAITH, GENERALLY UPHELD ON APPEAL. There are indeed many
conflicting documents and testimonies as well as arguments over their probative value
and significance. Suffice it to say, however, that all the above contentions involve
questions of fact, appreciation of evidence and credibility of witnesses, which are not
proper in this review. It is well-settled that the Supreme Court is not a trier of facts. In
petitions for review under Rule 45 of the Revised Rules of Court, only questions of law
may be raised and passed upon. Absent any whimsical or capricious exercise of
judgment, and unless the lack of any basis for the conclusions made by the lower courts
be amply demonstrated, the Supreme Court will not disturb their findings. At most, it
appears that petitioners have shown that their evidence was not believed by both the trial
and the appellate courts, and that the said courts tended to give more credence to the
evidence presented by the private respondents. But this in itself is not a reason for setting
aside such findings. We are far from convinced that both courts gravely abused their
respective authorities and judicial prerogatives.
DECISION
PANGANIBAN, J p:
Is a sale of future inheritance valid? In multiple sales of the same real property, who has
preference in ownership? What is the probative value of the lower court's finding of good
faith in registration of such sales in the registry of property? These are the main
questions raised in this Petition for review on certiorari under Rule 45 of the Rules of

Court to set aside and reverse the Decision 1 of the Court of Appeals 2 in CA-G.R. CV
NO. 24987 promulgated on September 26, 1991 affirming the decision of the Regional
Trial Court, Branch 63, Third Judicial Region, Tarlac, Tarlac in Civil Case No. 6328, and
its Resolution denying reconsideration thereof, promulgated on May 27, 1992. cdtai

Private respondents, however presented in evidence a "Deed of Revocation of a Deed of

Sale" dated March 12, 1981 (Exh. 6), wherein Lazaro revoked the sale in favor of
petitioners for the reason that it was "simulated or fictitious without any consideration
whatsoever". cdtai

By the Court's Resolution on October 25, 1995, this case (along with several others) was
transferred from the First to the Third Division and after due deliberation, the Court
assigned it to the undersigned ponente for the writing of this Decision.

Shortly after the case a quo was filed, Lazaro executed a sworn statement (Exh. G)
which virtually repudiated the contents of the Deed of Revocation of a Deed of Sale (Exh.
6) and the Deed of Sale (Exh. 4) in favor of private respondents. However, Lazaro
testified that he sold the property to Ricardo, and that it was a lawyer who induced him to
execute a deed of sale in favor of his children after giving him five pesos (P5.00) to buy a
"drink" (TSN September 18, 1985, pp. 204-205).

The Facts
On October 20, 1962, Lazardo Taedo executed a notarized deed of absolute sale in
favor of his eldest brother, Ricardo Taedo, and the latter's wife, Teresita Barera, private
respondents herein, whereby he conveyed to the latter in consideration of P1,500.00,
"one hectare of whatever share I shall have over Lot No. 191 of the cadastral survey of
Gerona, Province of Tarlac and covered by Title T-13829 of the Register of Deeds of
Tarlac", the said property being his "future inheritance" from his parents (Exh. 1). Upon
the death of his father Matias, Lazaro executed an "Affidavit of Conformity" dated
February 28, 1980 (Exh. 3) to "re-affirm respect, acknowledge and validate the sale I
made in 1962." On January 13, 1981, Lazaro executed another notarized deed of sale in
favor of private respondents covering his "undivided ONE TWELVE (1/12) of a parcel of
land known as Lot 191 . . ." (Exh. 4). He acknowledged therein his receipt of P10,000.00
as consideration therefor. In February 1981, Ricardo learned that Lazaro sold the same
property to his children, petitioners herein, through a deed of sale dated December 29,
1980 (Exh. E). On June 7, 1982, private respondents recorded the Deed of Sale (Exh. 4)
in their favor in the Registry of Deeds and the corresponding entry was made in Transfer
Certificate of Title No. 166451 (Exh. 5).
Petitioners on July 16, 1982 filed a complaint for rescission (plus damages) of the deeds
of sale executed by Lazaro in favor of private respondents covering the property inherited
by Lazaro from his father. cdasia
Petitioners claimed that their father, Lazaro, executed an "Absolute Deed of Sale" dated
December 29, 1980 (Exh. E), conveying to his ten children his allotted portion under the
extrajudicial partition executed by the heirs of Matias, which deed included the land in
litigation (Lot 191).
Petitioners also presented in evidence: (1) a private writing purportedly prepared and
signed by Matias dated December 28, 1978, stating that it was his desire that whatever
inheritance Lazaro would receive from him should be given to his (Lazaro's) children
(Exh. A); (2) a typewritten document dated March 10, 1979 signed by Lazaro in the
presence of two witnesses, wherein he confirmed that he would voluntarily abide by the
wishes of his father, Matias, to give to his (Lazaro's) children all the property he would
inherit from the latter (Exh. B); and (3) a letter dated January 1, 1980 of Lazaro to his
daughter Carmela, stating that his share in the extrajudicial settlement of the estate of his
father was intended for his children, petitioners herein (Exh. C).

The trial court decided in favor of private respondents, holding that petitioners failed "to
adduce a preponderance of evidence to support (their) claim." On appeal, the Court of
Appeals affirmed the decision of the trial court, ruling that the Deed of Sale dated January
13, 1981 (Exh. 9) was valid and that its registration in good faith vested title in said
respondents.
The Issues
Petitioners raised the following "errors" in the respondent Court, which they also now
allege in the instant Petition: cdt
"I. The trial court erred in concluding that the Contract of Sale of October 20, 1962
(Exhibit 7, Answer) is merely voidable or annullable and not void ab initio pursuant to
paragraph 2 of Article 1347 of the New Civil Code involving as it does a 'future
inheritance'.
"II. The trial court erred in holding that defendants-appellees acted in good faith in
registering the deed of sale of January 13, 1981 (Exhibit 9) with the Register of Deeds of
Tarlac and therefore ownership of the land in question passed on to defendantsappellees.
"III. The trial court erred in ignoring and failing to consider the testimonial and
documentary evidence of plaintiffs-appellants which clearly established by
preponderance of evidence that they are indeed the legitimate and lawful owners of the
property in question.
"IV. The decision is contrary to law and the facts of the case and the conclusions drawn
from the established facts are illogical and off-tangent." cdtai
From the foregoing, the issues may be restated as follows:
1. Is the sale of a future inheritance valid?
2. Was the subsequent execution on January 13, 1981 (and registration with the Registry
of Property) of a deed of sale covering the same property to the same buyers valid?

3. May this Court review the findings of the respondent Court (a) holding that the buyers
acted in good faith in registering the said subsequent deed of sale and (b) in "failing to
consider petitioners' evidence"? Are the conclusions of the respondent Court "illogical
and off-tangent"? cdta
The Court's Ruling
At the outset, let it be clear that the "errors" which are reviewable by this Court in this
petition for review on certiorari are only those allegedly committed by the respondent
Court of Appeals and not directly those of the trial court, which is not a party here. The
"assignment of errors" in the petition quoted above are therefore totally misplaced, and
for that reason, the petition should be dismissed. But in order to give the parties
substantial justice we have decided to delve into the issues as above re-stated. The
errors attributed by petitioners to the latter (trial) court will be discussed only insofar as
they are relevant to the appellate court's assailed Decision and Resolution.
The sale made in 1962 involving future inheritance is not really at issue here. In context,
the assailed Decision conceded "it may be legally correct that a contract of sale of
anticipated future inheritance is null and void." 3
But to remove all doubts, we hereby categorically rule that, pursuant to Article 1347 of
the Civil Code, "(n)o contract may be entered into upon a future inheritance except in
cases expressly authorized by law." cdasia
Consequently, said contract made in 1962 is not valid and cannot be the source of any
right nor the creator of any obligation between the parties.
Hence, the "affidavit of conformity" dated February 28, 1980, insofar as it sought to
validate or ratify the 1962 sale, is also useless and, in the words of the respondent Court,
"suffers from the same infirmity." Even private respondents in their memorandum 4
concede this.
However, the documents that are critical to the resolution of this case are: (a) the deed of
sale of January 13, 1981 in favor of private respondents covering Lazaro's undivided
inheritance of one-twelfth (1/12) share in Lot No. 191, which was subsequently registered
on June 7, 1982; and (b) the deed of sale dated December 29, 1980 in favor of
petitioners covering the same property. These two documents were executed after the
death of Matias (and his spouse) and after a deed of extra-judicial settlement of his
(Matias') estate was executed, thus vesting in Lazaro actual title over said property. In
other words, these dispositions, though conflicting, were no longer infected with the
infirmities of the 1962 sale. cdtai
Petitioners contend that what was sold on January 13, 1981 was only one-half hectare
out of Lot No. 191, citing as authority the trial court's decision. As earlier pointed out,
what is on review in these proceedings by this Court is the Court of Appeals' decision
which correctly identified the subject matter of the January 13, 1981 sale to be the entire
undivided 1/12 share of Lazaro in Lot No. 191 and which is the same property disposed
of on December 29, 1980 in favor of petitioners.

Critical in determining which of these two deeds should be given effect is the registration
of the sale in favor of private respondents with the register of deeds on June 7, 1982.
Article 1544 of the Civil Code governs the preferential rights of vendees in cases of
multiple sales, as follows: cdt
"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." aisadc
The property in question is land, an immovable, and following the above-quoted law,
ownership shall belong to the buyer who in good faith registers it first in the registry of
property. Thus, although the deed of sale in favor of private respondents was later than
the one in favor of petitioners, ownership would vest in the former because of the
undisputed fact of registration. On the other hand, petitioners have not registered the sale
to them at all.
Petitioners contend that they were in possession of the property and that private
respondents never took possession thereof. As between two purchasers, the one who
registered the sale in his favor has a preferred right over the other who has not registered
his title, even if the latter is in actual possession of the immovable property. 5
As to third issue, while petitioners conceded the fact of registration, they nevertheless
contended that it was done in bad faith. On this issue, the respondent Court ruled: cdta
"Under the second assignment of error, plaintiffs-appellants contend that defendantsappellees acted in bad faith when they registered the Deed of Sale in their favor as
appellee Ricardo already knew of the execution of the deed of sale in favor of the
plaintiffs; appellants cite the testimony of plaintiff Belinda Taedo to the effect that
defendant Ricardo Taedo called her up on January 4 or 5, 1981 to tell her that he was
already the owner of the land in question 'but the contract of sale between our father and
us were (sic) already consummated' (pp. 9-10, tsn, January 6, 1984). This testimony is
obviously self-serving, and because it was a telephone conversation, the deed of sale
dated December 29, 1980 was not shown; Belinda merely told her uncle that there was
already a document showing that plaintiffs are the owners (p. 80). Ricardo Taedo
controverted this and testified that he learned for the first time of the deed of sale
executed by Lazaro in favor of his children 'about a month or sometime in February 1981'
(p. 111, tsn, Nov. 28, 1984). . . ." 6

The respondent Court, reviewing the trial court's findings, refused to overturn the latter's
assessment of the testimonial evidence, as follows:

As held in the recent case of Chua Tiong Tay vs. Court of Appeals and Goldrock
Construction and Development Corp. 7 :

"We are not prepared to set aside the finding of the lower court upholding Ricardo
Taedo's testimony, as it involves a matter of credibility of witnesses which the trial judge,
who presided at the hearing, was in a better position to resolve." (Court of Appeals'
Decision, p. 6.) cdt

"The Court has consistently held that the factual findings of the trial court, as well as the
Court of Appeals, are final and conclusive and may not be reviewed on appeal. Among
the exceptional circumstances where a reassessment of facts found by the lower courts
is allowed are when the conclusion is a finding grounded entirely on speculation,
surmises or conjectures; when the inference made is manifestly absurd, mistaken or
impossible; when there is grave abuse of discretion in the appreciation of facts; when the
judgment is premised on a misapprehension of facts; when the findings went beyond the
issues of the case and the same are contrary to the admissions of both appellant and
appellee. After a careful study of the case at bench, we find none of the above grounds
present to justify the re-evaluation of the findings of fact made by the courts below." cdtai

In this connection, we note the tenacious allegations made by petitioners, both in their
basic petition and in their memorandum, as follows:
1. The respondent Court allegedly ignored the claimed fact that respondent Ricardo "by
fraud and deceit and with foreknowledge" that the property in question had already been
sold to petitioners, made Lazaro execute the deed of January 13, 1981;
2. There is allegedly adequate evidence to show that only 1/2 of the purchase price of
P10,000.00 was paid at the time of the execution of the deed of sale, contrary to the
written acknowledgment, thus showing bad faith; aisadc
3. There is allegedly sufficient evidence showing that the deed of revocation of the sale in
favor of petitioners "was tainted with fraud or deceit."
4. There is allegedly enough evidence to show that private respondents "took undue
advantage over the weakness and unschooled and pitiful situation of Lazaro Taedo. . ."
and that respondent Ricardo Taedo "exercised moral ascendancy over his younger
brother he being the eldest brother and who reached fourth year college of law and at
one time a former Vice-Governor of Tarlac, while his younger brother only attained first
year high school . . .";
5. The respondent Court erred in not giving credence to petitioners' evidence, especially
Lazaro Taedo's Sinumpaang Salaysay dated July 27, 1982 stating that Ricardo Taedo
deceived the former in executing the deed of sale in favor of private respondents. cdtai
To be sure, there are indeed many conflicting documents and testimonies as well as
arguments over their probative value and significance. Suffice it to say, however, that all
the above contentions involve questions of fact, appreciation of evidence and credibility
of witnesses, which are not proper in this review. It is well-settled that the Supreme Court
is not a trier of facts. In petitions for review under Rule 45 of the Revised Rules of Court,
only questions of law may be raised and passed upon. Absent any whimsical or
capricious exercise of judgment, and unless the lack of any basis for the conclusions
made by the lower courts be amply demonstrated, the Supreme Court will not disturb
their findings. At most, it appears that petitioners have shown that their evidence was not
believed by both the trial and the appellate courts, and that the said courts tended to give
more credence to the evidence presented by private respondents. But this in itself is not
a reason for setting aside such findings. We are far from convinced that both courts
gravely abused their respective authorities and judicial prerogatives.

In the same vein, the ruling in the recent case of South Sea Surety and Insurance
Company, Inc. vs. Hon. Court of Appeals, et al. 8 is equally applicable to the present
case:
"We see no valid reason to discard the factual conclusions of the appellate court. . . . (I)t
is not the function of this Court to assess and evaluate all over again the evidence,
testimonial and documentary, adduced by the parties, particularly where, such as here,
the findings of both the trial court and the appellate court on the matter coincide."
(Emphasis supplied)
WHEREFORE, the petition is DENIED and the assailed Decision of the Court of Appeals
is AFFIRMED.
11. SPOUSES TOMAS AND SILVINA OCCENA VS.ESPONILLA
The case at bar involves a portion of the 1,198-square meter residential lot (lot no. 265)
situated in Sibalom, Antique, originally owned by spouses Nicolas and Irene Tordesillas
under OCT No. 1130. The Tordesillas spouses had three (3) children, namely: Harod,
Angela and Rosario, the latter having been survived by her two (2) children, Arnold and
Lilia de la Flor.
After the death of the Tordesillas spouses, the lot was inherited by their children Harod
and Angela, and grandchildren Arnold and Lilia. In 1951, the heirs executed a Deed of
Pacto de Retro Sale 1 in favor of Alberta Morales covering the southwestern portion of
the lot with an area of 748 square meters. AEIcSa
Three (3) years later, in 1954, Arnold and Lilia executed a Deed of Definite Sale of
Shares, Rights, Interests and Participations 2 over the same 748 sq. m. lot in favor of
Alberta Morales. The notarized deed also attested that the lot sold by vendors Arnold and
Lilia to Alberta were their share in the estate of their deceased parents. ICDcEA

Alberta possessed the lot as owner, constructed a house on it and appointed a caretaker
to oversee her property. Thereafter, in July 1956, vendor Arnold de la Flor borrowed the
OCT from Alberta covering the lot. He executed an Affidavit 3 acknowledging receipt of
the OCT in trust and undertook to return said title free from changes, modifications or
cancellations.
In 1966, Arnold and Angela, nephew and daughter respectively of the Tordesillas
spouses, without the knowledge of Alberta, executed a Deed of Extrajudicial Settlement 4
declaring the two of them as the only co-owners of the undivided 1,198 sq. m. lot no. 265,
without acknowledging their previous sale of 748 sq. m. thereof to Alberta. A number of
times, thereafter, Alberta and her nieces asked Arnold for the OCT of the land but Arnold
just kept on promising to return it.
In 1983, Arnold executed an Affidavit of Settlement of the Estate 5 of Angela who died in
1978 without issue, declaring himself as the sole heir of Angela and thus consolidating
the title of the entire lot in his name.
In 1985, vendee Alberta Morales died. Her nieces-heirs, Lydia, Elsa and Dafrosa,
succeeded in the ownership of the lot. Months later, as the heirs were about to leave for
the United States, they asked Arnold to deliver to them the title to the land so they can
register it in their name. Arnold repeatedly promised to do so but failed to deliver the title
to them. TEcCHD
On December 4, 1986, after Albertas heirs left for the States, Arnold used the OCT he
borrowed from the deceased vendee Alberta Morales, subdivided the entire lot no. 265
into three sublots, and registered them all under his name, viz: lot no. 265-A (with TCT
No. 16895), lot no. 265-B (with TCT No. 16896) and lot no. 265-C (with TCT No. 16897).
He then paid the real estate taxes on the property.
On August 13, 1990, Arnold sold lot nos. 265-B & C to spouses Tomas and Sylvina
Occea, which included the 748 sq. m. portion previously sold to Alberta Morales. A Deed
of Absolute Sale 6 over said lots was executed to the Occea spouses and titles were
transferred to their names.
In 1993, after the death of Arnold, the three (3) nieces-heirs of Alberta Morales learned
about the second sale of their lot to the Occea spouses when they were notified by
caretaker Abas that they were being ejected from the land. In 1994, the heirs filed a case
7 for annulment of sale and cancellation of titles, with damages, against the second
vendees Occea spouses. In their complaint, they alleged that the Occeas purchased
the land in bad faith as they were aware that the lots sold to them had already been sold
to Alberta Morales in 1954. They averred that before the sale, when Tomas Occea
conducted an ocular inspection of the lots, Morito Abas, the caretaker appointed by
Alberta Morales to oversee her property, warned them not to push through with the sale
as the land was no longer owned by vendor Arnold as the latter had previously sold the
lot to Alberta Morales who had a house constructed thereon. IEDHAT

For their part, the Occea spouses claimed that the OCT in the name of the original
owners of the lots, the Tordesillas spouses, was cancelled after it was subdivided
between Angela and Arnold in 1969; that new TCTs had been issued in the latters
names; that they were unaware that the subject lots were already previously sold to
Morales as they denied that Tomas had a talk with caretaker Abas on the matter; that as
of December 4, 1987, the TCTs covering the lots were in the name of Arnold and his wife,
without any adverse claim annotated thereon; that vendor Arnold represented to them
that the occupants they saw on the land were squatters and that he merely tolerated their
presence; that they did not personally investigate the alleged squatters on the land and
merely relied on the representation of vendor Arnold; that sometime in 1966-1967, Arnold
and his co-heir Angela caused the survey of the original lot and subdivided it into 3 lots,
without opposition from Morales or her heirs. Thus, three (3) TCTs were issued in 1969 to
Arnold and Angela and, two of the lots were then sold to the Occea spouses, again
without objection from Alberta Morales.
The Occea spouses alleged that they were buyers in good faith as the titles to the
subject lots were free from liens or encumbrances when they purchased them. They
claimed that in 1989, Arnold offered to sell the subject lots to them. On August 13, 1990,
after they verified with the Antique Registry of Deeds that Arnolds TCTs were clean and
unencumbered, Arnold signed the instrument of sale over the subject lots in favor of the
Occeas for P100,000.00 and new titles were issued in their names.
The Occeas likewise set up the defenses of laches and prescription. They argue that
Alberta and plaintiffs-heirs were barred from prosecuting their action as they failed to
assert their right for forty (40) years. Firstly, they point out that vendor Arnold and Angela
subdivided the entire lot in 1966 and declared themselves as the only co-owners thereof
in the deed of extrajudicial settlement. Alberta Morales failed to oppose the inclusion of
her 748 sq. m. lot in the deed. Thus, the title to the entire lot no. 256 was transferred to
the names of Arnold and Angela. Secondly, preparatory to the division of the lots, vendor
Arnold had the land surveyed but Alberta again failed to oppose the same. Finally, Alberta
and her heirs who are claiming adverse rights over the land based on the 1951 Deed of
Pacto de Retro Sale and the 1954 Deed of Definite Sale of Shares failed for 40 years to
annotate their adverse claims on the new titles issued to Arnold and Angela, enabling the
latter to possess a clean title and transfer them to the Occea spouses.
After trial, the lower court rendered a decision declaring the Occea spouses as buyers in
good faith and ruled that the action of the heirs was time-barred.
On appeal by Albertas heirs, the Court of Appeals reversed the decision of the trial court.
It found that the Occeas purchased the land in bad faith and that the action filed by
Albertas heirs was not barred by prescription or laches. The dispositive portion reads:
WHEREFORE, the instant appeal is hereby GRANTED. Accordingly, the assailed
decision is hereby REVERSED and SET ASIDE and a new one is rendered declaring the
Deed of Absolute Sale dated August 13, 1990 executed between Arnold de la Flor in
favor of defendants-appellees null and void and ordering the cancellation of Transfer
Certificate of Title Nos. 16896, 16897, T-18241 and T-18242.

SO ORDERED. 8
Hence this appeal where petitioner-spouses Occea raise the following issues:
IWHETHER OR NOT A VERBAL INFORMATION COULD BE MADE TO PREVAIL OVER
A CLEAN CERTIFICATE OF TITLE OF A REGISTERED LAND WHICH IS FREE OF ANY
LIEN OR ENCUMBRANCE ANNOTATED ON ITS CERTIFICATE OF TITLE OR ANY
ADVERSE CLAIM RECORDED WITH THE REGISTER OF DEEDS. cDHAES
IIWHETHER OR NOT A BUYER OF A REGISTERED LAND IS OBLIGATED TO MAKE
INQUIRIES OF ANY POSSIBLE DEFECT OR ADVERSE CLAIM AFFECTING ITS
OWNERSHIP WHICH DOES NOT APPEAR ON THE CERTIFICATE OF TITLE.
IIIWHETHER OR NOT THE PERIOD OF MORE THAN FORTY (40) YEARS WITHOUT
POSITIVE ACTION TAKEN BY RESPONDENTS, AS WELL AS BY ALBERTA
MORALES, TO PROTECT THEIR INTEREST CAN BE CONSIDERED LACHES AND
THUS THEIR PRESENT ACTION HAS PRESCRIBED. HDICSa
On the first two issues, petitioner-spouses claim that they were purchasers of the land in
good faith as the law does not obligate them to go beyond a clean certificate of title to
determine the condition of the property. They argue that a person dealing with registered
land is only charged with notice of the burden on the property annotated on the title.
When there is nothing on the title to indicate any cloud or vice in the ownership of the
property or any encumbrance thereon, the purchaser is not required to explore further
than the title in quest of any hidden defect or inchoate right that may subsequently defeat
his right thereto. They claim they had every right to purchase the land despite the verbal
warning made by caretaker Abas as the information was mere hearsay and cannot
prevail over the title of the land which was free from any encumbrance. ISHaTA
Their arguments do not persuade.
The petition at bar presents a case of double sale of an immovable property. Article 1544
of the New Civil Code provides that in case an immovable property is sold to different
vendees, the ownership shall belong: (1) to the person acquiring it who in good faith first
recorded it in the Registry of Property; (2) should there be no inscription, the ownership
shall pertain to the person who in good faith was first in possession; and, (3) in the
absence thereof, to the person who presents the oldest title, provided there is good faith.
In all cases, good faith is essential. It is the basic premise of the preferential rights
granted to the one claiming ownership over an immovable. 9 What is material is whether
the second buyer first registers the second sale in good faith, i.e., without knowledge of
any defect in the title of the property sold. 10 The defense of indefeasibility of a Torrens
title does not extend to a transferee who takes the certificate of title in bad faith, with
notice of a flaw. 11 DISHEA
The governing principle of prius tempore, potior jure (first in time, stronger in right)
enunciated under Art. 1544 has been clarified, thus:

. . . Knowledge by the first buyer of the second sale cannot defeat the first buyers 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. Cabaa (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 and Crisostomo vs. CA, G.R. No. 95843, 02
September 1992). 12
In the case at bar, we find that petitioner-spouses failed to prove good faith in their
purchase and registration of the land. A purchaser in good faith and for value is one who
buys property without notice that some other person has a right to or interest in such
property and pays its fair price before he has notice of the adverse claims and interest of
another person in the same property. So it is that the honesty of intention which
constitutes good faith implies a freedom from knowledge of circumstances which ought to
put a person on inquiry. At the trial, Tomas Occea admitted that he found houses built on
the land during its ocular inspection prior to his purchase. He relied on the representation
of vendor Arnold that these houses were owned by squatters and that he was merely
tolerating their presence on the land. Tomas should have verified from the occupants of
the land the nature and authority of their possession instead of merely relying on the
representation of the vendor that they were squatters, having seen for himself that the
land was occupied by persons other than the vendor who was not in possession of the
land at that time. The settled rule is that a buyer of real property in the possession of
persons other than the seller must be wary and should investigate the rights of those in
possession. Without such inquiry, the buyer can hardly be regarded as a buyer in good
faith and cannot have any right over the property. 13 A purchaser cannot simply close his
eyes to facts which should put a reasonable man on his guard and then claim that he
acted in good faith under the belief that there was no defect in the title of his vendor. 14
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 vendors title will not make him an innocent
purchaser for value if it later develops that the title was in fact defective, and it appears
that he would have notice of the defect had he acted with that measure of precaution
which may reasonably be required of a prudent man in a similar situation.
Indeed, the general rule is that one who deals with property registered under the Torrens
system need not go beyond the same, but only has to rely on the title. He is charged with
notice only of such burdens and claims as are annotated on the title. However, this
principle does not apply when the party has actual knowledge of facts and circumstances
that would impel a reasonably cautious man to make such inquiry or when the purchaser
has knowledge of a defect or the lack of title in his vendor or of sufficient facts to induce a
reasonably prudent man to inquire into the status of the title of the property in litigation.
One who falls within the exception can neither be denominated an innocent purchaser for
value nor a purchaser in good faith. 15

The evidence of the private respondents show that when Tomas Occea conducted an
ocular inspection of the land prior to the second sale, Abas, the caretaker of the house
which Alberta Morales built on the land, personally informed Tomas that the lot had been
previously sold by the same vendor Arnold to Alberta Morales. With this information, the
Occeas were obliged to look beyond the title of their vendor and make further inquiries
from the occupants of the land as to their authority and right to possess it. However,
despite this information about a prior sale, the Occeas proceeded with the purchase in
haste. They did not inquire from Abas how they could get in touch with the heirs or
representatives of Alberta to verify the ownership of the land. Neither do the records
reveal that they exerted effort to examine the documents pertaining to the first sale.
Having discovered that the land they intended to buy was occupied by a person other
than the vendor not in actual possession thereof, it was incumbent upon the petitioners to
verify the extent of the occupants possessory rights. 16 The Occeas did nothing and
chose to ignore and disbelieve Abas statement.

of the respondents-heirs to enforce the trust and recover the property cannot prescribe.
They may vindicate their right over the property regardless of the lapse of time. 21
Hence, the rule that registration of the property has the effect of constructive notice to the
whole world cannot be availed of by petitioners and the defense of prescription cannot be
successfully raised against respondents.
In sum, the general rule is that registration under the Torrens system is the operative act
which gives validity to the transfer of title on the land. However, it does not create or vest
title especially where a party has actual knowledge of the claimants actual, open and
notorious possession of the property at the time of his registration. 22 A buyer in bad faith
has no right over the land. As petitioner-spouses failed to register the subject land in
good faith, ownership of the land pertains to respondent-heirs who first possessed it in
good faith.
IN VIEW WHEREOF, the petition is DISMISSED.

On the third issue, we hold that the action to annul title filed by respondents-heirs is not
barred by laches and prescription. Firstly, laches is a creation of equity and its application
is controlled by equitable considerations. Laches cannot be used to defeat justice or
perpetuate fraud and injustice. Neither should its application be used to prevent the
rightful owners of a property from recovering what has been fraudulently registered in the
name of another. 17 Secondly, prescription does not apply when the person seeking
annulment of title or reconveyance is in possession of the lot because the action partakes
of a suit to quiet title which is imprescriptible. 18 In this case, Morales had actual
possession of the land when she had a house built thereon and had appointed a
caretaker to oversee her property. Her undisturbed possession of the land for a period of
fifty (50) long years gave her and her heirs a continuing right to seek the aid of a court of
equity to determine the nature of the claim of ownership of petitioner-spouses. 19 As held
by this Court in Faja vs. Court of Appeals: 20 SATDHE
. . . There is settled jurisprudence that one who is in actual possession of a piece of land
claiming to be owner thereof may wait until his possession is disturbed or his title
attacked before taking steps to vindicate his right, the reason for the rule being, that his
undisturbed possession gives him a continuing right to seek the aid of a court of equity to
ascertain and determine the nature of the adverse claim and its effect on his own title,
which right can be claimed only by one who is in possession. . . . The right to quiet title to
the property, seek its reconveyance and annul any certificate of title covering it accrued
only from the time the one in possession was made aware of a claim adverse to his own,
and it is only then that the statutory period of prescription commences to run against such
possessor.
In the case at bar, Morales caretaker became aware of the second sale to petitionerspouses only in 1991 when he received from the latter a notice to vacate the land.
Respondents-heirs did not sleep on their rights for in 1994, they filed their action to annul
petitioners title over the land. It likewise bears to stress that when vendor Arnold
reacquired title to the subject property by means of fraud and concealment after he has
sold it to Alberta Morales, a constructive trust was created in favor of Morales and her
heirs. As the defrauded parties who were in actual possession of the property, an action