LTD: 2.
SALE OF PROPERTY PENDING LITIGATION
INNOCENT PURCHASER FOR VALUE
1. RULE OF CAVEAT EMPTOR (BUYER
BEWARE)
 It is true that as a rule a purchaser is not required to
explore further than what the title indicates for the
hidden defects except in certain circumstances that
would impel a reasonably cautious man to make such
inquiry
 Hence, 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 (PPT)
 Furthermore, a purchaser who fails to exercise the
measures of precaution which may be required of a
prudent man cannot be called a purchaser in good
faith
 For instance, where the land sold is in the possession
of a person other than the vendor, the purchaser must
go beyond the certificate of title and make inquiries
concerning the rights of the actual possessor,
otherwise, he cannot invoke the right of a purchaser
in good faith and could not have acquired a better
right than his predecessor-in-interest
a. BANKS EXPECTED TO EXERCISE
GREATER CARE AND PRUDENCE IN
THEIR DEALINGS
 Unlike private individuals, banks as well as persons
engaged in the business of lending money secured by
real estate mortgage, are expected to exercise greater
care and prudence in their dealings, including those
involving registered lands
 Rationale: Banks are invested with public interest
 In practice, banks before approving a loan, send
representatives to the premises of the land offered as
collateral and investigate who are the true owners
thereof.
 As a consequence of exercising the due care
demanded of it, it will be considered as an innocent
mortgagee for value.
 One who deals with property subject of a notice of lis
pendens (pending suit) cannot invoke the right of a
purchaser in good faith – neither can he acquire better
rights than those of his predecessor-in-interest
 This persons should examine the original on file with
the register of deeds for they are all constructively
notified of pending litigations involving real property
through notice of lis pendens annotated therein.
 A transferee pendent lite stands exactly in the shoes
of the transferor and is bound by any judgment or
decree which may be rendered for or against the latter
 Where the notice of lis pendens is inscribed long after
the title had become indefeasible, the inscription
becomes irrelevant
3. RULE ON DOUBLE SALE
 Between two buyers of the same immovable property
registered under the Torrens system, the law,
particularly Article 1544 of the Civil Code, gives
priority to:
o The first registrant in good faith;
o Then, the first possessor in good faith; and
o The buyer who in good faith presents the oldest
title
 The provision does not apply:
o if the property is not registered under the Torrens
system
o where there is only one valid sale, the previous
sale having been found to be fraudulent
o where deed of sale is found to be a forgery (as a
result, right of the other vendee should prevail)
 Furthermore, where two certificates purport to
include the same land, the earlier in date prevails, is
valid only absent any anomaly or irregularity tainting
the process of registration
 Where the inclusion of land in the certificate of prior
date is a mistake, the mistake may be rectified by
holding the latter of two certificates to be conclusive.
 A certificate of title is not conclusive where it is the
product of a faulty or fraudulent registration
a. PRINCIPLE OF “PRIOR EST TEMPORAE,
PRIOR EST IN JURA”
 In a situation where not all the requisites present,
which would warrant the application of Article 1544,
the principle of prior est temporae, prior est in
jura” or “he who is first in time is preferred in
right” should apply.
 o The only one who can invoke this right is the first
vendee. He is a purchaser in good faith because
at the time he bought the real property, there was
still no sale to a second vendee
 Under this principle, when the things sold twice is an
immovable, the one who acquires it and first records
it in the Registry of Property, both made in good faith,
shall be deemed the owner. (PPT)
o The act of registration must be coupled with good
faith
 It is essential that the buyer must act in good faith in
registering his deed of sale to merit the protection of
law.
o For instance, knowledge gained by the first buyer
of the second sale cannot defeat the first buyer’s
right EXCEPT when 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.
o Conversely, 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 (CRUZ VS CABANA by JUSTICE
TEEHANKEE)
CASES
1. SARILI VS LAGROSA
BY: Justice Perlas-Bernabe
FACTS:
 Respondent Lagrosa is claiming that he is the owner
of a certain parcel of land in Caloocan City.
 He claimed that during his vacation in the Philippines,
he discovered that a new certificate of title to the
subject property was issued in the name of Victorino
married to Isabel Amparo (Isabel) by virtue of a
falsified Deed of Absolute Sale purportedly executed
by him and his wife, Amelia U. Lagrosa (Amelia).
 Sps. Sarili maintained that they are innocent
purchasers for value, having purchased the subject
property from Ramon B. Rodriguez (Ramon), who
possessed and presented a Special Power of Attorney
to sell/dispose of the same, and, in such capacity,
executed a Deed of Absolute Sale conveying the said
property in their favor.
ISSUE:
Whether or not Sps Sarili are innocent purchasers
for value having relied only in the SPA presented by
Ramon
RULING:
 NO. They are not innocent purchasers for value.
 As a rule, a person dealing with registered land need
not go beyond the certificate to determine the
condition of the property.
 However, a higher degree of prudence is required
from one who buys from a person who is not the
registered owner, although the land object of the
transaction is registered. In such a case, the buyer is
expected to examine not only the certificate of title
but all factual circumstances necessary for him to
determine if there are any flaws in the title of the
transferor. The buyer also has the duty to ascertain
the identity of the person with whom he is dealing
with and the latter’s legal authority to convey the
property.
 The strength of the buyer’s inquiry on the seller’s
capacity or legal authority to sell depends on the proof
of capacity of the seller. If the proof of capacity
consists of a special power of attorney duly notarized,
mere inspection of the face of such public document
already constitutes sufficient inquiry. If no such
special power of attorney is provided or there is one
but there appears to be flaws in its notarial
acknowledgment, mere inspection of the document
will not do; the buyer must show that his investigation
went beyond the document and into the circumstances
of its execution.
 In the present case, it is undisputed that Sps. Sarili
purchased the subject property from Ramos on the
strength of the latter’s ostensible authority to sell
under the subject SPA. The said document, however,
readily indicates flaws in its notarial acknowledgment
since the respondent’s community tax certificate
(CTC) number was not indicated thereon.
 Despite this irregularity, however, Sps. Sarili failed to
show that they conducted an investigation beyond the
subject SPA and into the circumstances of its
execution as required by prevailing jurisprudence.
Hence, Sps. Sarili cannot be considered as innocent
purchasers for value.
.
 2. BUCTON VS RURAL BANK OF EL fact, there is nothing in the document to show that she
SALVADOR was acting or signing as an agent of petitioner. Thus,
consistent with the law on agency and established
BY: Justice Del Castillo
jurisprudence, petitioner cannot be bound by the acts
FACTS of Concepcion.

 Petitioner is the owner of a parcel of land located in
Cagayan de Oro.
 Concepcion borrowed the title of the land on the
pretext that she is going to show it to an interested
buyer. Concepcion obtained a loan from respondent
bank and as a security for the loan, Concepcion
mortgaged the property of petitioner using a SPA
which was allegedly executed in favor of her.
 When Concepcion failed to pay the loan, the house
and lot of petitioner were foreclosed.
 Petitioner insisted that she did not obtain any loan
from the bank and that her signature was forged by
Concepcion that the loan was entered into by the latter
in her own personal capacity. The bank on the other
hand maintains that it was not negligent in inspecting
the properties and relied on the presumption of
regularity of the notarized SPA
ISSUE
Whether or not the bank had exercised the due
care demanded of it relative to loans to be considered as
innocent mortgagee for value
RULING

 NO. The respondent bank is negligent.

 As a rule, banks should exercise the due care
demanded of it relative to loans to be considered as
innocent mortgagee for value.
 In order to bind the principal by a deed executed by
an agent, the deed must upon its face purport to be
made, signed and sealed in the name of the principal.
 In this case, respondent bank failed to carefully
examine the title and thoroughly inspect the
property given as security by Concepcion.
 As regards the SPA, the respondent bank should
have conducted a thorough inquiry on the
authenticity of the SPA considering that
petitioner’s residence certificate was not indicated
in the acknowledgement of the SPA. Furthermore,
the signatures appearing on the SPA are different
from the genuine signatures of the petitioner.
 Moreover, the authorized agent failed to indicate in
the mortgage that she was acting for and on behalf of
her principal. The Real Estate Mortgage, explicitly
shows on its face, that it was signed by Concepcion in
her own name and in her own personal capacity. In