Gabriel vs. Mabanta, 399 SCRA 573 (G.R. No.

142403, March 26, 2003)

Spouses Pablo and Escolastica Mabanta were the registered owners of two lots located in Patul
and Capaltitan, Santiago, Isabela, with an area of 512 and 15,000 square meters, covered by
Transfer Certificates of Title (TCT) Nos. 72705 and 72707, respectively. On October 25, 1975,
they mortgaged both lots with the Development Bank of the Philippines (DBP) as collateral for a
loan of P14,000.00.3

Five years thereafter or on September 1, 1980, spouses Mabanta sold the lots to Susana
Soriano by way of a "Deed of Sale of Parcels of Land With Assumption of Mortgage." 4 Included in
the Deed is an agreement that they could repurchase the lots within a period of two (2) years.

Spouses Mabanta failed to repurchase the lots. But sometime in 1984, they were able to
convince Alejandro Gabriel to purchase the lots from Susana Soriano. As consideration,
Alejandro delivered to Susana a 500-square meter residential lot with an actual value of
P40,000.00 and paid spouses Mabanta the sum of P5,000.00. On May 15, 1984, spouses
Mabanta executed a "Deed of Sale with Assumption of Mortgage" 5 in favor of Alejandro. For her
part, Susana executed a document entitled "Cancellation of Contract" 6 whereby she transferred
to Alejandro all her rights over the two lots.

Alejandro and his son Alfredo cultivated the lots. They also caused the restructuring of spouses
Mabanta’s loan with the DBP.7 However, when they were ready to pay the entire loan, they found
that spouses Benito and Pura Tan had paid it and that the mortgage was already cancelled. 8

On August 18, 1985, Benito Tan and Alejandro Tridanio, a barangay official, approached
Alejandro to refund to him the P5,000.00 he paid to spouses Mabanta. Alejandro refused
because Tan was unwilling to return the former’s 500-square meter lot delivered to Susana as
purchase price for the lots. Thereafter, spouses Tan tried to eject Alejandro from the lot covered
by TCT No. 72707.

On September 17, 1985, Alejandro and Alfredo filed with the Regional Trial Court, Branch 21,
Santiago, Isabela a complaint (involving the lot covered by TCT No. 72707) for specific
performance, reconveyance and damages with an application for a preliminary injunction against
spouses Mabanta, spouses Tan, the DBP and barangay officials Dominador Maylem and
Alejandro Tridanio. In due time, these defendants filed their respective answers.

During the proceedings, it turned out that it was spouses Tan’s daughter, Zenaida Tan-Reyes
who bought one of the lots (covered by TCT No. 72707) from spouses Mabanta on August 21,
1985. Not having been impleaded as a party-defendant, she filed an answer-in-intervention
alleging that she is the registered owner of the lot covered by TCT No. 72707; that she
purchased it from spouses Mabanta "in good faith and for value"; that she paid their loan with the
DBP in the amounts of P17,580.88 and P16,845.17 per Official Receipts Nos. 1749539 and
1749540, respectively; that the mortgage with the DBP was cancelled and spouses Mabanta
executed a "Deed of Absolute Sale" 9 in her favor; and that TCT No. T-72707 was cancelled and
in lieu thereof, TCT No. T-160391 was issued in her name.

Issue:
WHETHER OR NOT THE COURT OF APPEALS ERRED IN DECLARING THE SECOND SALE
OF THE DISPUTED LOT EXECUTED BY SPOUSES MABANTA IN FAVOR OF ZENAIDA TAN-
REYES VALID UNDER ARTICLE 1544 OF THE CIVIL CODE.
Ruling:

In the case at bar, certain pieces of evidence, put together, would prove that respondent Reyes
is not a buyer in good faith. The records show that on August 18, 1985, spouses Mabanta offered
to her for sale the disputed lot. They told her it was mortgaged with respondent DBP and that she
had to pay the loan if she wanted to buy it.17 She readily agreed to such a condition. The
following day, her father Benito Tan, accompanied by barangay official Tridanio, went to
petitioner Alejandro’s house offering to return to him the P5,000.00 he had paid to spouses
Mabanta. Tan did not suggest to return the 500-square meter lot petitioner delivered to Susana
Soriano.18 For this reason, petitioner refused Tan’s offer and even prohibited him from going to
respondent DBP. We quote the following testimony of petitioner who, despite his blindness as
shown by the records, testified to assert his right, thus:

We are thus convinced that respondent Reyes had knowledge that petitioner previously bought
the disputed lot from respondent spouses Mabanta. Why should her father approach petitioner
and offer to return to him the money he paid spouses Mabanta? Obviously, aware of the previous
sale to petitioner, respondent Reyes informed her father about it. At this juncture, it is reasonable
to conclude that what prompted him to go to petitioner’s house was his desire to facilitate his
daughter’s acquisition of the lot, i.e., to prevent petitioner Alejandro from contesting it. He did not
foresee then that petitioner would insist he has a prior right over the lot.

Now respondent Reyes claims that she is a purchaser in good faith. This is preposterous. Good
faith is something internal. Actually, it is a question of intention. In ascertaining one’s intention,
this Court must rely on the evidence of one’s conduct and outward acts. From her actuations as
specified above, respondent Reyes cannot be considered to be in good faith when she bought
the lot.

Moreover, it bears noting that on September 16, 1985, both petitioners filed with the trial court
their complaint involving the lot in question against respondents. After a month, or on October
17, 1985, respondent Reyes had the "Deed of Absolute Sale" registered with the Registry of
Property. Evidently, she wanted to be the first one to effect its registration to the prejudice of
petitioners who, although in possession, have not registered the same. This is another indicum of
bad faith.

We have consistently held that "in cases of double sale of immovables, what finds relevance and
materiality is not whether or not the second buyer was a buyer in good faith but whether or not
said second buyer registers such second sale in good faith, that is, without knowledge of any
defect in the title of the property sold."

Mere registration of title is not enough, good faith must concur with the registration. To be entitled
to priority, the second purchaser must not only establish prior recording of his deed, but must
have acted in good faith, without knowledge of the existence of another alienation by the vendor
to the other.22 In the old case of Leung Yee vs. F. L. Strong Machinery, Co. and Williamson, this
Court ruled:

In fine, we hold that respondent Zenaida Tan-Reyes did not act in good faith when she bought
the lot and had the sale registered.

WHEREFORE, the assailed Decision of the Court of Appeals is REVERSED and SET ASIDE.
The Decision of the trial court is hereby reinstated.
Ten Forty Realty vs. Cruz, 410 SCRA 484 (G.R. No. 151212, Sep. 10, 2003)

Facts:
"A complaint for ejectment was filed by [Petitioner Ten Forty Realty and
Development Corporation] against . . . [Respondent Marina Cruz] before the
Municipal Trial Court in Cities (MTCC) of Olongapo City, docketed as Civil Case 4269,
which alleged that: petitioner is the true and absolute owner of a parcel of lot and
residential house situated in #71 18th Street, E.B.B. Olongapo City, particularly
described as: chanrob1es virtual 1aw library

‘A parcel of residential house and lot situated in the above-mentioned address

containing an area of 324 square meters more or less bounded on the Northeast by
041 (Lot 255, Ts-308); on the Southeast by 044 (Lot 255, Ts-308); on the
Southwest by 043 (Lot 226-A & 18th street) and on the Northwest by 045 (Lot 227,
Ts-308) and declared for taxation purposes in the name of [petitioner] under T.D.
No. 002-4595-R and 002-4596. having acquired the same on December 5, 1996
chanrob1es virtua1 1aw 1ibrary

from Barbara Galino by virtue of a Deed of Absolute Sale; the sale was
acknowledged by said Barbara Galino through a ‘Katunayan’; payment of the capital
gains tax for the transfer of the property was evidenced by a Certification
Authorizing Registration issued by the Bureau of Internal Revenue; petitioner came
to know that Barbara Galino sold the same property on April 24, 1998 to Cruz, who
immediately occupied the property and which occupation was merely tolerated by
petitioner; on October 16, 1998, a complaint for ejectment was filed with the
Barangay East Bajac-Bajac, Olongapo City but for failure to arrive at an amicable
settlement, a Certificate to File Action was issued; on April 12, 1999 a demand letter
was sent to [respondent] to vacate and pay reasonable amount for the use and
occupation of the same, but was ignored by the latter; and due to the refusal of
[respondent] to vacate the premises, petitioner was constrained to secure the
services of a counsel for an agreed fee of P5,000.00 as attorney’s fee and P500.00
as appearance fee and incurred an expense of P5,000.00 for litigation.

Third Issue: chanrob1es virtual 1aw library

Alleged Acts of Ownership

Petitioner next questions the CA’s pronouncement that respondent’s occupation of

the property was an exercise of a right flowing from a claim of ownership. It submits
that the appellate court should not have passed upon the issue of ownership,
because the only question for resolution in an ejectment suit is that of possession de
facto.

Clearly, each of the parties claimed the right to possess the disputed property
because of alleged ownership of it. Hence, no error could have been imputed to the
appellate court when it passed upon the issue of ownership only for the purpose of
resolving the issue of possession de facto. 30 The CA’s holding is moreover in accord
with jurisprudence and the law.
Execution of a Deed of Sale Not Sufficient as Delivery

In a contract of sale, the buyer acquires the thing sold only upon its delivery "in any
of the ways specified in Articles 1497 to 1501, or any other manner signifying an
agreement that the possession is transferred from the vendor to the vendee." 31
With respect to incorporeal property, Article 1498 lays down the general rule: the
execution of a public instrument shall be equivalent to the delivery of the thing that
is the object of the contract if, from the deed, the contrary does not appear or
cannot be clearly inferred.chanrob1es virtua1 1aw 1ibrary

However, ownership is transferred not by contract but by tradition or delivery. 32

Nowhere in the Civil Code is it provided that the execution of a Deed of Sale is a
conclusive presumption of delivery of possession of a piece of real estate. 33

This Court has held that the execution of a public instrument gives rises only to a
prima facie presumption of delivery. Such presumption is destroyed when the
delivery is not effected because of a legal impediment. 34 Pasagui v. Villablanca 35
had earlier ruled that such constructive or symbolic delivery, being merely
presumptive, was deemed negated by the failure of the vendee to take actual
possession of the land sold.

For its part, the CA found it highly unbelievable that petitioner — which claims to be
the owner of the disputed property — would tolerate possession of the property by
respondent from April 24, 1998 up to October 16, 1998. How could it have been so
tolerant despite its knowledge that the property had been sold to her, and that it
was by virtue of that sale that she had undertaken major repairs and improvements
on it?

Petitioner should have likewise been put on guard by respondent’s declaration of the
property for tax purposes on April 23, 1998, 37 as annotated in the tax certificate
filed seven months later. 38 Verily, the tax declaration represented an adverse claim
over the unregistered property and was inimical to the right of petitioner.

Indeed, the above circumstances derogated its claim of control and possession of
the property.

Order of Preference in Double Sale of Immovable Property

The ownership of immovable property sold to two different buyers at different times
is governed by Article 1544 of the Civil Code, which reads as follows: jgc:chanrobles.com.ph

"Article 1544. . . .

"Should it be immovable property, the ownership shall belong to the person

acquiring it who in good faith first recorded it in the Registry of Property.

"Should there be no inscription, the ownership shall pertain to the person who in
good faith was first in possession; and, in the absence thereof, to the person who
presents the oldest title, provided there is good faith." cralaw virtua1aw library
First, the possession mentioned in Article 1544 includes not only material but also
symbolic possession. 42 Second, possessors in good faith are those who are not
aware of any flaw in their title or mode of acquisition. 43 Third, buyers of real
property that is in the possession of persons other than the seller must be wary —
they must investigate the rights of the possessors. 44 Fourth, good faith is always
presumed; upon those who allege bad faith on the part of the possessors rests the
burden of proof. 45

Earlier, we ruled that the subject property had not been delivered to petitioner;
hence, it did not acquire possession either materially or symbolically. As between
the two buyers, therefore, respondent was first in actual possession of the property.

Petitioner has not proven that respondent was aware that her mode of acquiring the
property was defective at the time she acquired it from Galino. At the time, the
property — which was public land — had not been registered in the name of Galino;
thus, respondent relied on the tax declarations thereon. As shown, the former’s
name appeared on the tax declarations for the property until its sale to the latter in
1998. Galino was in fact occupying the realty when respondent took over
possession. Thus, there was no circumstance that could have placed the latter upon
inquiry or required her to further investigate petitioner’s right of ownership.
Uraca vs. Court of Appeals, 278 SCRA 702 (G.R. No. 115158, Sep. 5, 1997)

Facts:

The Velezes (herein private respondents) were the owners of the lot and commercial building in
question located at Progreso and M.C. Briones Streets in Cebu City.

Herein (petitioners) were the lessees of said commercial building. 5

On July 8, 1985, the Velezes through Carmen Velez Ting wrote a letter to herein (petitioners)
offering to sell the subject property for P1,050,000.00 and at the same time requesting (herein
petitioners) to reply in three days.

On July 10, 1985, (herein petitioners) through Atty. Escolastico Daitol sent a reply-letter to the
Velezes accepting the aforesaid offer to sell.

On July 11, 1985, (herein petitioner) Emilia Uraca went to see Carmen Ting about the offer to sell
but she was told by the latter that the price was P1,400,000.00 in cash or manager's check and
not P1,050,000.00 as erroneously stated in their letter-offer after some haggling. Emilia Uraca
agreed to the price of P1,400,000.00 but counter-proposed that payment be paid in installments
with a down payment of P1,000,000.00 and the balance of P400,000 to be paid in 30 days.
Carmen Velez Ting did not accept the said counter-offer of Emilia Uraca although this fact is
disputed by Uraca.

No payment was made by (herein petitioners) to the Velezes on July 12, 1985 and July 13, 1985.

On July 13, 1985, the Velezes sold the subject lot and commercial building to the Avenue Group
(Private Respondent Avenue Merchandising Inc.) for P1,050,000.00 net of taxes, registration
fees, and expenses of the sale.

At the time the Avenue Group purchased subject property on July 13, 1985 from the Velezes, the
certificate of title of the said property was clean and free of any annotation of adverse claims
or lis pendens.

On July 31, 1985 as aforestated, herein (petitioners) filed the instant complaint against the
Velezes.

Issue:

II

The Court of Appeals erred in not ruling that petitioners have better rights to buy and own the
Velezes' property for registering their notice of lis pendens ahead of the Avenue Group's
registration of their deeds of sale taking into account Art. 1544, 2nd paragraph, of the Civil Code. 
Ruling:

Second Issue: Double Sale of an Immovable

The foregoing holding would have been simple and straightforward. But Respondent Velezes
complicated the matter by selling the same property to the other private respondents who were
referred to in the assailed Decision as the Avenue Group.

Before us therefore is a classic case of a double sale — first, to the petitioner; second, to the
Avenue Group. Thus, the Court is now called upon to determine which of the two groups of
buyers has a better right to said property.

Article 1544 of the Civil Code provides the statutory solution:

xxx xxx xxx

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.

Under the foregoing, the prior registration of the disputed property by the second buyer does not
by itself confer ownership or a better right over the property. Article 1544 requires that such
registration must be coupled with good faith. Jurisprudence teaches us that "(t)he governing
principle is primus tempore, potior jure (first in time, stronger in right). Knowledge gained by the
first buyer of the second sale cannot defeat the first buyer's rights except where the second
buyer registers in good faith the second sale ahead of the first, as provided by the Civil Code.
Such knowledge of the first buyer does not bar her from availing of her rights under the law,
among them, to register first her purchase as against the second buyer. But in converso,
knowledge gained by the second buyer of the first sale defeats his 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."   (Emphasis supplied)
20

After a thorough scrutiny of the records of the instant case, the Court finds that bad faith tainted
the Avenue Group's purchase on July 13, 1985 of the Velezes' real property subject of this case,
and the subsequent registration thereof on August 1, 1995. The Avenue Group had actual
knowledge of the Velezes' prior sale of the same property to the petitioners, a fact antithetical to
good faith. For a second buyer like the Avenue Group to successfully invoke the second
paragraph, Article 1544 of the Civil Code, it must possess good faith from the time of the sale in
its favor until the registration of the same. This requirement of good faith the Avenue Group
sorely failed to meet. That it had knowledge of the prior sale, a fact undisputed by the Court of
Appeals, is explained by the trial court thus:

We see no reason to disturb the factual finding of the trial court that the Avenue Group, prior to
the registration of the property in the Registry of Property, already knew of the first sale to
petitioners. It is hornbook doctrine that "findings of facts of the trial court, particularly when
affirmed by the Court of Appeals, are binding upon this Court"   save for exceptional
23

circumstances   which we do not find in the factual milieu of the present case. True, this doctrine
24

does not apply where there is a variance in the factual findings of the trial court and the Court of
Appeals. In the present case, the Court of Appeals did not explicitly sustain this particular holding
of the trial court, but neither did it controvert the same. Therefore, because the registration by the
Avenue Group was in bad faith, it amounted to no "inscription" at all. Hence, the third and not the
second paragraph of Article 1544 should be applied to this case. Under this provision, petitioners
are entitled to the ownership of the property because they were first in actual possession, having
been the property's lessees and possessors for decades prior to the sale.

Having already ruled that petitioners' actual knowledge of the first sale tainted their registration,
we find no more reason to pass upon the issue of whether the annotation of lis
pendens automatically negated good faith in such registration.

WHEREFORE, the petition is GRANTED. The assailed Decision of the Court of Appeals is
hereby SET ASIDE and the dispositive portion of the trial court's decision dated October 19,
1990 is REVIVED with the following MODIFICATION — the consideration to be paid under par. 2
of the disposition is P1,050,000.00 and not P1,400,000.00. No Costs.
Radiowealth Finance vs. Palileo, G.R. No. 83432, May 20, 1991

Facts: