G.R. No. L-29972 January 26, 1976 ROSARIO CARBONELL, petitioner, vs.

HONORABLE COURT OF APPEALS, JOSE PONCIO, EMMA INFANTE and RAMON INFANTE, respondents. MAKASIAR, J. 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 judgement shall be entered affirming in toto that of the court a quo, dated January 20, 1965, which dismisses the plaintiff's complaint and defendant's counterclaim. Without costs. The facts of the case 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 involve 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 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. 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.

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 pa anything. Then if after said one can he could not find an place where to move his house, he could still continue occupying the site but he should pay a rent that man, be agreed. (Sgd) (Sgd.) (Sgd) 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 mortgaged 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 given the lot to respondent Emma Infants; 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. On February 5, 1955, petitioner saw Emma Infante erecting a all around the lot with a gate. Petitioner then consulted Atty. Jose Garcia, who advised her to present an adverse claim over the land in question with the Office of the Register of Deeds of 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 corespondent 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. JOSE ROSARIO CONSTANCIO PONCIO CARBONELL MEONADA

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 an 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 Ms. 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 parole 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-11231) 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 parole 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. 5056, ROA in the C.A.).

On January 23, 1963, respondent Infantes, through another counsel, filed a motion for re-trial 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.). 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.). 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.). On November 2, 1967, the Court of Appeals (Fifth Division composed of Justices Magno Gatmaitan, Salvador V. Esguerra and Angle H. Mojica, speaking through Justice Magno Gatmaitan), rendered judgment reversing the decision of the trial court, declaring petitioner therein, to have a superior right to the land in question, and condemning the 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). Respondent 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). 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 movable property. Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there

is good faith (emphasis supplied). 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. 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 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). 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 of 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 Infantes'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 adversed 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 of 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 saving deposit passbook Exhibit "1" Infantes] and Poncio's copy of the mortgage contract, when Poncio sold the lot Carbonell who, after paying the arrearages of Poncio, assumed the balance of his mortgaged 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 tided 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. (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. Jara et al 22 SCRA 1247, 1252-1253). The only plausible and logical reason why Infante did not bother anymore to make such injury , w 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 b 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, Jan. 30, 1959, 105 Phil. 125051). (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 (1-11231, 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 him to remain in the property for one year; that plaintiff then induced Poncio to sign a document, copy of

which if 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 agreed to sell the land and its improvement 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 Saving s Bank; and that plaintiff's action is barred by the Statute of Frauds. ... (pp. 38-40, ROA, emphasis supplied). II

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 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:

EXISTENCE 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 reconsideration, 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 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 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" that "he decided to sell the

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 the fact that the said amount was the purchase 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 accomodation, 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. (Defendants-Appellees' brief, pp. 25-26). How shall We know why Poncio's bank deposit book is in plaintiffs 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 plaintiff's 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 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 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 Exhibit '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 P6.50 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 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 part 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 possession, 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 v. 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 invalid, 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 is due form in favor of Emma L. Infante on 2 February, 1955, Exhibit 3-Infante, 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. 7476, 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 plaintiff's 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.]. 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 9b) 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 an 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.

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 to 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 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. 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. 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 ease 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 that land to plaintiff, who had never increased her offer of P15 a square meter, there as no reason for Poncio to get said permit from her. Upon the they if plaintiff intended to mislead Poncio, she would have 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 all 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 it from the operation of the statute of frauds. Being a all 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 knew thereof. More than just the signing of Exhibit A by Poncio and Carbonell with Constancio Meonada as witness to fact the contract of sale, the transition was further confirmed when Poncio agreed to the actual payment by at 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. 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. 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 note Exh. 'A'. For a while, this court had that similar impression but after a more and through 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 op 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 b ' 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.

G.R. No. L-18497

May 31, 1965

DAGUPAN TRADING COMPANY, petitioner, vs. RUSTICO MACAM, respondent. DIZON, J.: Appeal taken by the Dagupan Trading Company from the decision of the Court of Appeals affirming the one rendered by the Court of First Instance of Pangasinan in Civil Case No. 13772, dismissing its complaint. 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 the 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 thereon. 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 appeal, was affirmed by the Court of Appeals. The facts of the case are not disputed. 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 Maron's, free from all liens and encumbrances. 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 redemptions were duly registered. On March 1, 1958, the latter sold all its rights and title to the property to appellant.

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 Maron's 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 Nacional, etc. vs. Camus, 70 Phil. 289
The present case, however, does not fall within either, situation. Here the sale in favor of appellee was executedbefore the land subject-matter thereof was registered, while the conflicting sale in favor of appellant was executedafter the same property had been registered. We cannot, 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-eighth 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 retrievably 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. Licuaco, 13 Phil. 357-358; Landig vs. U.S. Commercial Company, G.R. No. L3597, July 31, 1951). 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 cannot, 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 execution 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 thereon. 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.

G.R. No. L-48322 April 8, 1987 FELIPE DAVID and ANTONIA G. DAVID, petitioners, vs. EULOGIO BANDIN (substituted by his legal heirs, namely: JUANA SILVERIO, JOSE, GABRIEL, ANICETA, VIRGINIA and FELIX, all surnamed Bandin); GREGORIO BANDIN, RAYMUNDA BANDIN, VALENTIN BRIONES, SOFIO BRIONES and AGAPITA RAMOS. respondents. No. L-49712 April 8, 1987

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. The facts antecedent of this petition, as may be gathered from the decision, are as follows:

MAGNO DE LA CRUZ, petitioner, vs. HONORABLE COURT OF APPEALS; EULOGIO BANDIN (substituted by his legal heirs, namely: JUANA, SILVERIO, JOSE, GABRIEL, ANICETA, VIRGINIA and FELIX, all surnamed Bandin); GREGORIO BANDIN, RAYMUNDA BANDIN, SOFIO BRIONES and AGAPITA RAMOS; respondents. No. L-49716 April 8, 1987 JUANITA MARTIN VDA. DE LUCENA MAXIMINA MARTIN VDA. DE COSME, VICTORIA MARTIN VDA. DE OMANBAC, NEMESIO A. MARTIN, LEONORA DE LA CRUZ and AQUILINA DE LA CRUZ, petitioners, vs. EULOGIO BANDIN (substituted by his legal heirs, namely: JUANA, SILVERIO, JOSE, GABRIEL, ANICETA, VIRGINIA and FELIX, all surnamed Bandin);, VALENTIN BRIONES, AGAPITA RAMOS and COURT OF APPEALS, respondents. No. L-49687 April 8,1987 JOSE RAMIREZ and HEIRS OF AMBROCIA P. VDA. DE SOTERO RAMIREZ, petitioners, vs. COURT OF APPEALS and EULOGIO BANDIN (substituted by his legal heirs, namely: JUANA, SILVERIO, JOSE, GABRIEL, ANICETA, VIRGINIA and FELIX, all surnamed BANDIN); GREGORIO BANDIN, RAYMUNDA BANDIN, VALENTIN BRIONES, SOFIO BRIONES and AGAPITA RAMOS, respondents. YAP, J.: 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-

During their lifetime, the spouses Juan Ramos, who died on March 5, 1919, and Fortunate Calibo, who died before 1919, were the owners of two parcels of land situated in Las Pinas, 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). Both spouses died intestate, leaving as heirs two legitimate children, Candida and Victorians Ramos, and grand-daughter, Agapita Ramos, daughter of their deceased sora Anastacio. Upon the death of the said spouses, their daughter, Candida Ramos, assumed administration of the properties until her death on February 16, 1955. Victorians Ramos died on December 12,1931. 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 0. 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); andParcel 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 extrajudicially 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, Bernards, 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). 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. 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. 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. 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. 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. To Aquiline 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.

2.

death devolved by right of succession upon their heirs, namely, Candida Ramos, Victorians 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 extra-judicialy settled among their heirs, who, therefore, remained pro-indiviso co-owners of the said properties, and upon the death of Victorians and Candida, their respective shares in turn passed to their heirs. Accordingly, the trial court declared the plaintiffs, Agapita Ramos, and the heirs of Victorians 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 wen as an 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 Victorians 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) invali dated 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) proindiviso share pertaining to Agapita Ramos and the heirs of Victorians 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,

3.

4.

5.

6.

7.

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 Fortunate Calibo, which after their

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. 1 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

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&A Valentin Briones and Soto 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 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:

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 Appellee 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.

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: a) b) Dismissing the petitions in G.R. Nos. L-48322, L-49716 and L-49687; 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 Affirming the appealed decision, except as modified above.

c)

No pronouncement as to costs. SO ORDERED.

G.R. No. L-34500 March 18, 1988 MOISES OLIVARES and JUANITA T. OLIVARES, petitioners-appellants, vs. THE HONORABLE CARLOS V. GONZALES as Judge of the Court of First Instance of Iloilo (Branch VI), respondent and JACINTO TUVILLA, CEFERINO TUVILLA, and JUAN TUMABINI, respondents-appellees. MELENCIO-HERRERA, J.: 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 Juanita 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 P 1,350.00, pursuant to which, the Court subsequently issued a Writ of Execution on October 23, 1968. 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 1, 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 Tumabinis 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. 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 as 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, I, 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 shag be immediately executory upon promulgation. No costs. SO ORDERED.

G.R. No. L-28740 February 24, 1981 FERMIN Z. CARAM, JR., petitioner, vs. CLARO L. LAURETA, respondent. FERNANDEZ, J.: 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- appellants; 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 stin 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 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 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 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 co-defendant 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, did 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 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 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.; 2. Declaring as null and void the deed of sale Exhibit F, in favor of Fermin Caram, Jr.; 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. SO ORDERED. The defendants appealed from the judgment to the Court of Appeals. 10 The appeal was docketed as CAG.R. NO. 35721- R. The Court of Appeals promulgated its decision on January 29, 1968 affirming the judgment of the trial court. 1.

In his brief, the petitioner assigns the following errors: 11 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 AT TRIBUTABLE 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 a 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 Leaning 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. Ining Mansaca was with the two Irespe and Mata to engage the services 6f Atty. Aportadera in the annulment of the sale of his land to Laureta. When Leaning 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 occassion 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 of 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 Leaning 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. RA 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 an 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 registerable. Obviously, Aportadera and Irespe knew that even if Mata previously had sold t he Disputed such sale could not have been registered. 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. 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 recordered it in the Registry of Property. Should there be no inscription, the ownership shag pertain to the person who in good faith was first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith. (1473) 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. The petitioner's conclusion that the second deed of sale, "Exhibit F", is a voidable contract is not correct. I n 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. 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 declared valid so that one vendee may contract must be declared void to cut off all rights which may arise from said contract. Otherwise, Article 1544 win be meaningless. 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. SO ORDERED.

G.R. No. L-56232 June 22, 1984 ABELARDO CRUZ (deceased) substituted by Heirs Consuelo C. Cruz, Claro C. Cruz and Stephen C. Cruz, per Resolution, petitioners, vs. LEODEGARIA CABANA, TEOFILO LEGASPI , ILUMINADA CABANA and THE HONOR- ABLE COURT OF APPEALS,*respondents. TEEHANKEE, J.: 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 co-respondents 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 Cabana sold the land in question to defendants-spouses Teofilo Legaspi and Iluminada Cabana (Exh. 1). The said defendantsspouses 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 Cabana 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 Cabana (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).lwphl@it Said land was not repurchased and in the meantime, however, said defendants-spouses took possession of the land. Upon request of Leodegaria Cabana, 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 Cabana 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 plaintiff-appellant 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 not withstanding 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 plaintiffappellant. 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., L-15133 , 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 respondentsspouses. 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." 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 conversoknowledge 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." 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. 4

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.

G.R. No. 85082 February 25, 1991 SPOUSES PASTOR VALDEZ and VIRGINIA VALDEZ, petitioners, vs. HONORABLE COURT OF APPEALS AND FELICIDAD VIERNES, FRANCISCO ANTE, AND ANTONIO ANTE,respondents. GANCAYCO, J.:p This 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. 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 or 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. The Valdez spouses then proceeded to register the two deeds of sale dated June 15, 1980 and February 12, 1981 7with 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 any 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. 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: Defendant 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: 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. 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: 1.

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. 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. 16Thus, 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 follows: No decision shall be rendered by any court without expressing therein clearly and distinctly the factsand 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: Sec. 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 plaintiff 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 constitute 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 court 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. 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. SO ORDERED.

G.R. No. 77423 March 13, 1989 SPOUSES DIOSDADO NUGUID AND MARIQUETA VENEGAS, petitioners, vs. COURT OF APPEALS, AMORITA GUEVARRA, TERESITA GUEVARRA, NARCISO GUEVARRA, MARCIANA DELA ROSA, BERNABE BUENAVENTURA, AND JULIETA BUENAVENTURA, respondents. SARMIENTO, J.: 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 P 95.00. 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 P 300.00. 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 P 500.00. SO ORDERED. 5 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 Narcism, 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 onehalf 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 onehalf 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.

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: 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 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. 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 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". 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 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 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. 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. 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 refrain 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-ininterest, 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. 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. 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. Costs against the private respondents. SO ORDERED.

G.R. No. 83432 May 20, 1991 RADIOWEALTH FINANCE COMPANY, petitioner, vs. MANUELITO S. PALILEO, respondent. GANCAYCO, J.:p If the same piece of land was sold to two different purchasers, to whom shall ownership belong? Article 1544 of the Civil Code provides that in case of double sale of an immovable property, ownership shall be transferred: (1) to the person acquiring it who in good faith first recorded it in the Registry of Property; (2) in default thereof, to the person who in good faith was first in possession; and (3) in default thereof, to the person who presents the oldest title, provided there is good faith. There is no ambiguity regarding the application of the law with respect to lands registered under the Torrens System. Section 51 of Presidential Decree No. 1529 (amending Section 50 of Act No. 496 clearly provides that the act of registration is the operative act to convey or affect registered lands insofar as third persons are concerned. Thus, a person dealing with registered land is not required to go behind the register to determine the condition of the property. He is only charged with notice of the burdens on the property which are noted on the face of the register or certificate of title. 1 Following this principle, this Court has time and again held that a purchaser in good faith of registered land (covered by a Torrens Title) acquires a good title as against all the transferees thereof whose right is not recorded in the registry of deeds at the time of the sale. 2 The question that has to be resolved in the instant petition is whether or not the rule provided in Article 1544 of the Civil Code as discussed above, is applicable to a parcel of unregistered land purchased at a judicial sale. To be more specific, this Court is asked to determine who, as between two buyers of unregistered land, is the rightful ownerthe first buyer in a prior sale that was unrecorded, or the second buyer who purchased the land in an execution sale whose transfer was registered in the Register of Deeds. The facts as found by the Court of Appeals are as follows: On April 13, 1970, defendant spouses Enrique Castro and Herminia R. Castro sold to plaintiff-appellee Manuelito Palileo (private respondent herein), a parcel of unregistered coconut land situated in Candiis, Mansayaw, Mainit, Surigao del Norte. The sale is evidenced by a notarized Deed of Absolute Sale (Exh. "E"). The deed was not registered in the Registry of Property for unregistered lands in the province of Surigao del Norte. Since the execution of the deed of sale, appellee Manuelito Palileo who was then employed at Lianga Surigao del Sur, exercised acts of ownership over the land through his mother Rafaela Palileo, as administratrix or overseer. Appellee has continuously paid the real estate taxes on said land from 1971 until the present (Exhs. "C" to "C-7", inclusive). On November 29, 1976, a judgment was rendered against defendant Enrique T. Castro, in Civil Case No. 0103145 by the then Court of First Instance of Manila, Branch XIX, to pay herein defendant-appellant Radiowealth Finance Company (petitioner herein), the sum of P22,350.35 with interest thereon at the rate of 16% per annum from November 2, 1975 until fully paid, and the further sum of P2,235.03 as attorney's fees, and to pay the costs. Upon the finality of the judgment, a writ of execution was issued. Pursuant to said writ, defendant provincial Sheriff Marietta E. Eviota, through defendant Deputy Provincial Sheriff Leopoldo Risma, levied upon and finally sold at public auction the subject land that defendant Enrique Castro had sold to appellee Manuelito Palileo on April 13,1970. A certificate of sale

was executed by the Provincial Sheriff in favor of defendant- appellant Radiowealth Finance Company, being the only bidder. After the period of redemption has ( sic) expired, a deed of final sale was also executed by the same Provincial Sheriff. Both the certificate of sale and the deed of final sale were registered with the Registry of Deeds. 3 Learning of what happened to the land, private respondent Manuelito Palileo filed an action for quieting of title over the same. After a trial on the merits, the court a quo rendered a decision in his favor. On appeal, the decision of the trial court was affirmed. Hence, this petition for review on certiorari. In its petition, Radiowealth Finance Company presents the following errors: THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE DEED OF ABSOLUTE SALE (EXHIBIT B) ALLEGEDLY EXECUTED BY ENRIQUE CASTRO IN FAVOR OF APPELLEE MANUELITO PALILEO, WAS SIMULATED OR FICTITIOUS. 2. THE COURT OF APPEALS ERRED IN NOT FINDING APPELLEE MANUELITO PALILEO AS ADMINISTRATOR ONLY OF THE DISPUTED PROPERTY; AND 3. THE COURT OF APPEALS ERRED IN NOT FINDING DEFENDANT-APPELLANT RADIOWEALTH FINANCE COMPANY OWNER OF THE DISPUTED PROPERTY BY REASON OF THE CERTIFICATE OF SALE AND THE DEED OF FINAL SALE WHICH WERE ALL REGISTERED IN THE REGISTER OF DEEDS, HENCE, SUPERIOR TO THAT OF THE DEED OF SALE IN POSSESSION OF MANUELITO PALILEO, FOR BEING NOT REGISTERED. 4 As regards the first and second assigned errors, suffice it to state that findings of fact of the Court of Appeals are conclusive on this Court and will not be disturbed unless there is grave abuse of discretion. The finding of the Court of Appeals that the property in question was already sold to private respondent by its previous owner before the execution sale is evidenced by a deed of sale. Said deed of sale is notarized and is presumed authentic. There is no substantive proof to support petitioner's allegation that the document is fictitious or simulated. With this in mind, We see no reason to reject the conclusion of the Court of Appeals that private respondent was not a mere administrator of the property. That he exercised acts of ownership through his mother also remains undisputed. Going now to the third assigned error which deals with the main issue presented in the instant petition, We observe that the Court of Appeals resolved the same in favor of private respondent due to the following reason; what the Provincial Sheriff levied upon and sold to petitioner is a parcel of land that does not belong to Enrique Castro, the judgment debtor, hence the execution is contrary to the directive contained in the writ of execution which commanded that the lands and buildings belonging to Enrique Castro be sold to satisfy the execution. 5 There is no doubt that had the property in question been a registered land, this case would have been decided in favor of petitioner since it was petitioner that had its claim first recorded in the Registry of Deeds. For, as already mentioned earlier, it is the act of registration that operates to convey and affect registered land. Therefore, a bona fide purchaser of a registered land at an execution sale acquires a good title as against a prior transferee, if such transfer was unrecorded. However, it must be stressed that this case deals with a parcel of unregistered land and a different set of rules applies. We affirm the decision of the Court of Appeals. Under Act No. 3344, registration of instruments affecting unregistered lands is "without prejudice to a 1.

third party with a better right". The aforequoted phrase has been held by this Court to mean that the mere registration of a sale in one's favor does not give him any right over the land if the vendor was not anymore the owner of the land having previously sold the same to somebody else even if the earlier sale was unrecorded. The case of Carumba vs. Court of Appeals 6 is a case in point. It was held therein that Article 1544 of the Civil Code has no application to land not registered under Act No. 496. Like in the case at bar, Carumba dealt with a double sale of the same unregistered land. The first sale was made by the original owners and was unrecorded while the second was an execution sale that resulted from a complaint for a sum of money filed against the said original owners. Applying Section 35, Rule 39 of the Revised Rules of Court, 7 this Court held that Article 1544 of the Civil Code cannot be invoked to benefit the purchaser at the execution sale though the latter was a buyer in good faith and even if this second sale was registered. It was explained that this is because the purchaser of unregistered land at a sheriffs execution sale only steps into the shoes of the judgment debtor, and merely acquires the latter's interest in the property sold as of the time the property was levied upon. Applying this principle, the Court of Appeals correctly held that the execution sale of the unregistered land in favor of petitioner is of no effect because the land no longer belonged to the judgment debtor as of the time of the said execution sale. WHEREFORE, in view of the foregoing, the decision of the Court of Appeals in CA-G.R. CV No. 10788 is hereby AFFIRMED. No costs. SO ORDERED.

G.R. No. 104482

January 22, 1996

BELINDA TAEDO, for herself and in representation of her brothers and sisters, and TEOFILA CORPUZ TAEDO, representing her minor daughter VERNA TAEDO, petitioners, vs. THE COURT OF APPEALS, SPOUSES RICARDO M. TAEDO AND TERESITA BARERA TAEDO, respondents. PANGANIBAN, J.: 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 Decision1 of the Court of Appeals2 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. 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. 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. Petitioners claimed that their father, Lazaro, executed an "Absolute Deed of Sale" dated December 29, 1980 (Exit. E). Conveying to his ten children his allotted portion tinder 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). 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". 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 trial court decided in favor of private respondents, holding that petitioners failed "to adduce a proponderance 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: The trial court erred in concluding that the Contract of Sale of October 20, 1962 (Exhibit 7, Answer) is merely voidable or annulable 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 defendants-appellees. 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. From the foregoing, the issues may be restated as follows: 1. 2. 3. Is the sale of a future inheritance valid? 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? 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 offtangent"? I.

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 oncertiorari 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 restated. 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." 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 memorandum4 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. 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: Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be

transferred to the person who may have first taken possession thereof in good faith, if it should be movable property. Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith. The 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; Under the second assignment of error, plaintiffs-appellants contend that defendants-appellees 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 consumated" (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; 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.) In this connection, we note the tenacious allegations made by petitioners, both in their basic petition and in their memorandum, as follows:

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; 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 ViceGovernor 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'sSinumpaang Salaysay dated July 27, 1982 stating that Ricardo Taedo deceived the former in executing the deed of sale in favor of private respondents. 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. As held in the recent case of Chua Tiong Tay vs. Court of Appeals and Goldrock Construction and Development Corp.7 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. 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)

1.

WHEREFORE, the petition is DENIED and the assailed Decision of the Court of Appeals is AFFIRMED. No Costs. SO ORDERED.

G.R. No. 156973

June 4, 2004

SPOUSES TOMAS OCCEA and SILVINA OCCEA, petitioners, vs. LYDIA MORALES OBSIANA ESPONILLA, ELSA MORALES OBSIANA SALAZAR and DARFROSA OBSIANA SALAZAR ESPONILLA, respondents. PUNO, J.: 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 Sale1 in favor of Alberta Morales covering the southwestern portion of the lot with an area of 748 square meters. Three (3) years later, in 1954, Arnold and Lilia executed a Deed of Definite Sale of Shares, Rights, Interests and Participations2 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. 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 Affidavit3 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. 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 case7 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. 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 REVERSEDand 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: I WHETHER 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. II WHETHER 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. III WHETHER 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. 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. 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 The governing principle of prius tempore, potior jure (first in time, stronger in right) enunciated under Art. 1544 has been clarified, thus: x x x 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 afreedom 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. 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 petitionerspouses.19 As held by this Court in Faja vs. Court of Appeals:20 x x x 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. x x x 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 petitio ner-spouses 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 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. No costs. SO ORDERED.