TodayisTuesday,September27,2016

RepublicofthePhilippines
SUPREMECOURT
Manila
SECONDDIVISION
G.R.No.132161January17,2005
CONSOLIDATEDRURALBANK(CAGAYANVALLEY),INC.,petitioner,
vs.
THEHONORABLECOURTOFAPPEALSandHEIRSOFTEODORODELACRUZ,respondents.
DECISION
TINGA,J.:
PetitionerConsolidatedRuralBank,Inc.ofCagayanValleyfiledtheinstantPetitionforCertiorari1underRule45
oftheRevisedRulesofCourt,seekingthereviewoftheDecision2oftheCourtofAppealsTwelfthDivisioninCA
G.R.CVNo.33662,promulgatedon27May1997,whichreversedthejudgment3ofthelowercourtinfavorof
petitioner and the Resolution4 of the Court of Appeals, promulgated on 5 January 1998, which reiterated its
DecisioninsofarasrespondentsHeirsofTeodorodelaCruz(theHeirs)areconcerned.
Fromtherecord,thefollowingaretheestablishedfacts:
Rizal,Anselmo,Gregorio,FilomenoandDomingo,allsurnamedMadrid(hereaftertheMadridbrothers),werethe
registeredownersofLotNo.7036AofplanPsd10188,CadastralSurvey211,situatedinSanMateo,Isabelaper
TransferCertificateofTitle(TCT)No.T8121issuedbytheRegisterofDeedsofIsabelainSeptember1956.5
On23and24October1956,LotNo.7036AwassubdividedintoseverallotsundersubdivisionplanPsd50390.
One of the resulting subdivision lots was Lot No. 7036A7 with an area of Five Thousand Nine Hundred Fifty
Eight(5,958)squaremeters.6
On15August1957,RizalMadridsoldpartofhisshareidentifiedasLotNo.7036A7,toAlejaGamiao(hereafter
Gamiao) and Felisa Dayag (hereafter, Dayag) by virtue of a Deed of Sale,7 to which his brothers Anselmo,
Gregorio, Filomeno and Domingo offered no objection as evidenced by their Joint Affidavit dated 14 August
1957.8ThedeedofsalewasnotregisteredwiththeOfficeoftheRegisterofDeedsofIsabela.However,Gamiao
andDayagdeclaredthepropertyfortaxationpurposesintheirnamesonMarch1964underTaxDeclarationNo.
7981.9
On28May1964,GamiaoandDayagsoldthesouthernhalfofLotNo.7036A7,denominatedasLotNo.7036
A7B, to Teodoro dela Cruz,10 and the northern half, identified as Lot No. 7036A7A,11 to Restituto
Hernandez.12 Thereupon, Teodoro dela Cruz and Restituto Hernandez took possession of and cultivated the
portionsofthepropertyrespectivelysoldtothem.13
Later, on 28 December 1986, Restituto Hernandez donated the northern half to his daughter, Evangeline
HernandezdelRosario.14ThechildrenofTeodorodelaCruzcontinuedpossessionofthesouthernhalfaftertheir
fathersdeathon7June1970.
InaDeedofSale15dated15June1976,theMadridbrothersconveyedalltheirrightsandinterestsoverLotNo.
7036A7toPacificoMarquez(hereafter,Marquez),whichtheformerconfirmed16on28February1983.17The
deedofsalewasregisteredwiththeOfficeoftheRegisterofDeedsofIsabelaon2March1982.18
Subsequently,MarquezsubdividedLotNo.7036A7intoeight(8)lots,namely:LotNos.7036A7Ato7036A7
H, for which TCT Nos. T149375 to T149382 were issued to him on 29 March 1984.19 On the same date,
Marquez and his spouse, Mercedita Mariana, mortgaged Lots Nos. 7036A7A to 7036A7D to the
Consolidated Rural Bank, Inc. of Cagayan Valley (hereafter, CRB) to secure a loan of One Hundred Thousand

Pesos(P100,000.00).20ThesedeedsofrealestatemortgagewereregisteredwiththeOfficeoftheRegisterof
Deedson2April1984.
On 6 February 1985, Marquez mortgaged Lot No. 7036A7E likewise to the Rural Bank of Cauayan (RBC) to
securealoanofTenThousandPesos(P10,000.00).21
AsMarquezdefaultedinthepaymentofhisloan,CRBcausedtheforeclosureofthemortgagesinitsfavorand
thelotsweresoldtoitasthehighestbidderon25April1986.22
On31October1985,MarquezsoldLotNo.7036A7GtoRomeoCalixto(Calixto).23
Claiming to be null and void the issuance of TCT Nos. T149375 to T149382 the foreclosure sale of Lot Nos.
7036A7A to 7036A7D the mortgage to RBC and the sale to Calixto, the Heirsnow respondents herein
representedbyEdroneldelaCruz,filedacase24forreconveyanceanddamagesthesouthernportionofLotNo.
7036A(hereafter,thesubjectproperty)againstMarquez,Calixto,RBCandCRBinDecember1986.
EvangelinedelRosario,thesuccessorininterestofRestitutoHernandez,filedwithleaveofcourtaComplaintin
Intervention25whereinsheclaimedthenorthernportionofLotNo.7036A7.
In the Answer to the Amended Complaint,26 Marquez, as defendant, alleged that apart from being the first
registrant,hewasabuyeringoodfaithandforvalue.HealsoarguedthatthesaleexecutedbyRizalMadridto
GamiaoandDayagwasnotbindinguponhim,itbeingunregistered.Forhispart,Calixtomanifestedthathehad
no interest in the subject property as he ceased to be the owner thereof, the same having been reacquired by
defendantMarquez.27
CRB,asdefendant,andcodefendantRBCinsistedthattheyweremortgageesingoodfaithandthattheyhadthe
righttorelyonthetitlesofMarquezwhichwerefreefromanylienorencumbrance.28
Aftertrial,theRegionalTrialCourt,Branch19ofCauayan,Isabela(hereafter,RTC)handeddownadecisionin
favorofthedefendants,disposingasfollows:
WHEREFORE,inviewoftheforegoingconsiderations,judgmentisherebyrendered:
1.Dismissingtheamendedcomplaintandthecomplaintinintervention
2. Declaring Pacifico V. Marquez the lawful owner of Lots 7036A7 now Lots 7036A7A to 7036A7H,
inclusive,coveredbyTCTNos.T149375toT149382,inclusive
3. Declaring the mortgage of Lots 7036A7A, 7036A7B, 7036A7C and 7036A7D in favor of the
defendant Consolidated Rural Bank (Cagayan Valley) and of Lot 7036A7E in favor of defendant Rural
BankofCauayanbyPacificoV.Marquezvalid
4.DismissingthecounterclaimofPacificoV.Marquezand
5.DeclaringtheHeirsofTeodorodelaCruzthelawfulownersofthelotscoveredbyTCTNos.T33119,T
33220andT7583.
Nopronouncementastocosts.
SOORDERED.29
Insupportofitsdecision,theRTCmadethefollowingfindings:
Withrespecttoissuesnumbers13,theCourtthereforeholdsthatthesaleofLot7036A7madebyRizalMadrid
toAlejaGamiaoandFelisaDayagandthesubsequentconveyancestotheplaintiffsandintervenorsareallvalid
andtheMadridbrothersareboundbysaidcontractsbyvirtueoftheconfirmationmadebythemonAugust14,
1957(Exh.B).
ArethedefendantsPacificoV.MarquezandRomeoB.CalixtobuyersingoodfaithandforvalueofLot7036A7?
It must be borne in mind that good faith is always presumed and he who imputes bad faith has the burden of
proving the same (Art. 527, Civil Code). The Court has carefully scrutinized the evidence presented but finds
nothingtoshowthatMarquezwasawareoftheplaintiffsandintervenorsclaimofownershipoverthislot.TCT
No.T8121coveringsaidproperty,beforetheissuanceofMarqueztitle,revealsnothingabouttheplaintiffsand
intervenorsrighttheretoforitisanadmittedfactthattheconveyancesintheirfavorarenotregistered.

TheCourtisthereforeconfrontedwithtwosalesoverthesameproperty.Article1544oftheCivilCodeprovides:
"ART.1544.Ifthesamethingshouldhavebeensoldtodifferentvendees,theownershipshallbetransferredto
thepersonwhomayhavefirsttakenpossessionthereofingoodfaith,ifitshouldbemovableproperty.
Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first
recordeditintheRegistryofProperty.xxx"(Underscoringsupplied).
FromtheforegoingprovisionsandintheabsenceofproofthatMarquezhasactualorconstructiveknowledgeof
plaintiffsandintervenorsclaim,theCourthastorulethatasthevendeewhofirstregisteredhissale,Marquez
ownershipoverLot7036A7mustbeupheld.30
TheHeirsinterposedanappealwiththeCourtofAppeals.IntheirAppellantsBrief,31theyascribedthefollowing
errors to the RTC: (1) it erred in finding that Marquez was a buyer in good faith (2) it erred in validating the
mortgageofthepropertiestoRBCandCRBand(3)iterredinnotreconveyingLotNo.7036A7Btothem.32
IntervenorEvangelinedelRosariofiledaseparateappealwiththeCourtofAppeals.Itwas,however,dismissedin
a Resolution dated 20 September 1993 for her failure to pay docket fees. Thus, she lost her standing as an
appellant.33
On 27 May 1997, the Court of Appeals rendered its assailed Decision34 reversing the RTCs judgment. The
dispositiveportionreads:
WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE. Accordingly, judgment is
herebyrenderedasfollows:
1.DeclaringtheheirsofTeodorodelaCruzthelawfulownersofthesouthernhalfportionandEvangeline
HernandezdelRosariothenorthernhalfportionofLotNo.7036A7,nowcoveredbyTCTNos.T149375
toT149382,inclusive
2. Declaring null and void the deed of sale dated June 15, 1976 between Pacifico V. Marquez and the
MadridbrotherscoveringsaidLot7036A7
3. Declaring null and void the mortgage made by defendant Pacifico V. Marquez of Lot Nos. 7036A7A,
7036A7B, 7036A7C and 7036A7D in favor of the defendant Consolidated Rural Bank and of Lot
7036A7EinfavorofdefendantRuralBankofCauayanand
4. Ordering Pacifico V. Marquez to reconvey Lot 7036A7 to the heirs of Teodoro dela Cruz and
EvangelineHernandezdelRosario.
Nopronouncementastocosts.
SOORDERED.35
In upholding the claim of the Heirs, the Court of Appeals held that Marquez failed to prove that he was a
purchaseringoodfaithandforvalue.ItnotedthatwhileMarquezwasthefirstregistrant,therewasnoshowing
that the registration of the deed of sale in his favor was coupled with good faith. Marquez admitted having
knowledgethatthesubjectpropertywas"beingtaken"bytheHeirsatthetimeofthesale.36TheHeirswerealso
in possession of the land at the time. According to the Decision, these circumstances along with the subject
propertys attractive locationit was situated along the National Highway and was across a gasoline station
shouldhaveputMarquezoninquiryastoitsstatus.Instead,Marquezclosedhiseyestothesemattersandfailed
toexercisetheordinarycareexpectedofabuyerofrealestate.37
AnentthemortgageesRBCandCRB,theCourtofAppealsfoundthattheymerelyreliedonthecertificatesoftitle
of the mortgaged properties. They did not ascertain the status and condition thereof according to standard
bankingpractice.Forfailuretoobservetheordinarybankingprocedure,theCourtofAppealsconsideredthemto
haveactedinbadfaithandonthatbasisdeclarednullandvoidthemortgagesmadebyMarquezintheirfavor.38
Dissatisfied,CRBfiledaMotionforReconsideration39pointingout,amongothers,thattheDecisionpromulgated
on27May1997failedtoestablishgoodfaithonthepartoftheHeirs.Absentproofofpossessioningoodfaith,
CRBavers,theHeirscannotclaimownershipoverthesubjectproperty.
InaResolution40dated5January1998,theCourtofAppealsstresseditsdisbeliefinCRBsallegationthatitdid
notmerelyrelyonthecertificatesoftitleofthepropertiesandthatitconductedcreditinvestigationandstandard
ocularinspection.ButrecallingthatintervenorEvangelinedelRosariohadlostherstandingasanappellant,the
CourtofAppealsaccordinglymodifieditspreviousDecision,asfollows:

WHEREFORE,thedecisiondatedMay27,1997,isherebyMODIFIEDtoreadasfollows:
WHEREFORE,thedecisionappealedfromisherebyREVERSEDandSETASIDEinsofarasplaintiffsappellants
areconcerned.Accordingly,judgmentisherebyrenderedasfollows:
1.DeclaringtheHeirsofTeodorodelaCruzthelawfulownersofthesouthernhalfportionofLotNo.7036
A7
2. Declaring null and void the deed of sale dated June 15, 1976 between Pacifico V. Marquez and the
MadridbrothersinsofarasthesouthernhalfportionofLotNO.(sic)7036A7isconcerned
3. Declaring the mortgage made by defendant Pacifico V. Marquez in favor of defendant Consolidated
Rural Bank (Cagayan Valley) and defendant Rural Bank of Cauayan as null and void insofar as the
southernhalfportionofLotNo.7036A7isconcerned
4. Ordering defendant Pacifico V. Marquez to reconvey the southern portion of Lot No. 7036A7 to the
HeirsofTeodorodelaCruz.
Nopronouncementastocosts.
SOORDERED.41
Hence, the instant CRB petition. However, both Marquez and RBC elected not to challenge the Decision of the
appellatecourt.
Petitioner CRB, in essence, alleges that the Court of Appeals committed serious error of law in upholding the
Heirs ownership claim over the subject property considering that there was no finding that they acted in good
faith in taking possession thereof nor was there proof that the first buyers, Gamiao and Dayag, ever took
possession of the subject property. CRB also makes issue of the fact that the sale to Gamiao and Dayag was
confirmedadayaheadoftheactualsale,clearlyevincingbadfaith,itadds.Further,CRBassertsMarquezsright
overthepropertybeingitsregisteredowner.
Thepetitionisdevoidofmerit.However,thedismissalofthepetitionisjustifiedbyreasonsdifferentfromthose
employedbytheCourtofAppeals.
Like the lower court, the appellate court resolved the present controversy by applying the rule on double sale
provided in Article 1544 of the Civil Code. They, however, arrived at different conclusions. The RTC made CRB
andtheotherdefendantswin,whiletheCourtofAppealsdecidedthecaseinfavoroftheHeirs.
Article1544oftheCivilCodereads,thus:
ART.1544.Ifthesamethingshouldhavebeensoldtodifferentvendees,theownershipshallbetransferredto
thepersonwhomayhavefirsttakenpossessionthereofingoodfaith,ifitshouldbemovableproperty.
Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first
recordeditintheRegistryofProperty.
Shouldtherebenoinscription,theownershipshallpertaintothepersonwhoingoodfaithwasfirstinpossession
and,intheabsencethereof,tothepersonwhopresentstheoldesttitle,providedthereisgoodfaith.
Theprovisionisnotapplicableinthepresentcase.Itcontemplatesacaseofdoubleormultiplesalesbyasingle
vendor.Morespecifically,itcoversasituationwhereasinglevendorsoldoneandthesameimmovableproperty
to two or more buyers.42 According to a noted civil law author, it is necessary that the conveyance must have
beenmadebyapartywhohasanexistingrightinthethingandthepowertodisposeofit.43Itcannotbeinvoked
wherethetwodifferentcontractsofsalearemadebytwodifferentpersons,oneofthemnotbeingtheownerof
thepropertysold.44Andevenifthesalewasmadebythesameperson,ifthesecondsalewasmadewhensuch
person was no longer the owner of the property, because it had been acquired by the first purchaser in full
dominion,thesecondpurchasercannotacquireanyright.45
Inthecaseatbar,thesubjectpropertywasnottransferredtoseveralpurchasersbyasinglevendor.Inthefirst
deed of sale, the vendors were Gamiao and Dayag whose right to the subject property originated from their
acquisitionthereoffromRizalMadridwiththeconformityofalltheotherMadridbrothersin1957,followedbytheir
declarationofthepropertyinitsentiretyfortaxationpurposesintheirnames.Ontheotherhand,thevendorsin
theotherorlaterdeedweretheMadridbrothersbutatthattimetheywerenolongertheownerssincetheyhad
longbeforedisposedofthepropertyinfavorofGamiaoandDayag.

CitingManresa,theCourtofAppealsin1936hadoccasiontoexplaintheproperapplicationofArticle1473ofthe
OldCivilCode(nowArticle1544oftheNewCivilCode)inthecaseofCarpiov.Exevea,46thus:
Inorderthattraditionmaybeconsideredperformed,itisnecessarythattherequisiteswhichitimpliesmusthave
been fulfilled, and one of the indispensable requisites, according to the most exact Roman concept, is that the
conveyorhadtherightandthewilltoconveythething.Theintentiontotransferisnotsufficientitonlyconstitutes
thewill.Itis,furthermore,necessarythattheconveyorcouldjuridicallyperformthatactthathehadtherighttodo
so,sincearightwhichhedidnotpossesscouldnotbevestedbyhiminthetransferee.
ThisiswhatArticle1473hasfailedtoexpress:thenecessityforthepreexistenceoftherightonthepartofthe
conveyor.Butevenifthearticledoesnotexpressit,itwouldbeunderstood,inouropinion,thatthatcircumstance
constitutesoneoftheassumptionsuponwhichthearticleisbased.
ThisconstructionisnotrepugnanttothetextofArticle1473,andnotonlyisitnotcontrarytoit,butitexplainsand
justifiesthesame.(Vol.10,4thed.,p.159)47
In that case, the property was transferred to the first purchaser in 1908 by its original owner, Juan Millante.
Thereafter,itwassoldtoplaintiffCarpioinJune1929.Bothconveyanceswereunregistered.Onthesamedate
thatthepropertywassoldtotheplaintiff,JuanMillantesoldthesametodefendantExevea.Thistime,thesale
was registered in the Registry of Deeds. But despite the fact of registration in defendants favor, the Court of
Appeals found for the plaintiff and refused to apply the provisions of Art. 1473 of the Old Civil Code, reasoning
that"onthedateoftheexecutionofthedocument,Exhibit1,JuanMillantedidnotandcouldnothaveanyright
whatsoevertotheparceloflandinquestion."48
Citing a portion of a judgment dated 24 November 1894 of the Supreme Court of Spain, the Court of Appeals
elucidatedfurther:
Article1473oftheCivilCodepresupposestherightofthevendortodisposeofthethingsold,anddoesnotlimit
oralterinthisrespecttheprovisionsoftheMortgageLawinforce,whichupholdstheprinciplethatregistration
does not validate acts or contracts which are void, and that although acts and contracts executed by persons
who,intheRegistry,appeartobeentitledtodosoarenotinvalidatedoncerecorded,evenifafterwardstheright
of such vendor is annulled or resolved by virtue of a previous unrecorded title, nevertheless this refers only to
thirdparties.49
In a situation where not all the requisites are present which would warrant the application of Art. 1544, the
principleofpriortempore,potiorjureorsimply"hewhoisfirstintimeispreferredinright,"50shouldapply.51The
onlyessentialrequisiteofthisruleispriorityintimeinotherwords,theonlyonewhocaninvokethisisthefirst
vendee.Undisputedly,heisapurchaseringoodfaithbecauseatthetimeheboughttherealproperty,therewas
still no sale to a second vendee.52 In the instant case, the sale to the Heirs by Gamiao and Dayag, who first
bought it from Rizal Madrid, was anterior to the sale by the Madrid brothers to Marquez. The Heirs also had
possessed the subject property first in time. Thus, applying the principle, the Heirs, without a scintilla of doubt,
haveasuperiorrighttothesubjectproperty.
Moreover,itisanestablishedprinciplethatnoonecangivewhatonedoesnothavenemodatquodnonhabet.
Accordingly, one can sell only what one owns or is authorized to sell, and the buyer can acquire no more than
what the seller can transfer legally.53 In this case, since the Madrid brothers were no longer the owners of the
subjectpropertyatthetimeofthesaletoMarquez,thelatterdidnotacquireanyrighttoit.
Inanyevent,assumingarguendothatArticle1544appliestothepresentcase,theclaimofMarquezstillcannot
prevailovertherightoftheHeirssinceaccordingtotheevidencehewasnotapurchaserandregistrantingood
faith.
FollowingArticle1544,inthedoublesaleofanimmovable,therulesofpreferenceare:
(a)thefirstregistrantingoodfaith
(b)shouldtherebenoentry,thefirstinpossessioningoodfaithand
(c)intheabsencethereof,thebuyerwhopresentstheoldesttitleingoodfaith.54
Prior registration of the subject property does not by itself confer ownership or a better right over the property.
Article1544requiresthatbeforethesecondbuyercanobtainpriorityoverthefirst,hemustshowthatheactedin
goodfaiththroughout(i.e.,inignoranceofthefirstsaleandofthefirstbuyersrights)fromthetimeofacquisition
untilthetitleistransferredtohimbyregistrationorfailingregistration,bydeliveryofpossession.55

Intheinstantcase,theactionsofMarquezhavenotsatisfiedtherequirementofgoodfaithfromthetimeofthe
purchaseofthesubjectpropertytothetimeofregistration.FoundbytheCourtofAppeals,Marquezknewatthe
timeofthesalethatthesubjectpropertywasbeingclaimedor"taken"bytheHeirs.Thiswasadetailwhichcould
indicateadefectinthevendorstitlewhichhefailedtoinquireinto.Marquezalsoadmittedthathedidnottake
possession of the property and at the time he testified he did not even know who was in possession. Thus, he
testifiedondirectexaminationintheRTCasfollows:
ATTY.CALIXTO
QCanyoutellusthecircumstancestoyourbuyingthelandinquestion?
AIn1976theMadridbrothersconfessedtometheirproblemsabouttheirlotsinSanMateothattheywere
being taken by Teodoro dela Cruz and Atty. Teofilo A. Leonin that they have to pay the lawyers fee of
P10,000.00otherwiseAtty.Leoninwillconfiscatetheland.Sotheybeggedmetobuytheirproperties,some
ofit.SothatonJune3,1976,theycametoCabaganwhereIwasandgavethemP14,000.00,Ithink.We
havetalkedthattheywillexecutethedeedofsale.
QWhyisit,doctor,thatyouhavealreadythisdeedofsale,Exh.14,whydidyoufinditnecessarytohave
thisDeedofConfirmationofaPriorSale,Exh.15?
A Because as I said a while ago that the first deed of sale was submitted to the Register of Deeds by
RomeoBaduasothatIsaidthatbecausewhenIbecameaMunicipalHealthOfficerinSanMateo,Isabela,
I heard so many rumors, so many things about the land and so I requested them to execute a deed of
confirmation.56
...
ATTY.CALIXTO
QAtpresent,whoisinpossessionontheRicelandportionofthelotinquestion?
AIcannotsaybecausethepeopleworkingonthatarechangingfromtimetotime.
QWhy,haveyounottakenoverthecultivationofthelandinquestion?
AWell,theDelaCruzesareprohibitingthatwewilloccupytheplace.
QSo,youdonothaveanypossession?
ANone,sir.57
One who purchases real property which is in actual possession of others should, at least, make some inquiry
concerningtherightsofthoseinpossession.Theactualpossessionbypeopleotherthanthevendorshould,at
least,putthepurchaseruponinquiry.Hecanscarcely,intheabsenceofsuchinquiry,beregardedasabonafide
purchaserasagainstsuchpossessions.58Theruleofcaveatemptorrequiresthepurchasertobeawareofthe
supposedtitleofthevendorandonewhobuyswithoutcheckingthevendorstitletakesalltherisksandlosses
consequenttosuchfailure.59
ItisfurtherperplexingthatMarquezdidnotfightforthepossessionofthepropertyifitweretruethathehada
better right to it. In our opinion, there were circumstances at the time of the sale, and even at the time of
registration, which would reasonably require a purchaser of real property to investigate to determine whether
defectsexistedinhisvendorstitle.Instead,Marquezwillfullyclosedhiseyestothepossibilityoftheexistenceof
theseflaws.Forfailuretoexercisethemeasureofprecautionwhichmayberequiredofaprudentmaninalike
situation,hecannotbecalledapurchaseringoodfaith.60
AsthisCourtexplainedinthecaseofSpousesMathayv.CourtofAppeals:61
Althoughitisarecognizedprinciplethatapersondealingonaregisteredlandneednotgobeyonditscertificate
of title, it is also a firmly settled rule that where there are circumstances which would put a party on guard and
prompthimtoinvestigateorinspectthepropertybeingsoldtohim,suchasthepresenceofoccupants/tenants
thereon,itis,ofcourse,expectedfromthepurchaserofavaluedpieceoflandtoinquirefirstintothestatusor
nature of possession of the occupants, i.e., whether or not the occupants possess the land en concepto de
dueo, in concept of owner. As is the common practice in the real estate industry, an ocular inspection of the
premisesinvolvedisasafeguardacautiousandprudentpurchaserusuallytakes.Shouldhefindoutthattheland
he intends to buy is occupied by anybody else other than the seller who, as in this case, is not in actual
possession, it would then be incumbent upon the purchaser to verify the extent of the occupants possessory

rights.Thefailureofaprospectivebuyertotakesuchprecautionarystepswouldmeannegligenceonhispartand
wouldtherebyprecludehimfromclaimingorinvokingtherightsofa"purchaseringoodfaith."62
This rule equally applies to mortgagees of real property. In the case of Crisostomo v. Court of Appeals,63 the
Courtheld:
It is a wellsettled rule that a purchaser or mortgagee cannot close his eyes to facts which should put a
reasonable man upon his guard, and then claim that he acted in good faith under the belief that there was no
defect in the title of the vendor or mortgagor. His mere refusal to believe that such defect exists, or his willful
closingofhiseyestothepossibilityoftheexistenceofadefectinthevendorsormortgagorstitle,willnotmake
himaninnocentpurchaserormortgageeforvalue,ifitafterwardsdevelopsthatthetitlewasinfactdefective,and
it appears that he had such notice of the defects as would have led to its discovery had he acted with the
measureofaprudentmaninalikesituation.64
Banks, their business being impressed with public interest, are expected to exercise more care and prudence
thanprivateindividualsintheirdealings,eventhoseinvolvingregisteredlands.Hence,formerelyrelyingonthe
certificates of title and for its failure to ascertain the status of the mortgaged properties as is the standard
procedureinitsoperations,weagreewiththeCourtofAppealsthatCRBisamortgageeinbadfaith.
In this connection, Marquezs obstention of title to the property and the subsequent transfer thereof to CRB
cannot help the latters cause. In a situation where a party has actual knowledge of the claimants actual, open
andnotoriouspossessionofthedisputedpropertyatthetimeofregistration,asinthiscase,theactualnoticeand
knowledge are equivalent to registration, because to hold otherwise would be to tolerate fraud and the Torrens
systemcannotbeusedtoshieldfraud.65
Whilecertificatesoftitleareindefeasible,unassailableandbindingagainstthewholeworld,theymerelyconfirm
orrecordtitlealreadyexistingandvested.Theycannotbeusedtoprotectausurperfromthetrueowner,norcan
theybeusedfortheperpetrationoffraudneitherdotheypermitonetoenrichhimselfattheexpenseofothers.66
WealsofindthattheCourtofAppealsdidnoterrinawardingthesubjectpropertytotheHeirsabsentproofof
goodfaithintheirpossessionofthesubjectpropertyandwithoutanyshowingofpossessionthereofbyGamiao
andDayag.
As correctly argued by the Heirs in their Comment,67 the requirement of good faith in the possession of the
propertyfindsnoapplicationincaseswherethereisnosecondsale.68Inthecaseatbar,TeodorodelaCruztook
possessionofthepropertyin1964longbeforethesaletoMarqueztranspiredin1976andaconsiderablelength
oftimeeighteen(18)yearsinfactbeforetheHeirshadknowledgeoftheregistrationofsaidsalein1982.As
Article526oftheCivilCodeaptlyprovides,"(H)eisdeemedapossessoringoodfaithwhoisnotawarethatthere
existsinhistitleormodeofacquisitionanyflawwhichinvalidatesit."Thus,therewasnoneedfortheappellate
courttoconsidertheissueofgoodfaithorbadfaithwithregardtoTeodorodelaCruzspossessionofthesubject
property.
Likewise,weareoftheopinionthatitisnotnecessarythatthereshouldbeanyfindingofpossessionbyGamiao
andDayagofthesubjectproperty.ItshouldberecalledthattheregularityofthesaletoGamiaoandDayagwas
nevercontestedbyMarquez.69InfacttheRTCupheldthevalidityofthissale,holdingthattheMadridbrothers
areboundbythesalebyvirtueoftheirconfirmationthereofintheJointAffidavitdated14August1957.Thatthis
was executed a day ahead of the actual sale on 15 August 1957 does not diminish its integrity as it was made
beforetherewasevenanyshadowofcontroversyregardingtheownershipofthesubjectproperty.
Moreover,asthisCourtdeclaredinthecaseofHeirsofSimplicioSantiagov.HeirsofMarianoE.Santiago,70tax
declarations "are good indicia of possession in the concept of an owner, for no one in his right mind would be
payingtaxesforapropertythatisnotinhisactualorconstructivepossession."71
WHEREFORE,thePetitionisDENIED.ThedispositiveportionoftheCourtofAppealsDecision,asmodifiedbyits
Resolutiondated5January1998,isAFFIRMED.Costsagainstpetitioner.
SOORDERED.
Puno,(Chairman),AustriaMartinez,Callejo,Sr.,andChicoNazario,JJ.,concur.

Footnotes
1Dated26February1998Filedon12March1998Rollo,pp.941withannexes.

2PennedbyJusticeArtemioG.Tuquero,concurredinbyJusticesArtemonD.LunaandHectorL.Hofilea

Rollo,pp.2330.
3Dated10May1991WrittenbyHonorableArtemioR.Alivia,RegionalTrialJudgeRollo,pp.98109.
4PennedbyJusticeArtemioG.Tuquero,concurredinbyJusticesArtemonD.LunaandHectorL.Hofilea

Rollo,pp.3334.
5Rollo,p.23.
6Ibid.
7ExhibitA.
8Rollo,pp.23and103RTCDecision,p.6ExhibitB,RTCRecords,p.6InthisJointAffidavitexecuted

before Apolonio S. Padua, Justice of Peace, Anselmo, Gregorio, Filomeno and Domingo, all surnamed
Madrid,underoath,declaredthat"wehavenoobjectionofthealienation,asitisapartoftheexclusive
shareofourbrotherthevendorstillunsegregatedthatassuchwehereuntoconfirmthesaidsaleinfavor
ofAlejaGamiaoandFelisaDayag."
9ExhibitCRollo,p.103RTCDecision,p.6.
10Rollo,p.24ExhibitI2.
11IbidExhibitI1.
12ExhibitsDandERollo,p.103RTCDecision,p.6.
13Rollo,pp.24and103RTCDecision,p.6.
14IbidExhibitF.
15Exhibit14.
16Exhibit15.
17Rollo,pp.24and104.
18Ibid.
19ExhibitsK,K1toK7,Exhibits613.
20Rollo,pp.24and105CARecords,p.54.
21Rollo,pp.24and105.
22IbidCARecords,p.55.
23Rollo,p.24.
24Complaintdated15December1986,RTCRecords,pp.18withAnnexesAmendedComplaintdated24

December1986,RTCRecords,pp.1418.
25Dated24January1987RTCRecords,pp.3340withannexes.
26Dated4March1987,Id.at5357.
27Rollo,pp.100101Id.at34.
28Id.at100Id.at3.
29Id.at25and109Id.at12.
30Id.at106107Id.at910.

31CARecords,pp.4579.
32Rollo,p.26Id.at4950.
33Id.at33.
34Id.at2330.
35Id.at2930.
36Id.at27TSN,pp.3536,21September1989.
37Id.at2728.
38Id.at29.
39Filedon17June1997SeeRollo,p.9.
40Rollo,pp.3334.
41Id.at34.
42C.Villanueva,PhilippineLawonSales100(1995).
43A.TOLENTINO,COMMENTARIESANDJURISPRUDENCEONTHECIVILCODEOFTHEPHILIPPINES,

VOLUMEV96(1999),citing10Manresa170,171.
44Id.,citing Olsen v. Yearsley, 11 Phil. 178, Carpio v. Exevea, (C.A.) 38 Off. Gaz. 1356 and Cruzado v.

Bustos,34Phil.17.
45Id.,citingBautista v. Sioson, 39 Phil. 615 Lichauco v. Berenger, 39 Phil. 643 Salvaro v. Cabana, 129

SCRA656.
46No.43354,(CA)38Off.Gaz.1356(1936).Thiscaseiscitedinthefollowingbookstodemonstratethat

Art. 1544 (then Art. 1473 of the Old Civil Code) cannot be invoked if the sale is made by two different
vendors: A. Padilla, Civil Law, Civil Code Annotated 878 (1953) E. Paras, Civil Code of the Philippines
Annotated Vol. V, 12th ED. 166167 (1990) A. Tolentino, Commentaries and Jurisprudence on the Civil
CodeofthePhilippines,Vol.V96(1999)C.Villanueva,PhilippineLawonSAles100(1995).
47Id.at1357.
48Id.at1358.
49Supranote47.
50BlacksLawDictionary6thEd.1194(1990).
51Supranote42.
52D.Jurado,CivilLawReviewer19thEd.879(1999).
53Tangalinv.CourtofAppeals,422Phil.358,365(2001).
54 A. Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines, Vol. V 96 (1999)

Martinezv.CourtofAppeals,G.R.No.123547,21May2001,358SCRA38,50Bayocav.Nogales,G.R.
No.138201,12September2000,340SCRA154,165166,citingJ.C.Vitug,CompendiumofCivilLawand
Jurisprudence,pp.604605Balatbatv.CourtofAppeals,329Phil.858,872(1996).Citationomitted.
55Uracav.CA,344Phil.253,265(1997).
56TSN,pp.3435,21September1989.
57Id.at3839,21September1989.

58Republicv.Hon.CourtofAppeals,No.L42856,27January1981,102SCRA331,344,citingConspecto

v.Fruto,31Phil.144,149.
59Caram,Jr.v.Laureta,No.L28740,24February1981,103SCRA7,16.
60Voluntadv.Sps.Dizon,372Phil.82,91(1999).
61356Phil.870(1998).
62Id.at892.
63274Phil.1134(1991).
64Id.at11421143,citationsomitted.
65Lavidesv.Pre,419Phil.665,671672(2001).
66Bayocav.Nogales,G.R.No.138201,12September2000,340SCRA154,169.
67Rollo,pp.6377.
68Id.at71.
69Id.at105.
70G.R.No.151440,17June2003,404SCRA193.
71Id.at199SeealsoLarenav.Mapili,G.R.No.146341,7August2003,408SCRA484,491.
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