Emilio Calma vs. Atty. Jose Lachica, Jr.

G.R. No. 222031

November 22, 2017

Topic: Double sale; buyer in good faith

FACTS: Respondent Atty. Jose Lachica claims to be the owner of a 20,000 sq.m. parcel of land in
Cabanatuan City covered by TCT No. T-28380, having acquired the same through sale from Ceferino
Tolentino. The title to said property was also delivered to him in 1974 and he has been in actual physical
possession of the property since then. However, the 1974 Deed of Sale was lost so the parties executed a
new Deed of Sale executed on April 29, 1979. Respondent had to travel to far-away places because of his
job in the government but he continued to possess the entire property through his helper. In 1981, he
caused the annotation of a Notice of Adverse Claim on TCT No. T-28380. After the notarization of the 1979
Deed of Sale in 1986, Ceferino and his son Ricardo requested respondent to allow them to cultivate the
5,000 sq.m. portion of the subject land and in consideration, they would process the transfer of the title
to respondent’s name. Respondent agreed out of trust. In 2001, respondent returned to Cabanatuan and
found that title to the property was transferred to Ricardo’s name, which was in turn cancelled and
transferred under petitioner Emilio Calma’s name. Respondent argued that the sale between Ceferino
and Ricardo was null and void for being executed with fraud and that that not only was Ricardo in full
knowledge of the sale of the subject property to him by Ceferino, but also his adverse claim was evidently
annotated in the latter's title and carried over to Ricardo's title. Respondent filed a petition for the
annulment of deeds of sale and cancellation of title petitioner.

ISSUE: Who between Calma and Lachica has a better right

HELD:

The Court ruled for the petitioner.

Sale from Ceferino to respondent

Respondent's claimed right over the subject property is grounded upon his alleged acquisition of the same
from Ceferino by sale.

Both the RTC and the CA were convinced that the sale of the subject property by Ceferino to respondent
was valid and as such, the latter has a valid claim of right over the same. This can be gleaned from the
RTC's Decision ordering Ricardo to pay respondent damages due to the former's bad faith in the
acquisition of the subject property, recognizing thus the latter's interest and right over the same. The CA
upheld respondent's rights over the subject property even more by ordering, among others, the
cancellation of petitioner's title and the transfer thereof to respondent's name.

Sale from Ricardo to Petitioner

Petitioner's claimed right over the subject property, on the other hand, is grounded upon his acquisition
of the same from Ricardo by sale. Unlike the sale from Ceferino to respondent, the Deed of Sale in
petitioner's favor was registered with the Registry of Deeds, giving rise to the issuance of a new
certificate of title in the name of the petitioner.
from Ricardo as evidenced by a Deed of Absolute Sale dated July 10, 1998, duly notarized on even date;
(2) said sale was registered in the Registry of Deeds, Cabanatuan City on December 22, 1998 as evidenced
by TCT No. T-96168; (3) petitioner made inquiries with the Register of Deeds and the bank where the
subject property was mortgaged by Ricardo as regards the authenticity and the status of Ricardo's title
before proceeding with the purchase thereof; and (4) petitioner was able to ascertain that Ricardo's title
was clean and free from any lien and encumbrance as the said title, together with his inquiries, showed
that the only annotations in the said title were respondent's 1981 adverse claim and its cancellation in
1994.

From the foregoing factual backdrop, there was no indicia that could have aroused questions in the
petitioner's mind regarding the title of the subject property. Hence, We do not find any cogent reason not
to apply the general rule allowing the petitioner to rely on the face of the title.

For one, it is clearly manifest in the records that while respondent's adverse claim appears in Ricardo's
title, it also appears therein that the said adverse claim had already been cancelled on April 26, 1994 or
more than four years before petitioner puchased the subject property. As correctly found by the RTC,
thus, Ricardo's title is already clean on its face, way before petitioner puchased the same.

Further, respondent's allegation of fraud and petitioner's knowledge of the transaction between him and
Ceferino are not supported by any evidence except bare allegations. It is basic that an allegation of fraud
must be substantiated.42 Section 543 , Rule 8 provides that in all averments of fraud, the circumstances
constituting the same must be stated with particularity. Moreover, fraud is a question of fact which must
be proved by clear and convincing evidence.44

At any rate, contrary to the CA's ruling, petitioner was never remiss in his duty of ensuring that the
property that he was going to purchase had a clean title. Despite Ricardo's title being clean on its face,
petitioner still conducted an investigation of his own by proceeding to the Register of Deeds, as well as to
the bank where said title was mortgaged, to check on the authenticity and the status of the title. Thus,
petitioner was proven to be in good faith when he dealt with Ricardo and relied on the title presented
and authenticated to him by the Register of Deeds and confirmed by the mortgagee-bank. Respondent,
on the other hand, failed to proffer evidence to prove otherwise.

Notably, the CA's conclusions to the contrary are merely based on assumptions and conjectures, such as
that the bank's advice for petitioner to buy the subject property was meant only for the protection of the
bank's interest; and that the annotation of the adverse claim on Ceferino's title and carried over to
Ricardo's title for a total of 13 years before it was cancelled should have aroused suspicion.45 These
conclusions have no factual or legal basis. What is essential on the matter of petitioner's good faith in the
acquisition of the subject property is the cancellation of such adverse claim, which clearly appears on the
face of Ricardo's title.

As the fact that petitioner is an innocent purchaser for value had been established, the validity and efficacy
of the registration, as well as the cancellation, of respondent's adverse claim is immaterial in this case.
What matters is that the petitioner had no knowledge of any defect in the title of the property that he
was going to purchase and that the same was clean and free of any lien and encumbrance on its face by
virtue of the entry on the cancellation of adverse claim therein. Thus, petitioner may safely rely on the
correctness of the entries in the title.
Even the defect in Ricardo's title due to his bad faith in the acquisition of the subject property, as found
by both the RTC and the CA, should not affect petitioner's rights as an innocent purchaser for value. The
CA patently erred in ruling that since Ricardo had no valid title on the subject property due to his bad
faith, he had nothing to convey to the petitioner. It is settled that a defective title may still be the source
of a completely legal and valid title in the hands of an innocent purchaser for value.46

Petitioner has a better right of ownership over the subject property

Applying now the rule on double sale under Article 1544 of the Civil Code, petitioner's right as an innocent
purchaser for value who was able to register his acquisition of the subject property should prevail over
the unregistered sale of the same to the respondent. Article 1544 states:

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. (emphasis supplied)

With that, We find no necessity to belabor on the other issues raised in the petition.

WHEREFORE, premises considered, the Decision dated April 28, 2015 of the Court of Appeals is REVERSED
and SET ASIDE. Accordingly, the Decision dated January 20, 2009 of the Regional Trial Court of Cabanatuan
City, Branch 30, is hereby REINSTATED.
CARMELITA FUDOT v. CATTLEYA LAND, INC.

FACTS:

n July 1992, respondent Cattleya Land, Inc. had someone to check the titles of nine lots it intended to buy
from spouses Tecson. Finding no defect on the titles, Cattleya Land purchased the lots from the Tecsons
through a Deed of Conditional Sale in November 1992, and subsequently, a Deed of Absolute Sale in
October 1993. However, the Register of Deeds refused annotating the sale because of an existing notice
of attachment in the lots. Nonetheless, the attachment was eventually cancelled after Cattleya Land
persuaded the Tecsons to settle it.

In January 1995, Petitioner Fudot presented for registration in the titles a deed of sale purportedly
executed by the Tecsons in her favor on December 1986. Cattleya Land immediately sent a letter of
protest to Fudot’s application. Having learned that the Register of Deed registered the dead of sale of
petitioner and issued a new title in her name, Cattleya Land filed a complaint with the Regional Trial Court.
In intervention, Asuncion Tecson claimed that she never signed any deed of sale covering any part of the
conjugal property in favor of Fudot. The Regional Trial Court ruled that the sale between the Tecsons and
Fudot was invalid because the deed of sale was forged, based on the convincing and unrebutted testimony
of Asuncion. The Court of Appeals dismissed the appeal holding that there was no double sale as the
Tecson-Fudot sale was null and void.

ISSUE: Whether or not Fudot has a better right as the first buyer of the subject property in accordance
with Art. 1455 of the Civil Code on double sale.

RULING:

Petitioner’s arguments, which rest on the assumption that there was a double sale, must fail.

In the first place, there is no double sale to speak of. Art. 1544 of the Civil Code,24 which provides the rule
on double sale, applies only to a situation where the same property is validly sold to different vendees. In
this case, there is only one sale to advert to, that between the spouses Tecson and respondent.

Provision on double sale is not applicable where there is only one valid sale, the previous sale having been
found to be fraudulent.

The trial court declared that the sale between the spouses Tecson and petitioner is invalid, as it bears the
forged signature of Asuncion. Said finding is based on the unrebutted testimony of Asuncion and the trial
court’s visual analysis and comparison of the signatures in her Complaint-in-Intervention and the
purported deed of sale. This finding was upheld by the Court of Appeals, as it ruled that the purported
sale in petitioner’s favor is null and void, taking into account Asuncion’s unrefuted deposition. In
particular, the Court of Appeals noted petitioner’s failure to attend the taking of the oral deposition and
to give written interrogatories. In short, she did not take the necessary steps to rebut Asuncion’s definitive
assertion.

The congruence of the wills of the spouses is essential for the valid disposition of conjugal property.27
Thus, under Article 166 of the Civil Code28 which was still in effect on 19 December 1986 when the deed
of sale was purportedly executed, the husband cannot generally alienate or encumber any real property
of the conjugal partnership without the wife’s consent.
In this case, following Article 17329 of the Civil Code, on 26 June 1995, or eight and a half years (8 ½) after
the purported sale to petitioner, Asuncion filed her Complaint-in-Intervention seeking the nullification
thereof, and while her marriage with Troadio was still subsisting. Both the Court of Appeals and the trial
court found Asuncion’s signature in the deed of sale to have been forged, and consequently, the deed of
sale void for lack of marital consent. We find no reason to disturb the findings of the trial court and the
Court of Appeals. Findings of fact of lower courts are deemed conclusive and binding upon the Supreme
Court subject to certain exceptions,30 none of which are present in this case. Besides, it has long been
recognized in our jurisprudence that a forged deed is a nullity and conveys no title.31

Petitioner argues she has a better right over the property in question, as the holder of and the first one
to present, the owner’s copy of the title for the issuance of a new TCT. The Court is not persuaded.

The act of registration does not validate petitioner’s otherwise void contract. Registration is a mere
ministerial act by which a deed, contract, or instrument is sought to be inscribed in the records of the
Office of the Register of Deeds and annotated at the back of the certificate of title covering the land
subject of the deed, contract, or instrument. While it operates as a notice of the deed, contract, or
instrument to others, it does not add to its validity nor converts an invalid instrument into a valid one as
between the parties,32 nor amounts to a declaration by the state that the instrument is a valid and
subsisting interest in the land.33 The registration of petitioner’s void deed is not an impediment to a
declaration by the courts of its invalidity.

Even assuming that there was double sale in this case, petitioner would still not prevail. The pertinent
portion of Art. 1544 provides:

Art. 1544. x x x.

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.

x x x x.

In interpreting this provision, the Court declared that the governing principle is primus tempore, potior
jure (first in time, stronger in right). Knowledge gained by the first buyer of the second sale cannot defeat
the first buyer’s rights, except where the second buyer registers in good faith the second sale ahead of
the first as provided by the aforequoted provision of the Civil Code. Such knowledge of the first buyer
does not bar him from availing of his rights under the law, among them to register first his purchase as
against the second buyer. However, knowledge gained by the second buyer of the first sale defeats his
rights even if he is first to register the second sale, since such knowledge taints his prior registration with
bad faith.34 It is thus 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.35

We agree with the trial court and the Court of Appeals that respondent was a buyer in good faith, having
purchased the nine (9) lots, including the subject lot, without any notice of a previous sale, but only a
notice of attachment relative to a pending civil case. In fact, in its desire to finally have the title to the
properties transferred in its name, it persuaded the parties in the said case to settle the same so that the
notice of attachment could be cancelled.
Relevant to the discussion are the following provisions of P.D. No. 1529:

Sec. 51. Conveyance and other dealings by registered owner.— An owner of registered land may convey,
mortgage, lease, charge or otherwise deal with the same in accordance with existing laws. He may use
such forms of deeds, mortgages, lease or other voluntary instruments as are sufficient in law. But no deed,
mortgage, lease or other voluntary instrument, except a will purporting to convey or affect registered land
shall take effect as a conveyance or bind the land, but shall operate only as a contract between the parties
and as evidence of authority to the Register of Deeds to make Registration.

The act of registration shall be the operative act to convey or affect the land insofar as third persons are
concerned, and in all cases under this Decree, the registration shall be made in the office of the Register
of Deeds for the province or city where the land lies. (Emphasis supplied)

Sec. 52. Constructive notice upon registration.—Every conveyance, mortgage, lease, lien attachment,
order, judgment, instrument or entry affecting registered land shall, if registered, filed or entered in the
office of the Register of Deeds for the province or city where the land to which it relates lies, be
constructive notice to all persons from the time of such registering, filing or entering.

It has been held that between two transactions concerning the same parcel of land, the registered
transaction prevails over the earlier unregistered right. The act of registration operates to convey and
affect the registered land so that a bona fide purchaser of such land acquires good title as against a prior
transferee, if such prior transfer was unrecorded.36 As found by the courts a quo, respondent was able
to register its purchase ahead of petitioner. It will be recalled that respondent was able to register its
Deed of Conditional Sale with the Register of Deeds as early as 6 November 1992, and its Deed of Absolute
Sale on 14 October 1993. On the other hand, petitioner was able to present for registration her deed of
sale and owner’s copy of the title only on 23 January 1995, or almost nine years after the purported sale.
Why it took petitioner nine (9) years to present the deed and the owner’s copy, she had no credible
explanation; but it is clear that when she finally did, she already had constructive notice of the deed of
sale in respondent’s favor. Without a doubt, respondent had acquired a better title to the
property.1âwphi1

Finally, anent petitioner’s claim that P.D. No. 1529 applies to registered lands or any subsequent sale
thereof, while Art. 1544 of the Civil Code applies only to immovable property not covered by the Torrens
System, suffice it to say that this quandary has already been answered by an eminent former member of
this Court, Justice Jose Vitug, who explained that the registration contemplated under Art. 1544 has been
held to refer to registration under P.D. No. 1529, thus:

The registration contemplated under Art. 1544 has been held to refer to registration under Act 496 Land
Registration Act (now PD 1529) which considers the act of registration as the operative act that binds the
land (see Mediante v. Rosabal, 1 O.G. [12] 900, Garcia v. Rosabal, 73 Phil 694). On lands covered by the
Torrens System, the purchaser acquires such rights and interest as they appear in the certificate of title,
unaffected by any prior lien or encumbrance not noted therein. The purchaser is not required to explore
farther than what the Torrens title, upon its face, indicates. The only exception is where the purchaser
has actual knowledge of a flaw or defect in the title of the seller or of such liens or encumbrances which,
as to him, is equivalent to registration (see Sec. 39, Act 496; Bernales v. IAC, G.R. 75336, 18 October 1988;
Hernandez vs. Sales, 69 Phil 744; Tajonera s. Court of Appeals, L-26677, 27 March 1981) (Emphasis
supplied)37