Express Credit v Velasco| 2005|Quisumbing, J.

| | by Jasper required of banks and financing

companies, to ascertain whether the
FACTS: property being offered as security for the
● The Velasco spouses bought a parcel of land in debt has already been sold to another to
Diliman, QC from the Garcia spouses. Since the prevent injury to prior innocent buyers.
house on the property was still under construction, They also have the resources to ascertain
the lot was still covered by the mother title and had any encumbrances over the properties
no separate title yet. The sellers promised to give they are dealing with.
the title after the construction was completed. e. The caretaker of the house already told
● The spouses Velasco moved in and had applied for the investigators that the house was
telephone connection and insurance. However, already sold to the Velasco spouses. A
they still haven’t received the title from the spouses purchaser cannot close his eyes to facts
Garcia despite repeated demands. Thus, they went which should put a reasonable man upon
to the Register of Deeds in QC and found out that his guard and claim that he acted in good
the property has been mortgaged to Express Credit faith under the belief that there was no
Financing one year after the Garcia spouses sold the defect in the title of the vendor.
house to them. RULING: WHEREFORE, the assailed Decision dated August
● The Velascos filed a case for Quieting of Title. A 20, 2002 and Resolution dated November 12, 2002 of the
notice of lis pendens was attached to the title. Court of Appeals in CA-G.R. CV No. 56491 are AFFIRMED.
However, despite this notice and writ of preliminary SO ORDERED.
injunction, Express Credit still foreclosed the
property and bought it in a public auction as the
highest bidder. Thereafter, it secured a certificate
of title in its own name.
● RTC: Ruled that Express Credit is a purchaser in
good faith. The purchaser is not required to go
beyond the certificate of title. However, Express
Credit should reimburse the spouses Velasco for
the amount spent in purchasing the house.
● CA: Reversed the RTC ruling.
ISSUES/RATIO:
1. Whether Express Credit has a preferential right over
the property for being a purchaser in good faith and
for registering the property first – No
a. This is a case of double sale under Art.
1544. However, the rules provided in the
that article only applies to purchasers in
good faith. Express Credit is not a
purchaser in good faith.
b. Express Credit justifies its acquisition of
the property by saying that when it was
mortgaged, the previous sale of the land
was not annotated on the title and so its
purchase was in good faith. It is true that a
person dealing with the owner of
registered land is not bound to go beyond
the certificate of title. He may rely on the
notices of the encumbrances on the
property annotated on the certificate of
title or absence of any annotation.
c.
d. However, we note that the Garcia spouses
are unlike other mortgagors. They are in
the business of constructing and selling
townhouses and are past masters in real
estate transactions. Further, petitioner is
in the business of extending credit to the
public, including real estate loans. In both
these businesses, it devolves upon both,
greater charge than ordinary buyers or
encumbrancers for value, who are not in
such venture. It is standard in their
business, as a matter of due diligence