Carbonell vs.

Court of Appeals, and Poncio 69 SCRA 99 January 1976 FACTS: On January 27, 1955, respondent Jose Poncio executed a private memorandum of sale of his parcel of land with improvements situated in San Juan, Rizal in favor of petitioner Rosario Carbonell who knew that the said property was at that time subject to a mortgage in favor of the Republic Savings Bank (RSB) for the sum of P1,500.00. Four days later, Poncio, in another private memorandum, bound himself to sell the same property for an improved price to one Emma Infante for the sum of P2,357.52, with the latter still assuming the existing mortgage debt in favor of the RSB in the amount of P1,177.48. Thus, in February 2, Poncio executed a formal registerable deed of sale in her (Infante's) favor. So, when the first buyer Carbonell saw the seller Poncio a few days afterwards, bringing the formal deed of sale for the latter's signature and the balance of the agreed cash payment, she was told that he could no longer proceed with formalizing the contract with her (Carbonell) because he had already formalized a sales contract in favor of Infante. To protect her legal rights as the first buyer, Carbonell registered on February 8, 1955 with the Register of Deeds her adverse claim as first buyer entitled to the property. Meanwhile, Infante, the second buyer, was able to register the sale in her favor only on February 12, 1955, so that the transfer certificate of title issued in her name carried the duly annotated adverse claim of Carbonell as the first buyer. The trial court declared the claim of the second buyer Infante to be superior to that of the first buyer Carbonell, a decision which the Court of Appeals reversed. Upon motion for reconsideration, however, Court of Appeals annulled and set aside its first decision and affirmed the trial courts decision. ISSUE: Who has the superior right over the subject property? COURT RULING: The Supreme Court reversed the appellate courts decision and declared the first buyer Carbonell to have the superio r right over the subject property, relying on Article 1544 of the Civil Code. 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 paragraphs, good faith must characterize the prior possession, while under the second paragraph, good faith must characterize the act of anterior registration. 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 to Infante as there was no such sale to Infante then. Hence, Carbonell's prior purchase of the land was made in good faith which did not cease after Poncio told her on January 31, 1955 of his second sale of the same lot to Infante. Carbonell wanted to meet Infante but the latter refused so to protect her legal rights, Carbonell registered her adverse claim on February 8, 1955. Under the circumstances, this recording of Carb onells adverse claim should be deemed to have been done in good faith and should emphasize Infante's bad faith when the latter registered her deed of sale 4 days later.

Dagupan Trading vs. Macam 14 SCRA 99 May 1965 FACTS: Sammy Maron and his seven brothers and sisters were pro-indiviso owners of a parcel of unregistered land located in barrio Parayao, Binmaley, Pangasinan. In 1955, while their application for registration of said land under Act No. 496 was pending, they executed, on June 19 and on September 21, two deeds of sale conveying the property to herein respondent Rustico Macam who thereafter took possession of the property and made substantial improvements upon it. On October 14, 1955, OCT No. 6942 covering the land was issued in the name of the Marons, free from all liens and encumbrances. On August 4, 1956, however, by virtue of a final judgment of the Municipal Court of Manila in a civil case in favor of Manila Trading and Supply Co. (Manila Trading) against Sammy Maron, levy was made upon whatever interest he had in the subject property. Thereafter, said interest was sold at public auction to the judgment creditor Manila Trading. The corresponding notice of levy, certificate of sale and the sheriff's certificate of final sale in favor of Manila Trading - because nobody exercised the right of redemption - were duly registered, and on March 1, 1958, the latter sold all its rights and title in the property to herein petitioner Dagupan Trading Company (Dagupan Trading). On September 4, 1958, Dagupan Trading filed an action against Macam, praying that it be declared owner of one-eighth portion of the subject property. The CFI of Pangasinan dismissed the said complaint, and the Court of Appeals affirmed its decision. ISSUE: Who has the superior right over the one-eight portion of the subject property?

COURT RULING: The Supreme Court likewise affirmed both decisions of the lower courts. At the time of the levy, Sammy Maron already had no interest on the one-eight portion of the property he and his siblings have inherited because for a considerable time prior to the levy, said interest had already been conveyed upon Macam "fully and irretrievably" - as the Court of Appeals held. Consequently, the 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. The unregistered sale and the consequent conveyance of title and ownership in favor Macam could not have been cancelled and rendered of no effect upon the subsequent issuance of the Torrens title over the entire parcel of land. Moreover, upon the execution of the deed of sale in his favor by Sammy Maron, Macam had immediately taken possession of the land conveyed as its new owner and introduced considerable improvements upon it himself. To deprive him, therefore, of the same by sheer force of technicality would be against both justice and equity.

DAVID VS BANDIN G.R. No. L-48322 April 8, 1987 FACTS: During their lifetime, the spouses Juan Ramos and Fortunate Calibo, were the owners of two parcels of land; the Talon Property and Laong property. Both spouses died intestate, leaving as heirs two legitimate children, Candida and Victoriana Ramos, and grand-daughter, Agapita Ramos, daughter of their deceased Sora Anastacio. Candida and Victoriana died intestate on February 16, 1955 and December 12, 1931, respectively. Candida Ramos; her niece, Agapita Ramos; and her nephew, Eulogio Bandin, sold a portion of the Talon property to the spouses Rufino 0. Miranda and Natividad Guinto. This portion was divided into three lots. Parcel 1 was subsequently sold to Narciso Velasquez and Albino Miranda. Parcels 2 and 3 were subsequently sold to Jose Ramirez and Sotero Ramirez, respectively, who registered these properties and obtained OCT Nos. 2027 and 2029 in the irrespective names. The remaining portion of the Talon property was extrajudicially partitioned on September17, 1955 among the heirs of Candida Ramos and was subdivided in seven lots. Lot 5 was given to Victoria Martin, who was able to register the land and was issued OCT No. 3706. Lot 6 was given to Maximina Martin, who also was able to register the land and was issued OCT No. 3707. A portion of these lots were subsequently sold to Magno de la Cruz who was able to obtain TCT. 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. On January21, 1965, the Venturanzas, in a deed of sale also signed by Juanita Martin, conveyed a portion of the property to the spouses Felipe and Antonia David. Juanita Martin was able to register the property in her name and was issued OCT No. 8916 on July 1, 1971.On June 14, 1963, respondents, who were the heirs of Victoriana except for Agapita, filed a complaint for the recovery and partition of property. 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 ingood faith for value. Not satisfied with the decision, both plaintiffs and defendants appealed to the Court of Appeals which nullified the transfers made to the defendants who were declared by the trial court as purchasers in good faith. ISSUES: 1. Whether or not private respondents' claim is barred by prescription 2. Whether or not petitioners were buyers in good faith HELD: 1. No. Respondents claim is not barred by laches and prescription since it was not shown that they 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. 2. G.R. No. L-48322: Petitioners Felipe David and Antonia G. David were buyers in bad faith. They 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. G.R. No. L-49867: The court held that petitioners Jose Ramirez and the heirs of Ambrocia P. Vda. de Ramirez (widow of 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. 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. In the instant case, what petitioners bought were unregistered lands. G.R. No. L-49712: Petitioner Magno de la Cruz was a purchaser in good faith. 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 cannot be nullified and cancelled.

Olivares vs Gonzales 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. Mario Guarina III for petitioners-appellants. Enrique Arguelles for 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.

Caram vs. Laureta G.R. No. L-28740 FACTS: On June 10, 1945, Marcos Mata conveyed a large tract of agricultural land covered by OCT 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. Since June 10, 1945, the plaintiff Laureta had been and is 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. On May 5, 1947, the same land covered by OCT 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 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. The defendant Fermin Caram Jr. claimed that he has no knowledge or information about the previous encumbrances, transactions, and alienations in favor of plaintiff until the filing of the complaints.

ISSUE: Whether or not the knowledge petitioner of a prior unregistered sale of a titled property attributable to petitioner and equivalent in law of registration of sale. HELD: Yes. 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. Since Caram was a registrant in bad faith, the situation is as if there was no registration at all. 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. 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. 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.

Cruz vs. Cabaa 129 SCRA 656 FACTS: In June 1965, respondent Leodegaria Cabaa sold the subject property to respondent spouses Teofilo Legaspi and Iluminada Cabaa (spouses Legaspi) under their contract entitled Bilihang Muling Mabibili which stipulated that Cabaa c an repurchase the land within one year from December 31, 1966. The said land was not repurchased, however, so the spouses Legaspi took possession of the said property. Later, Cabaa requested that the land title be lent to her in order to mortgage the property to the Philippine National Bank (PNB), to which the spouses Legaspi yielded. On October 21, 1968, Cabaa formally sold the land to spouses Legaspi by way of an absolute sale. The spouses Legaspi then attempted to register the deed of sale, but failed because they could not present the owner's duplicate of title which was still in the possession of the PNB as mortgage. Subsequently, they were able to register the document of sale on May 13, 1969 under Primary Entry No. 210113 of the Register of Deeds of Quezon Province. On November 29, 1968, Cabaa sold the same property to herein petitioner Abelardo Cruz (now deceased), who, in turn, tried to register the deed of sale on September 3, 1970. However, he was informed that Cabaa had already sold the property to the spouses Legaspi, so he was only able to register the land in his name on February 9, 1971. The CFI of Quezon Province declared the spouses Legaspi as the true and rightful owners of the subject property and the land title that Cruz had acquired as null and void. The Court of Appeals affirmed said decision, but ordered Cabaa reimburse to Cruz's heirs the amounts of P2,352.50, which the late petitioner Abelardo Cruz paid to PNB to discharge the mortgage obligation of Cabaa in favor of said bank, and the amount 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. ISSUE: Who is the rightful owner of the subject property? COURT RULING: The Supreme Court affirmed the decision of the appellate court with modification ordering and sentencing respondent Leodegaria Cabaa to reimburse and pay to petitioner's heirs the total sum of P5,750.00. There is no question that spouses Legaspi 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 Abelardo Cruz was the second buyer under a deed of sale dated November 29, 1968, which to ail indications, contrary to the text, was a sale with right of repurchase for ninety (90) days. There is no question, either, that spouses Legaspi were the first and the only ones to be in possession of the subject property. The knowledge of the first sale Abelardo Cruz had gained 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. 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." Cruz vs Cabana FACTS: On June 1, 1965, defendant Leodegaria Cabana sold a parcel of land with right of repurchase to defendants-spouses Teofilo Legaspi and Iluminada Cabana. A document Bilihang Muling Mabibili stipulated that the land can be repurchased by the vendor within one year from December 31, 1966. 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 PN8. On October 21, 1968, defendant Leodegaria Cabana sold the land by way of absolute sale to the defendants-spouses. However, on November 29, 1968, defendant sold the same property to plaintiff Abelardo Cruz and the latter was able to register it in his name. While the title was registered in plaintiff-appellant Cruzs name on February 9, 1971, he knew of the sale of the land to defendants spouses Legaspi, as he was informed in the Office of the Register of Deed of Quezon. ISSUE: Whether or not, the second buyer Cruz, being the first to register the land creates right as against the first buyer, notwithstanding his knowledge of the previous sale. HELD: No. Said respondent spouses were likewise the first to register the sale with the 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 sellers duplicate certificate was still with the bank. But there is n o 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 respondents spouses., 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.

Valdez vs CA G.R. No. 85082 February 25, 1991 SPOUSES PASTOR VALDEZ and VIRGINIA vs. HONORABLE COURT OF APPEALS AND FELICIDAD VIERNES, FRANCISCO ANTE, AND ANTONIO ANTE,respondents. Sumulong Law Offices for petitioners. Antonio A. Ante for respondents Ante. Jose A. Rico for respondent Viernes. 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

VALDEZ, petitioners,

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 7 with 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: 1. 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? 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: 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 9

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 12 Felicidad Viernes. 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. 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 14 superior right to the property in question as against respondent Viernes. 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 16 that the branch clerk of court issued the corresponding subpoena. Thus, 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 17 TCT to petitioners on September 30, 1983 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:

13

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.

Nuguid vs CA 171 SCRA 213, G.R. No. 77423 March 13, 1989 FACTS: The deceased spouses Victorino and Crisanta dela Rosa were the registered owners of a parcel of land situated in Bataan, and covered by OCT. Victorino dela Rosa (widowed by then) sold one half of the said property to Juliana Salazar for P 95.00. This sale was not registered. Immediately after the sale, Juliana Salazar constructed a house on the lot she purchased. Petitioner spouses caused the registration of a document entitled Kasulatan ng Partihan at Bilihan. In this document, Marciana dela Rosa, 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 for the sum of P300.00. Subsequently, the OCT was cancelled by the Register of Deeds, and TCT was issued in the names of the petitioners. The private respondents claim that the document is a forged deed. The petitioners assert that the land subject of this case was offered to them for sale by Nicolas dela Rosa who then claimed that he had already purchased the shares of the heirs over the subject property as evidenced by a private document entitled Kasunduan. The RTC dismissed the complaint filed b y the private respondents, but on appeal, this was reversed by the Court of Appeals. Hence, this petition. ISSUE: Whether or not the subsequent sale is valid, the petitioner spouses being purchasers in good faith. HELD: Yes.The Original Certificate of Title No. 3778 covering the entire property was clean and free from any annotation of an encumbrance, 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, precjsely, 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. 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 purc hase 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 courts 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 onehalf of the property as this was their arrangement with the previous owners-to which request the petitioners acceded. 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-in-interest, 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.

Radiowealth Finance Co. vs. Palileo 197 SCRA 245 May 1991 FACTS: In April 1970, defendant spouses Enrique Castro and Herminio R. Castro (spouse Castro) sold to herein respondent Manuelito Palileo a parcel of unregistered coconut land in Surigao del Norte. The sale is evidenced by a notarized Deed of Absolute Sale, but 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, Palileo who was then employed in Lianga, Surigao del Sur, exercised acts of ownership over the land through his mother Rafaela Palileo, as administratrix or overseer. Manuelito Palileo has continuously paid the real estate taxes on said land from 1971 until the present. In November 1976, the CFI of Manila rendered a judgment was rendered against defendant Enrique T. Castro to pay herein petitioner Radiowealth Finance Company (Radiowealth), the sum of P22,350.35 with interest rate of 16% per annum from November 2, 1975 until fully paid, and upon the finality of the judgment, a writ of execution was issued. The 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 Palileo in 1970. The said Provincial Sheriff executed a certificate of sale was by the in favor of Radiowealth as the only bidder, and upon expiration of the redemption period, she also executed a deed of final sale. Both documents were registered with the Registry of Deeds. Learning of what happened to the land, Palileo filed an action for recovery of the subject property. The court a quo rendered a decision in favor of Palileo, which the Court of Appeals affirmed. ISSUE: Who is the rightful owner of the subject property? COURT RULING: The Supreme Court likewise affirmed the appellate courts decision on this case. There is no doubt that had the subject prope rty been a registered land, this case would have been decided in favor of Radiowealth since it was the company that had its claim first recorded in the Registry of Deeds for it is the act of registration that operates to convey and affect registered land. Therefore, a bonafide purchaser of a registered land at an execution sale acquires a good title as against a prior transferee, if such transfer was unrecorded. However, a different set of rules applies in the case at bar which deals with a parcel of unregistered land. Under Act No. 3344, registration of instruments affecting unregistered lands is "without prejudice to a third party with a better right." The aforequoted phrase has been held by the Supreme 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. 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. RADIOWEALTH V. PALILEO (May 20, 1991) FACTS: Spouses Castro sold a parcel of unregistered coconut land in Surigao del Norte to Manuelito Palileo. The sale is evidenced by a notarized deed of sale and Palileo exercised acts of ownership through his mother and also paid real estate taxes.

Meanwhile, a judgment over a civil case was rendered agains Enriqur Castro ordering him to pay 22K to Radiowealth Finance Co. Pursuant to this, the provincial sheriff levied upon and sold in public auction the subject land that was previously sold to Palileo. A certificate of sale was issued in favor of Radiowealth being the lone bidder and after the expiration of the period of redemption, a deed of final sale was also executed in their favor and both deeds was registered to the Registry of Deeds. ISSUE: WON the sale in public auction is valid. HELD: Had Art.1544 been applied, the judgment should be rendered in favor of Radiowealth being the one who registered the land first. But since the subject land is an unregistered land, a different rule should apply. Under Act.3344 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. Article 1544 of the Civil Code has no application to land not registered under the torrens system. 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. As such, 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.

TAEDO V. CA (January 22, 1996) FACTS: Lazaro Taedo executed a deed of absolute sale in favor of Ricardo Taedo and Teresita Barrera in which he conveyed a parcel of land which he will inherit. Upon the death of his father he executed an affidavit of conformity to reaffirm the said sale. He also executed another deed of sale in favor of the spouses covering the parcel of land he already inherited. Ricardo registered the last deed of sale in the registry of deeds in their favor. Ricardo later learned that Lazaro sold the same property to his children through a deed of sale. ISSUE: WON the Taedo spouses have a better right over the property against the children of Lazaro Taedo. HELD: Since a future inheritance generally cannot be a subject of a contract, the deed of sale and the affidavit of conformity made by Lazaro has no effect. The subject of dispute therefore is the deed of sale made by him in favor of spouses Taedo and another to his children after he already legally acquired the 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.

OCCENA VS ESPONILLA 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. DECISION 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 1 heirs executed a Deed of Pacto de Retro Sale 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 Affidavit 3 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 Settlement4 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 Estate5 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 Albe rta 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 6 Alberta Morales. A Deed of Absolute Sale 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 unaw are 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 forP100,000.00 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 purcha sed 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 herebyREVERSED and 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 defendantsappellees 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 10 title of the property sold. The defense of indefeasibility of a Torrens title does not extend to a transferee who takes the certificate of title in bad 11 faith, with notice of a flaw. 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 a freedom 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 13 property. 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 va lue 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 petitioner-spouses.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 petitioner -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 21 the property regardless of the lapse of time. 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.