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 court’s
decision.

ISSUE:Who has the superior right over the subject property?

COURT RULING:
The Supreme Court reversed the appellate court’s decision and declared the first buyer Carbonell to
have the superior 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
Carbonell’s 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 vs. MACAM
FACTS:

 Sammy Maron and his seven brothers and sisters were pro-indiviso owners of a parcel of
unregistered land located in Pangasinan. Pending their application for registration of said land
under Act No. 496, they executed two deeds of sale conveying the property to Macam, who took
possession and introduced substantial improvements to it. One month later an OCT was issued in
the name of the Maron's, free from all liens and encumbrances.
 By virtue of a final judgment rendered in a civil case of the MTC of Manila against Maron in favor
of the Manila Trading and Supply Company, levy was made upon whatever interest he had in the
property. The interest was sold at public auction to the judgment creditor. The corresponding
notice of levy, certificate of sale and the Sheriff's certificate of final sale in favor of the Manila
Trading and Supply Co. — because nobody exercised the right of redemptions — were duly
registered. Manila Trading and Supply company sold all its rights and title to the property to
Dagupan.

ISSUE: Who has the better right as between Dagupan Trading Company, and Rustico Macam to the
one-eighth share of Sammy Maron in the subject property?

HELD: Dagupan

RATIO:
 If the property were unregistered land, Macam would have the better right because his claim
would then be based on a prior sale coupled with public, exclusive and continuous possession as
owner.
 If the property were registered land, Dagupan would have a better right. The Court consistently
held that in case of conveyance of registered real estate, the registration of the deed of sale is the
operative act that gives validity to the transfer.
 The deeds of sale executed in Macam’s favor were not registered while the levy in execution and
the provisional certificate of sale as well as the final deed of sale in favor of Dagupan were
registered.
 Consequently, this registered conveyance must prevail although posterior to the one executed in
favor of Macam, and Dagupan must be deemed to have acquired such right, title and interest as
appeared on the certificate of title issued in favor of Sammy Maron, subject to no lien,
encumbrance or burden not noted thereon.
 The present case, however, does not fall within either, situation. Here, the sale in favor of
Macam was executed before the subject land was registered, while the conflicting sale in favor of
Dagupan was executed after the same property had been registered.
 Section 35, Rule 39 of the Rules of Court: Upon the execution and delivery of the final certificate
of sale in favor of the purchaser of land sold in an execution sale, such purchaser "shall be
substituted to and acquire all the right, title, interest and claim of the judgment debtor to the
property as of the time of the levy.
 At the time of the levy, Maron had no interest and claim on the 1/8 portion of the property
inherited by him and his co-heirs because for a considerable time prior to the levy, his interest had
already been conveyed to Macam. Consequently, subsequent levy made on the property for the
purpose of satisfying the judgment rendered against Sammy Maron in favor of the Manila Trading
Company was void and of no effect.
 The unregistered sale and the consequent conveyance of title and ownership in favor of 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.
 To quote the CA decision:
... . Separate and apart from this however, we believe that in the inevitable conflict between a right of
ownership already fixed and established under the Civil Law and/or the Spanish Mortgage Law — which
cannot be affected by any subsequent levy or attachment or execution — and a new law or system which
would make possible the overthrowing of such ownership on admittedly artificial and technical grounds,
the former must be upheld and applied.
 As stated, upon the execution of the deed of sale in his favor by Maron, Macam took possession of
the land as owner, and introduced considerable improvement. To deprive him now of the same by
sheer force of technicality would be against both justice and equity.
OLIVARES V GONZALES -Knowledge by the first buyer of the second sale cannot defeat the first
buyer’s rights except when the second buyer first registers in good faith the second sale.

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

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.
Caram vs. Laureta

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 V. CABANA

Leodegaria Cabana sold his real propery first to Teofilo Legaspi and Illuminada Cabana and then later to
Abelardo Cruz.

Legaspi and Cabana were able to take possession of the property but they were not able to register the
deed of absolute sale because the property was still mortgaged to PNB. They however were able to
register with the RD the sale with the right to repurchase. On the other hand, Cruz succeeded to register
the deed of absolute sale in his favor.

HELD:
Even though Cruz was the first to register the deed of absolute sale, he cannot be given a better right
over the property because he was a buyer in bad faith.

Cruz knew the prior sale of the property because he was informed by the RD that Legazpi and Cabana
already registered the sale of the said property. 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.
Cruz vs. Cabaña

FACTS:
In June 1965, respondent Leodegaria Cabaña sold the subject property to respondent spouses Teofilo
Legaspi and Iluminada Cabaña (spouses Legaspi) under their contract entitled “Bilihang Muling Mabibili”
which stipulated that Cabaña can 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, Cabaña 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, Cabaña
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, Cabaña 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 Cabaña 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 Cabaña 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 Cabaña 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 Cabaña 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

Valdez vs. CA

Facts: Spouses Valdez are the registered owner of a piece of residential lot located in Antipolo Rizal
which they acquired by virtue of sales contract. The respondents Fabella occupied the said lot by
building their house in the said lot thereby depriving the plaintiff’s rightful possession. Several times, the
plaintiffs orally asked the defendants to peacefully surrender the premises to them, but they refused to
vacate the lot they unlawfully occupied.
Because the unfounded refusal on the part of the private respondents, the Brgy. Capt. Was
forced to issue the issue the necessary certificate to file action. The petitioners filed a complaint for
unlawful detainer before the MTC. The MTC rendered a decision in favor of the petitioners spouses
Valdez. Private respondents appealed to the RTC in which the RTC affirmed in toto the decision of the
MTC. Thereafter, they appealed to the CA. the CA of appeals reversed the decision of the RTC. It held
that for spouse Valdes, the petitioners failed to make a case for unlawful detainer because they failed to
show that they had given the private respondents the right to occupy the premises or that they have
tolerated private respondents’ possession of the same, which is a requirement in unlawful detainer
cases. It added that the allegations in petitioners’ complaint lack jurisdictional elements for forcible
entry which requires an allegation or prior material possession.
Thus, this petitioner for review.

Issue: 1. Whether or not the allegations of the complaint clearly made out a case of unlawful detainer
2. Whether or not the MTC has the original jurisdiction over the case

Ruling: The petition is denied and the judgment of CA that the MTC for lack of jurisdiction is affirmed.
The Supreme Court held that: it is the nature of defendant’s entry into the land which
determines the cause of action, whether it is forcible entry or unlawful detainer. If the entry is illegal,
then the action which may be filed against the intruder if forcible entry. If, however, the entry is legal
but the possession thereafter becomes illegal, the case is unlawful detainer. Petitioners alleged in their
complaint that they inherited the property from their parents; that possession thereof by private
respondent was by tolerance of their mother, and after her death by their own tolerance. It is settled
that one whose stay is merely tolerated becomes a deforciant illegally occupying the land the moment
he is required to leave. It is essential in unlawful detainer cases of this kind, that plaintiff’s supposed acts
of tolerance must have been present right from the right from the start of the possession which is later
sought to be recovered. This is where the petitioners’ cause of action fails.
The evidence revealed that the possession of defendant was illegal at the inception and not
merely tolerated as alleged in the complaint, considering that defendant started to occupy the subject
lot and then built a house thereon without the permission and consent of petitioners and before them,
their mother. Clearly, defendant’s entry in to the land was effected clandestinely, without the
knowledge of the owner, consequently, it is categorized as possession by stealth which is forcible entry.
 In the instant case, the allegations in the complaint do not contain any averment of fact that
would substantiate petitioners’ claim they permitted or tolerated the occupation or the property by
respondents. The complaint contains only bare allegations that respondents without any color of title
whatsoever occupies the land in question by building their house in the said land thereby depriving
petitioners the possession thereof. Since the complaint did not satisfy the jurisdictional requirement of a
valid cause for unlawful detainer, the MTC had no jurisdiction over the case.

Nuguid vs. Court of Appeals, and Guevarra

The deceased spouses Victorino and Crisanta dela Rosa (spouses dela Rosa) were registered owners of a
parcel of land in Orani, Bataan, and covered by OCT No. 3778. On or about May 4, 1931, Victorino dela
Rosa (widowed by then) sold one-half of the said property to Juliana Salazar for P95.00. This sale
between him and Salazar, though evidenced by a document, was not registered. Nevertheless, Juliana
Salazar constructed a house on the lot she purchased immediately after the sale. On March 10, 1964,
petitioner spouses Diosdado Nuguid and Marqiueta Venegas (spouses Nuguid) caused the registration of
a document entitled "Kasulatan ng Partihan at Bilihan" (Kasulatan) dated June 6, 1961. In this
document, Marciana dela Rosa, together with the heirs of Victorino and Crisanta dela Rosa, sold to
spouses Nuguid the entire area of the property for the sum of P300.00. Subsequently, OCT No. 3778
was cancelled by the Register of Deeds of Bataan, and TCT No. T-12782 was issued in the spouses
Nuguid’s names.

Private respondents claimed that the presented by spouses Nuguid was forged. They also allegedly
discovered the forged deed as well as the certificate of title in the name of the petitioners much later,
that is, on February 28, 1978, when respondents Amorita Guevarra and Teresita Guevarra thought of
having the title of their grandmother Juliana Salazar, registered. On the other hand, spouse Nuguid
assert that in the latter part of 1960, Nicolas dela Rosa, uncle of respondent Marciana dela Rosa and
grandfather of the other heirs-signatories, offered to sell the subject land to them. Apparently, Nicolas
dela Rosa claimed that he had already purchased the shares of the heirs over the subject property as
evidenced by a private document entitled "Kasunduan" (Kasunduan) dated August 31, 1955, and as a
matter of fact, he had in his possession the original certificate of title covering the property in the
name of the deceased Victorino and Crisanta dela Rosa.

The CFI of Bataan dismissed the complaint filed by private respondents, but the Court of Appeals
reversed said decision and ordered the spouses Nuguid to execute a deed of reconveyance in favor of
herein respondents.

ISSUE: Who is the rightful owner of the subject property?

The Supreme Court reinstated the decision of the CFI of Bataan. The basis for the Court of Appeals'
conclusion that petitioners were buyers in bad faith is ambiguous because said court relied on the
singular circumstance that the petitioners are from Orani, Bataan, and should have personally known
that the private respondents were the persons in actual possession. However, at the time of the
purchase, the spouses Nuguid dealt with Pedro Guevarra and Pascuala Tolentino, the latter being the
actual occupants. The respondents Guevarras, children of the said Pedro and Pascuala Guevarra, came
into the picture only after their parents died. As for the respondent heirs of Victorino dela Rosa, their
being in actual possession of any portion of the property was, likewise, simply presumed or taken for
granted by the Court of Appeals.

The private respondents cannot also honestly claim that they became aware of the spouses Nuguid’s
title only in 1978, because ever since the latter bought the property in 1961, the spouse Nuguid have
occupied the same openly, publicly, and continuously in the concept of owners, even building their
house thereon. For seventeen years they were in peaceful possession, with the respondents Guevarras
occupying less than one-half of the same property.
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.

Radiowealth Finance Co. vs. Palileo

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?

The Supreme Court likewise affirmed the appellate court’s decision on this case. There is no doubt that
had the subject property 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.
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 court’s
decision.

ISSUE:Who has the superior right over the subject property?

COURT RULING:
The Supreme Court reversed the appellate court’s decision and declared the first buyer Carbonell to
have the superior 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
Carbonell’s 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 vs. MACAM

FACTS:

 Sammy Maron and his seven brothers and sisters were pro-indiviso owners of a parcel of
unregistered land located in Pangasinan. Pending their application for registration of said land
under Act No. 496, they executed two deeds of sale conveying the property to Macam, who took
possession and introduced substantial improvements to it. One month later an OCT was issued in
the name of the Maron's, free from all liens and encumbrances.
 By virtue of a final judgment rendered in a civil case of the MTC of Manila against Maron in favor
of the Manila Trading and Supply Company, levy was made upon whatever interest he had in the
property. The interest was sold at public auction to the judgment creditor. The corresponding
notice of levy, certificate of sale and the Sheriff's certificate of final sale in favor of the Manila
Trading and Supply Co. — because nobody exercised the right of redemptions — were duly
registered. Manila Trading and Supply company sold all its rights and title to the property to
Dagupan.

ISSUE: Who has the better right as between Dagupan Trading Company, and Rustico Macam to the
one-eighth share of Sammy Maron in the subject property?

HELD: Dagupan

RATIO:
 If the property were unregistered land, Macam would have the better right because his claim
would then be based on a prior sale coupled with public, exclusive and continuous possession as
owner.
 If the property were registered land, Dagupan would have a better right. The Court consistently
held that in case of conveyance of registered real estate, the registration of the deed of sale is the
operative act that gives validity to the transfer.
 The deeds of sale executed in Macam’s favor were not registered while the levy in execution and
the provisional certificate of sale as well as the final deed of sale in favor of Dagupan were
registered.
 Consequently, this registered conveyance must prevail although posterior to the one executed in
favor of Macam, and Dagupan must be deemed to have acquired such right, title and interest as
appeared on the certificate of title issued in favor of Sammy Maron, subject to no lien,
encumbrance or burden not noted thereon.
 The present case, however, does not fall within either, situation. Here, the sale in favor of
Macam was executed before the subject land was registered, while the conflicting sale in favor of
Dagupan was executed after the same property had been registered.
 Section 35, Rule 39 of the Rules of Court: Upon the execution and delivery of the final certificate
of sale in favor of the purchaser of land sold in an execution sale, such purchaser "shall be
substituted to and acquire all the right, title, interest and claim of the judgment debtor to the
property as of the time of the levy.
 At the time of the levy, Maron had no interest and claim on the 1/8 portion of the property
inherited by him and his co-heirs because for a considerable time prior to the levy, his interest had
already been conveyed to Macam. Consequently, subsequent levy made on the property for the
purpose of satisfying the judgment rendered against Sammy Maron in favor of the Manila Trading
Company was void and of no effect.
 The unregistered sale and the consequent conveyance of title and ownership in favor of 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.
 To quote the CA decision:
... . Separate and apart from this however, we believe that in the inevitable conflict between a right of
ownership already fixed and established under the Civil Law and/or the Spanish Mortgage Law — which
cannot be affected by any subsequent levy or attachment or execution — and a new law or system which
would make possible the overthrowing of such ownership on admittedly artificial and technical grounds,
the former must be upheld and applied.
 As stated, upon the execution of the deed of sale in his favor by Maron, Macam took possession of
the land as owner, and introduced considerable improvement. To deprive him now of the same by
sheer force of technicality would be against both justice and equity.
OLIVARES V GONZALES -Knowledge by the first buyer of the second sale cannot defeat the first
buyer’s rights except when the second buyer first registers in good faith the second sale.

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

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.

Caram vs. Laureta

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 V. CABANA

Leodegaria Cabana sold his real propery first to Teofilo Legaspi and Illuminada Cabana and then later to
Abelardo Cruz.

Legaspi and Cabana were able to take possession of the property but they were not able to register the
deed of absolute sale because the property was still mortgaged to PNB. They however were able to
register with the RD the sale with the right to repurchase. On the other hand, Cruz succeeded to register
the deed of absolute sale in his favor.

HELD:
Even though Cruz was the first to register the deed of absolute sale, he cannot be given a better right
over the property because he was a buyer in bad faith.

Cruz knew the prior sale of the property because he was informed by the RD that Legazpi and Cabana
already registered the sale of the said property. 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.
Cruz vs. Cabaña

FACTS:
In June 1965, respondent Leodegaria Cabaña sold the subject property to respondent spouses Teofilo
Legaspi and Iluminada Cabaña (spouses Legaspi) under their contract entitled “Bilihang Muling Mabibili”
which stipulated that Cabaña can 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, Cabaña 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, Cabaña
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, Cabaña 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 Cabaña 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 Cabaña 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 Cabaña 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 Cabaña 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

Valdez vs. CA

Facts: Spouses Valdez are the registered owner of a piece of residential lot located in Antipolo Rizal
which they acquired by virtue of sales contract. The respondents Fabella occupied the said lot by
building their house in the said lot thereby depriving the plaintiff’s rightful possession. Several times, the
plaintiffs orally asked the defendants to peacefully surrender the premises to them, but they refused to
vacate the lot they unlawfully occupied.
Because the unfounded refusal on the part of the private respondents, the Brgy. Capt. Was
forced to issue the issue the necessary certificate to file action. The petitioners filed a complaint for
unlawful detainer before the MTC. The MTC rendered a decision in favor of the petitioners spouses
Valdez. Private respondents appealed to the RTC in which the RTC affirmed in toto the decision of the
MTC. Thereafter, they appealed to the CA. the CA of appeals reversed the decision of the RTC. It held
that for spouse Valdes, the petitioners failed to make a case for unlawful detainer because they failed to
show that they had given the private respondents the right to occupy the premises or that they have
tolerated private respondents’ possession of the same, which is a requirement in unlawful detainer
cases. It added that the allegations in petitioners’ complaint lack jurisdictional elements for forcible
entry which requires an allegation or prior material possession.
Thus, this petitioner for review.
Issue: 1. Whether or not the allegations of the complaint clearly made out a case of unlawful detainer
2. Whether or not the MTC has the original jurisdiction over the case

Ruling: The petition is denied and the judgment of CA that the MTC for lack of jurisdiction is affirmed.
The Supreme Court held that: it is the nature of defendant’s entry into the land which
determines the cause of action, whether it is forcible entry or unlawful detainer. If the entry is illegal,
then the action which may be filed against the intruder if forcible entry. If, however, the entry is legal
but the possession thereafter becomes illegal, the case is unlawful detainer. Petitioners alleged in their
complaint that they inherited the property from their parents; that possession thereof by private
respondent was by tolerance of their mother, and after her death by their own tolerance. It is settled
that one whose stay is merely tolerated becomes a deforciant illegally occupying the land the moment
he is required to leave. It is essential in unlawful detainer cases of this kind, that plaintiff’s supposed acts
of tolerance must have been present right from the right from the start of the possession which is later
sought to be recovered. This is where the petitioners’ cause of action fails.
The evidence revealed that the possession of defendant was illegal at the inception and not
merely tolerated as alleged in the complaint, considering that defendant started to occupy the subject
lot and then built a house thereon without the permission and consent of petitioners and before them,
their mother. Clearly, defendant’s entry in to the land was effected clandestinely, without the
knowledge of the owner, consequently, it is categorized as possession by stealth which is forcible entry.
In the instant case, the allegations in the complaint do not contain any averment of fact that
would substantiate petitioners’ claim they permitted or tolerated the occupation or the property by
respondents. The complaint contains only bare allegations that respondents without any color of title
whatsoever occupies the land in question by building their house in the said land thereby depriving
petitioners the possession thereof. Since the complaint did not satisfy the jurisdictional requirement of a
valid cause for unlawful detainer, the MTC had no jurisdiction over the case.

Nuguid vs. Court of Appeals, and Guevarra

The deceased spouses Victorino and Crisanta dela Rosa (spouses dela Rosa) were registered owners of a
parcel of land in Orani, Bataan, and covered by OCT No. 3778. On or about May 4, 1931, Victorino dela
Rosa (widowed by then) sold one-half of the said property to Juliana Salazar for P95.00. This sale
between him and Salazar, though evidenced by a document, was not registered. Nevertheless, Juliana
Salazar constructed a house on the lot she purchased immediately after the sale. On March 10, 1964,
petitioner spouses Diosdado Nuguid and Marqiueta Venegas (spouses Nuguid) caused the registration of
a document entitled "Kasulatan ng Partihan at Bilihan" (Kasulatan) dated June 6, 1961. In this
document, Marciana dela Rosa, together with the heirs of Victorino and Crisanta dela Rosa, sold to
spouses Nuguid the entire area of the property for the sum of P300.00. Subsequently, OCT No. 3778
was cancelled by the Register of Deeds of Bataan, and TCT No. T-12782 was issued in the spouses
Nuguid’s names.

Private respondents claimed that the presented by spouses Nuguid was forged. They also allegedly
discovered the forged deed as well as the certificate of title in the name of the petitioners much later,
that is, on February 28, 1978, when respondents Amorita Guevarra and Teresita Guevarra thought of
having the title of their grandmother Juliana Salazar, registered. On the other hand, spouse Nuguid
assert that in the latter part of 1960, Nicolas dela Rosa, uncle of respondent Marciana dela Rosa and
grandfather of the other heirs-signatories, offered to sell the subject land to them. Apparently, Nicolas
dela Rosa claimed that he had already purchased the shares of the heirs over the subject property as
evidenced by a private document entitled "Kasunduan" (Kasunduan) dated August 31, 1955, and as a
matter of fact, he had in his possession the original certificate of title covering the property in the
name of the deceased Victorino and Crisanta dela Rosa.
The CFI of Bataan dismissed the complaint filed by private respondents, but the Court of Appeals
reversed said decision and ordered the spouses Nuguid to execute a deed of reconveyance in favor of
herein respondents.

ISSUE: Who is the rightful owner of the subject property?

The Supreme Court reinstated the decision of the CFI of Bataan. The basis for the Court of Appeals'
conclusion that petitioners were buyers in bad faith is ambiguous because said court relied on the
singular circumstance that the petitioners are from Orani, Bataan, and should have personally known
that the private respondents were the persons in actual possession. However, at the time of the
purchase, the spouses Nuguid dealt with Pedro Guevarra and Pascuala Tolentino, the latter being the
actual occupants. The respondents Guevarras, children of the said Pedro and Pascuala Guevarra, came
into the picture only after their parents died. As for the respondent heirs of Victorino dela Rosa, their
being in actual possession of any portion of the property was, likewise, simply presumed or taken for
granted by the Court of Appeals.

The private respondents cannot also honestly claim that they became aware of the spouses Nuguid’s
title only in 1978, because ever since the latter bought the property in 1961, the spouse Nuguid have
occupied the same openly, publicly, and continuously in the concept of owners, even building their
house thereon. For seventeen years they were in peaceful possession, with the respondents Guevarras
occupying less than one-half of the same property.

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.
 Radiowealth Finance Co. vs. Palileo

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?

The Supreme Court likewise affirmed the appellate court’s decision on this case. There is no doubt that
had the subject property 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.