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Consolidated Rural Bank (Cagayan Valley), Inc vs Court of Appeals 448 SCRA 347 January 17, 2005 Ponente:

Tinga Nature: Petition for review on certiorari of a decision and resolution of the Court of Appeals Facts: The Madrid brothers were registered owners of Lot No. 7036-A in Isabela per TCT No. T-8121. It was subdivided into several lots. 1ST SALE (August 15 1957) Rizal Madrid sold part of his share to Gamiao and Dayag by virtue of a deed of sale, to which his brothers offered no objection. The deed of sale was not registered with the Office of the Register of Deeds, however, Gamiao and Dayag declared the property in their names for taxation purposes. Gamiao and Dayag sold the southern portion of the land to Teodoro dela Cruz, and the northern portion was sold to Restituto Hernandez. These buyers took possession of and cultivated the portions of the property respectively sold to them. 2ND SALE (June 15 1976) The Madrid brothers conveyed all their rights and interests to Pacifico Marquez. The deed of sake was registered with the Office of the Register of Deeds. Marquez subdivided the lot into 8. Lots 7036-A-7-A until 7036-A-7-D were mortgaged to the Consolidated Rural Bank to secure a loan of P100,000. Additionally, Marquez mortgaged Lot No. 7036-A-7-E to the Rural Bank of Cauayan to secure a loan of P10,000. These deeds of real estate mortgage were registered with the Office of the Register of Deeds. Meanwhile, Marquez sold Lot No. 7036-A-7-G to Romeo Calixto. Marquez defaulted in the payment of his loan and CRB caused the foreclosure of the mortgages and the lots were sold to it as the highest bidder. The heirs of Teodoro dela Cruz filed a case for reconveyance and damages as to the southern portion of the land, claiming to be null and void the issuance of TCTs to Marquez; the foreclosure sale in favour of CRB; to mortgage to RBC; and the sale to Calixto. Evangeline del Rosario, successor-in-interest of Hernandez, filed a Complaint in Intervention wherein she claimed the northern portion of Lot No. 7036-A-7. Marquez argued that he was a buyer in good faith and for value. He argued as well that being the first registrant, the sale in favour of him must prevail over the sale to Gamiao and Dayag which shouldnt be binding upon him, that being unregistered. CRB, on the other hand, insisted that they were mortgagees in good faith and that they had the right to rely on the titles of Marquez. The RTC ruled in favour of Marquez, finding nothing to show that Marquez was aware of dela Cruz and del Rosarios claim of ownership and holding that it was, indeed, Marquez, who first registered. The CA, however, reversed the ruling of the RTC, holding that Marquez failed to prove that he was a purchaser in good faith and noting that while Marquez was the first registrant, there was no showing that the registration was coupled with good faith. Marquez admitted having knowledge that there was dispute over said property and that the Heirs of dela Cruz were also in possession of the land. As to the mortgages, the CA held that the banks merely relied on the certificates o title and this failure to observe diligence in standard banking procedure constitutes bad faith and on that basis, the mortgages were declared null and void. CRB insisted that Marquez had the right over the said property being the first registered owners. Hence, this petition. Issue: WON Marquez, having registered first, has better right over the property Held//Ratio: No. But first, important!! Applicability of 1544. The RTC and the CA, albeit arriving at different conclusions, both relied on the NCCs provision on double sale (1544) to resolve the case. However, the Supreme Court held that such provision is not applicable in this case. 1544 contemplates a case of double sale by a single vendor. It is necessary that the conveyance must have been made by a party who has an existing right in the thing and the power to dispose of it. It cannot be invoked where the two different contracts of sale are made by two different persons, one of them not being the owner of the property sold. In the case at bar, the subject property was not transferred to several purchasers by a single vendor. In the first sale, the vendors were Gamiao and Dayag whose right to the property originated from their acquisition thereof from Rizal Madrid. In the second sale, the vendors were the Madrid brothers but at that time they were no longer the owners since they had long disposed of the property. In a situation where not all the requisites are present which would warrant the application of 1544, the principle that he who is first in time is preferred in right should apply. In the instant case, the sale by Gamiao and Dayag who

first bought it from Rizal Madrid was anterior to the sale to Marquez. The Heirs of dela Cruz and Hernandez also had possession of the property first. Thus, applying the principle, the Heirs have a superior right to the subject property. Morover, since the Madrid brothers were no longer the owners of the lot at the time of the sale to Marquez, Marquez did not acquire any right to it. Assuming arguendo that 1544 applies, the claim of Marquez still cannot prevail over the right of the Heirs since he was not a purchaser in good faith.