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561 Phil. 254


[ G.R. NO. 166913, October 05, 2007 ]




For our resolution is the instant Petition for Review on Certiorari seeking to reverse the Decision[1] of the Court of Appeals (Fifteenth Division) dated January 31, 2005 in CA-G.R. SP No. 78079.

The facts of the case are:

In 1992, spouses Lorenzo and Corazon Parungao, respondents, purchased from Spring Homes Subdivision (Spring Homes) Lot Nos. 1, 2, 3, and 4 with a total area of 486 square meters (sq. m.) at P1,350.00 per sq. m. or a total price of P656,100.00. In addition, they also bought Lot Nos. 7, 8, and 9 with a total area of 457 sq. m. at P1,550.00 per sq. m. or a total price of P708,360.00. All these lots are located at Block VI, Phase II-C, Spring Homes, Barangay Culiat, Calamba City, Laguna. Respondents made a down payment of P536,000.00, leaving a balance of P828,450.00, exclusive of interest.

Sometime in November 1992, respondents introduced improvements on the lots consisting of a concrete perimeter fence with cyclone wires on top, a heavy steel gate, and two fish breeding buildings, all at a cost of P945,000.00. They also elevated the ground level of the lots by filling them with earth and “adobe.”

Under the terms of the Contracts to Sell signed by respondents and Spring Homes, the balance of P828,450.00 was to be paid by them within one year from its execution; and that should they apply for a loan as payment for the balance, they would continue to pay the monthly installment until their obligation is fully paid.

Respondents failed to pay the installments. They also failed to secure a loan because Spring Homes refused to deliver to them the Transfer Certificates of Title (TCTs) covering the lots required in their application for a loan secured by a real estate mortgage. Apparently, respondents had requested Spring Homes to furnish them copies of the Contracts to Sell, the TCTs, receipts of real estate taxes paid, tax declarations, and the survey and vicinity plans of the lots they purchased. However, Roy Madamba, salesman-representative of Spring Homes, gave respondents only copies of the Contracts to Sell. But respondents returned these copies to Spring Homes for correction of the lot numbers and the names of the vendees.

On April 11, 1997, Spring Homes executed two separate Deeds of Absolute Sale in favor of spouses Mariano and Corazon Tanglao, petitioners, wherein the former sold to the latter two lots covered by TCT Nos. T-268566 and T-268572. Hence, the said TCTs were cancelled and in lieu thereof, TCT Nos. T-393365 and T-3377723 were issued in the names of petitioners. It turned out that the lots sold to them were among the lots previously sold to respondents.

In a letter dated September 15, 1997, respondents demanded that Spring Homes deliver to them the corrected Contracts to Sell, as well as the TCTs covering the lots they purchased.

Meanwhile, petitioners took possession of the two lots they bought. They forcibly opened the steel gate as well as the doors of the buildings and entered the premises.

When informed of these events, respondents demanded an explanation from Spring Homes. Bertha Pasic, its treasurer, apologized and promised she would settle the matter with petitioners. However, the controversy was not settled.

On July 15, 1999, respondents filed with the Housing and Land Use Regulatory Board (HLURB), Regional Office No. 1V a complaint for annulment of deed of sale and/or return of investment for the seven (7) lots and costs of improvements, plus interest and damages, docketed as HLURB Case No. R-1V6-08199-1104. Impleaded as respondents were Spring Homes, Berta Pasic, Felipa Messiah, and petitioners.

Despite notice, Spring Homes, Pasic, and Messiah did not file their respective answers to the complaint, nor did they appear during the hearings.

On October 3, 2000, HLURB Arbiter Gregorio L. Dean rendered a Decision, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered:
  1. Dismissing the complaint filed against respondents Felipa Messiah and Spouses Tanglao for lack of merit;
  2. Ordering respondent Spring Homes to pay complainants:

    Php536,000.00 by way of refund of payments with 12% interest per annum to commence from August 11, 1999;
    Php935,000.00 as actual damages; and
    Php20,000.00 as attorney’s fees.

  3. Ordering respondents Spring Homes Subdivision Co., Inc., and Bertha Pasic, jointly and severally, to pay complainant the sum of Php20,000.00 as moral damages and to pay this Board the sum of Php10,000.00 as administrative fine.
Dissatisfied with the ruling, respondents filed a petition for review with the HLURB Board of Commissioners, docketed as HLURB Case No. REM-A-001211-0272.

On August 24, 2001, the HLURB Board of Commissioners rendered its Judgment reversing the Arbiter’s Decision and granting the petition for review, thus:
WHEREFORE, premises considered, the petition for review is granted. The decision of the office below is set aside and a new decision is rendered as follows:
  1. Declaring as valid and subsisting the contract to sell between complainants and respondent Spring Homes;
  2. Directing complainants to immediately update their account and directing respondent Spring Homes to accept payment and to deliver title to complainants upon full payment of the purchases price;
  3. Declaring as invalid the deed of absolute sale in favor of the spouses Tanglao over the subject lots and directing the cancellation of respondent spouses TCTs Nos. T-268566 and T-268572 of the Registry of Deeds for Calamba, Laguna and its reversion to respondent Spring Homes;
  4. Directing respondent Spring Homes to refund to respondent spouses Tanglao all the amounts paid by the latter in connection with the sale of the subject lots to the latter with 12% interest reckoned from the date of the sale;
  5. Directing respondent Spring Homes to pay administrative fine of P10,000.00 for unsound business practice.
The HLURB Board of Commissioners found that at the time of the sale of the two lots in question to petitioners, the contracts between respondents and Spring Homes were still subsisting. Moreover, the fence and existing structures erected on the premises should have forewarned petitioners that there are adverse claimants of the two lots.

Petitioners filed a motion for reconsideration, but this was denied by the HLURB Board of Commissioners in a Resolution promulgated on February 22, 2002.

Petitioners then filed an appeal with the Office of the President, docketed as O.P. Case No. 02-C-099. But in its Decision dated March 12, 2003, the Office of the President dismissed their appeal and affirmed the Decision of the HLURB Board of Commissioners.

Petitioners’ motion for reconsideration was also denied by the said Office in its Order dated June 18, 2003.

Eventually, petitioners filed with the Court of Appeals a petition for review under Rule 43 of the 1997 Rules of Civil Procedure, as amended.

On January 31, 2004, the Court of Appeals rendered its Decision dismissing the petition, thus:
WHEREFORE, premises considered, the petition for review is DENIED DUE COURSE and ordered DISMISSED. The Decision dated 12 March 2003 of the Office of the President which affirmed the Decision of the HLURB Board of Commissioners (Third Division) dated 24 August 2001 reversing the 03 October 2000 Decision of Housing and Land Use Arbiter Gerardo L. Dean and the Order dated 18 June 2003 of the Office of the President denying the motion for reconsideration are hereby AFFIRMED. Costs against petitioners Sps. Mariano S. Tanglao and Corazon M. Tanglao.

The Court of Appeals held that there was a perfected contract to sell between respondents and Spring Homes as early as 1992. As this contract was subsisting at the time of the second sale, respondents have a superior right over the lots in question.

The only issue for our resolution is who between the petitioners and respondents have the right of ownership over the two lots in controversy.

The ownership of immovable property sold to two different persons at different times is governed by Article 1544 of the Civil Code,[2] which provides:
Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have 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 possession and, in the absence thereof, to the person who presents the oldest title, provided there is good faith.
In double sales of immovable property, the governing principle is prius tempore, prius jure (first in time, stronger in right). Thus, in Payongayong v. Court of Appeals,[3] this Court held that under Article 1544, preferential rights shall be accorded to: (1) the person acquiring it who in good faith first recorded it in the Registry of Property, (2) in default thereof to the person who in good faith was first in possession, and (3) in default thereof, to the person who presents the oldest title, provided there is good faith. In all of these cases, good faith is essential, being the basic premise of the preferential rights granted to the person claiming ownership of the immovable.[4]

In Occeña v. Esponilla,[5] this Court, speaking through then Associate Justice (now Chief Justice) Reynato S. Puno, laid down the following rules in the application of Article 1544: (1) 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; and (2) 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. Differently put, the act of registration by the second buyer must be coupled with good faith, meaning, the registrant must have no knowledge of the defect or lack of title of his vendor or must not have been aware of facts which should put him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the title of his vendor.[6]

Applying the foregoing doctrines, the pivotal question before us is whether petitioners, the second buyers, are purchasers in good faith.

A purchaser in good faith or innocent purchaser for value is one who buys property and pays a full and fair price for it at the time of the purchase or before any notice of some other person’s claim on or interest in it.[7] The burden of proving the status of a purchaser in good faith lies upon him who asserts that status and it is not sufficient to invoke the ordinary presumption of good faith, that is, that everyone is presumed to have acted in good faith.[8]

In the instant case, the HLURB Arbiter, the HLURB Commission, the Office of the President, and the Court of Appeals found that at the time of the second sale to petitioners by Spring Homes, there were already occupants and improvements on the two lots in question. These facts should have put petitioners on their guard. Settled is the rule that a buyer of real property in possession of persons other than the seller must be wary and should investigate the rights of those in possession, for without such inquiry the buyer can hardly be regarded as a buyer in good faith and cannot have any right over the property.[9]

As the petitioners cannot be considered buyers in good faith, they cannot rely upon the indefeasibility of their TCTs in view of the doctrine that the defense of indefeasibility of a torrens title does not extend to transferees who take the certificate of title in bad faith.[10]

Considering that respondents who, in good faith, were first in possession of the subject lots, we rule that the ownership thereof pertains to them.

WHEREFORE, we DENY the petition. The Decision of the Court of Appeals (Fifteenth Division) dated January 31, 2005 in CA-G.R. SP No. 78079 is AFFIRMED in toto. Costs against the petitioners.


Puno, C.J., (Chairperson), Corona, Azcuna, and Garcia, JJ., concur.

[1] Rollo, pp. 20-41. Penned by Associate Justice Celia C. Librea-Leagogo and concurred in by Associate Justice Andres B. Reyes, Jr., and Associate Justice Lucas P. Bersamin.

[2] Ten Forty Realty and Development Corp. v. Cruz, G.R. No. 151212, September 10, 2003, 410 SCRA 484.

[3] G.R. No. 144576, May 28, 2004, 430 SCRA 210, citing Balatbat v. Court of Appeals, 261 SCRA 128 (1996).

[4] Gabriel v. Spouses Mabanta and Colobong, G.R. No. 142403, March 26, 2003, 399 SCRA 573.

[5] G.R. No. 156973, June 4, 2004, 431 SCRA 116.

[6] San Lorenzo Development Corp. v. Court of Appeals, G.R. No. 124242, January 21, 2005, 449 SCRA 99, citing Nuguid v. Court of Appeals, 171 SCRA 213 (1989); Bautista v. Court of Appeals, 230 SCRA 446 (1994).

[7] Tanongon v. Samson, G.R. No. 140889, May 9, 2002, 382 SCRA 130, citing David v. Malay, 318 SCRA 711 (1999); Republic v. Court of Appeals, 301 SCRA 366 (1999); Co v. Court of Appeals, 196 SCRA 705 (1991).

[8] Aguirre v. Court of Appeals, G.R. No. 122249, January 29, 2004, 421 SCRA 310.

[9] Occeña v. Espanilla, supra, footnote 5, pp. 124-125, citing Spouses Castro v. Miat, 397 SCRA 271 (2003).

[10] Baricuatro, Jr. v. Court of Appeals, G.R. No. 105902, February 9, 2000, 325 SCRA 137, citing Philippine Stock Exchange, Inc. v. Court of Appeals, 281 SCRA 232 (1997).

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