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476 Phil. 641

FIRST DIVISION

[ G.R. No. 154409, June 21, 2004 ]

SPOUSES NOEL AND JULIE ABRIGO, PETITIONERS, VS. ROMANA DE VERA, RESPONDENT.

D E C I S I O N

PANGANIBAN, J.:

Between two buyers of the same immovable property registered under the Torrens system, the law gives ownership priority to (1) the first registrant in good faith; (2) then, the first possessor in good faith; and (3) finally, the buyer who in good faith presents the oldest title. This provision, however, does not apply if the property is not registered under the Torrens system.

The Case

Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, seeking to set aside the March 21, 2002 Amended Decision[2] and the July 22, 2002 Resolution[3] of the Court of Appeals (CA) in CA-GR CV No. 62391. The Amended Decision disposed as follows:
WHEREFORE, the dispositive part of the original DECISION of this case, promulgated on November 19, 2001, is SET ASIDE and another one is entered AFFIRMING in part and REVERSING in part the judgment appealed from, as follows:

“1.
Declaring [Respondent] Romana de Vera the rightful owner and with better right to possess the property in question, being an innocent purchaser for value therefor;


“2.
Declaring Gloria Villafania [liable] to pay the following to [Respondent] Romana de Vera and to [Petitioner-]Spouses [Noel and Julie] Abrigo, to wit:
As to [Respondent] Romana de Vera:
  1. P300,000.00 plus 6% per annum as actual damages;
  2. P50,000.00 as moral damages;
  3. P50,000.00 as exemplary damages;
  4. P30,000.00 as attorney’s fees; and
  5. Cost of suit.
As to [Petitioner-]Spouses [Noel and Julie] Abrigo:
  1. P50,000.00 as moral damages;
  2. P50,000.00 as exemplary damages;
  3. P30,000.00 as attorney’s fees;
  4. Cost of suit.”[4]
The assailed Resolution denied reconsideration.

The Facts

Quoting the trial court, the CA narrated the facts as follows:
“As culled from the records, the following are the pertinent antecedents amply summarized by the trial court:
‘On May 27, 1993, Gloria Villafania sold a house and lot located at Banaoang, Mangaldan, Pangasinan and covered by Tax Declaration No. 1406 to Rosenda Tigno-Salazar and Rosita Cave-Go. The said sale became a subject of a suit for annulment of documents between the vendor and the vendees.

‘On December 7, 1993, the Regional Trial Court, Branch 40 of Dagupan City rendered judgment approving the Compromise Agreement submitted by the parties. In the said Decision, Gloria Villafania was given one year from the date of the Compromise Agreement to buy back the house and lot, and failure to do so would mean that the previous sale in favor of Rosenda Tigno-Salazar and Rosita Cave-Go shall remain valid and binding and the plaintiff shall voluntarily vacate the premises without need of any demand. Gloria Villafania failed to buy back the house and lot, so the [vendees] declared the lot in their name.

‘Unknown, however to Rosenda Tigno-Salazar and Rosita Cave-Go, Gloria Villafania obtained a free patent over the parcel of land involved [on March 15, 1988 as evidenced by OCT No. P-30522]. The said free patent was later on cancelled by TCT No. 212598 on April 11, 1996.

‘On October 16, 1997, Rosenda Tigno-Salazar and Rosita Cave-Go, sold the house and lot to the herein [Petitioner-Spouses Noel and Julie Abrigo].

‘On October 23, 1997, Gloria Villafania sold the same house and lot to Romana de Vera x x x. Romana de Vera registered the sale and as a consequence, TCT No. 22515 was issued in her name.

‘On November 12, 1997, Romana de Vera filed an action for Forcible Entry and Damages against [Spouses Noel and Julie Abrigo] before the Municipal Trial Court of Mangaldan, Pangasinan docketed as Civil Case No. 1452. On February 25, 1998, the parties therein submitted a Motion for Dismissal in view of their agreement in the instant case that neither of them can physically take possession of the property in question until the instant case is terminated. Hence the ejectment case was dismissed.’[5]
“Thus, on November 21, 1997, [petitioners] filed the instant case [with the Regional Trial Court of Dagupan City] for the annulment of documents, injunction, preliminary injunction, restraining order and damages [against respondent and Gloria Villafania].

“After the trial on the merits, the lower court rendered the assailed Decision dated January 4, 1999, awarding the properties to [petitioners] as well as damages. Moreover, x x x Gloria Villafania was ordered to pay [petitioners and private respondent] damages and attorney’s fees.

“Not contented with the assailed Decision, both parties [appealed to the CA].”[6]
Ruling of the Court of Appeals

In its original Decision promulgated on November 19, 2001, the CA held that a void title could not give rise to a valid one and hence dismissed the appeal of Private Respondent Romana de Vera.[7] Since Gloria Villafania had already transferred ownership to Rosenda Tigno-Salazar and Rosita Cave-Go, the subsequent sale to De Vera was deemed void.

The CA also dismissed the appeal of Petitioner-Spouses Abrigo and found no sufficient basis to award them moral and exemplary damages and attorney’s fees.

On reconsideration, the CA issued its March 21, 2002 Amended Decision, finding Respondent De Vera to be a purchaser in good faith and for value. The appellate court ruled that she had relied in good faith on the Torrens title of her vendor and must thus be protected.[8]

Hence, this Petition.[9]

Issues

Petitioners raise for our consideration the issues below:
“1.Whether or not the deed of sale executed by Gloria Villafania in favor of [R]espondent Romana de Vera is valid.


“2.Whether or not the [R]espondent Romana de Vera is a purchaser for value in good faith.


“3.
Who between the petitioners and respondent has a better title over the property in question.”[10]
In the main, the issues boil down to who between petitioner-spouses and respondent has a better right to the property.

The Court’s Ruling

The Petition is bereft of merit.

Main Issue:
Better Right over the Property

Petitioners contend that Gloria Villafania could not have transferred the property to Respondent De Vera because it no longer belonged to her.[11] They further claim that the sale could not be validated, since respondent was not a purchaser in good faith and for value.[12]

Law on Double Sale

The present case involves what in legal contemplation was a double sale. On May 27, 1993, Gloria Villafania first sold the disputed property to Rosenda Tigno-Salazar and Rosita Cave-Go, from whom petitioners, in turn, derived their right. Subsequently, on October 23, 1997, a second sale was executed by Villafania with Respondent Romana de Vera.

Article 1544 of the Civil Code states the law on double sale thus:
“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.”
Otherwise stated, the law provides that a double sale of immovables transfers ownership to (1) the first registrant in good faith; (2) then, the first possessor in good faith; and (3) finally, the buyer who in good faith presents the oldest title.[13] There is no ambiguity in the application of this law with respect to lands registered under the Torrens system.

This principle is in full accord with Section 51 of PD 1529[14] which provides that no deed, mortgage, lease or other voluntary instrument --except a will -- purporting to convey or affect registered land shall take effect as a conveyance or bind the land until its registration.[15] Thus, if the sale is not registered, it is binding only between the seller and the buyer but it does not affect innocent third persons.[16]

In the instant case, both Petitioners Abrigo and respondent registered the sale of the property. Since neither petitioners nor their predecessors (Tigno-Salazar and Cave-Go) knew that the property was covered by the Torrens system, they registered their respective sales under Act 3344.[17] For her part, respondent registered the transaction under the Torrens system[18] because, during the sale, Villafania had presented the transfer certificate of title (TCT) covering the property.[19]

Respondent De Vera contends that her registration under the Torrens system should prevail over that of petitioners who recorded theirs under Act 3344. De Vera relies on the following insight of Justice Edgardo L. Paras:
“x x x If the land is registered under the Land Registration Act (and has therefore a Torrens Title), and it is sold but the subsequent sale is registered not under the Land Registration Act but under Act 3344, as amended, such sale is not considered REGISTERED, as the term is used under Art. 1544 x x x.”[20]
We agree with respondent. It is undisputed that Villafania had been issued a free patent registered as Original Certificate of Title (OCT) No. P-30522.[21] The OCT was later cancelled by Transfer Certificate of Title (TCT) No. 212598, also in Villafania’s name.[22] As a consequence of the sale, TCT No. 212598 was subsequently cancelled and TCT No. 22515 thereafter issued to respondent.

Soriano v. Heirs of Magali[23] held that registration must be done in the proper registry in order to bind the land. Since the property in dispute in the present case was already registered under the Torrens system, petitioners’ registration of the sale under Act 3344 was not effective for purposes of Article 1544 of the Civil Code.

More recently, in Naawan Community Rural Bank v. Court of Appeals,[24] the Court upheld the right of a party who had registered the sale of land under the Property Registration Decree, as opposed to another who had registered a deed of final conveyance under Act 3344. In that case, the “priority in time” principle was not applied, because the land was already covered by the Torrens system at the time the conveyance was registered under Act 3344. For the same reason, inasmuch as the registration of the sale to Respondent De Vera under the Torrens system was done in good faith, this sale must be upheld over the sale registered under Act 3344 to Petitioner-Spouses Abrigo.

Radiowealth Finance Co. v. Palileo[25] explained the difference in the rules of registration under Act 3344 and those under the Torrens system in this wise:
“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 this 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.

“The case of Carumba vs. Court of Appeals[26] is a case in point. It was held therein that Article 1544 of the Civil Code has no application to land not registered under Act No. 496. Like in the case at bar, Carumba dealt with a double sale of the same unregistered land. The first sale was made by the original owners and was unrecorded while the second was an execution sale that resulted from a complaint for a sum of money filed against the said original owners. Applying [Section 33], Rule 39 of the Revised Rules of Court,[27] this Court held that Article 1544 of the Civil Code cannot be invoked to benefit the purchaser at the execution sale though the latter was a buyer in good faith and even if this second sale was registered. It was explained that this is because the purchaser of unregistered land at a sheriff’s 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.

“Applying this principle, x x x the execution sale of 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.”[28]
Petitioners cannot validly argue that they were fraudulently misled into believing that the property was unregistered. A Torrens title, once registered, serves as a notice to the whole world.[29] All persons must take notice, and no one can plead ignorance of the registration.[30]

Good-Faith Requirement

We have consistently held that Article 1544 requires the second buyer to acquire the immovable in good faith and to register it in good faith.[31] Mere registration of title is not enough; good faith must concur with the registration.[32] We explained the rationale in Uraca v. Court of Appeals,[33] which we quote:
“Under the foregoing, the prior registration of the disputed property by the second buyer does not by itself confer ownership or a better right over the property. Article 1544 requires that such registration must be coupled with good faith. Jurisprudence teaches us that ‘(t)he governing principle is primus tempore, potior jure (first in time, stronger in right). Knowledge gained by the first buyer of the second sale cannot defeat the first buyer’s rights except where the second buyer registers in good faith the second sale ahead of the first, as provided by the Civil Code. Such knowledge of the first buyer does not bar her from availing of her rights under the law, among them, to register first her purchase as against the second buyer. But in converso, knowledge gained by the second buyer of the first sale 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 for the second buyer being able to displace the first buyer; that 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.’”[34] (Italics supplied)
Equally important, under Section 44 of PD 1529, every registered owner receiving a certificate of title pursuant to a decree of registration, and every subsequent purchaser of registered land taking such certificate for value and in good faith shall hold the same free from all encumbrances, except those noted and enumerated in the certificate.[35] Thus, a person dealing with registered land is not required to go behind the registry to determine the condition of the property, since such condition is noted on the face of the register or certificate of title.[36] Following this principle, this Court has consistently held as regards registered land that a purchaser in good faith acquires a good title as against all the transferees thereof whose rights are not recorded in the Registry of Deeds at the time of the sale.[37]

Citing Santiago v. Court of Appeals,[38] petitioners contend that their prior registration under Act 3344 is constructive notice to respondent and negates her good faith at the time she registered the sale. Santiago affirmed the following commentary of Justice Jose C. Vitug:
“The governing principle is prius tempore, potior jure (first in time, stronger in right). 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 (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. Cabana (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, Crisostomo vs. CA, G.R. 95843, 02 September 1992).

x x x x x x x x x

“Registration of the second buyer under Act 3344, providing for the registration of all instruments on land neither covered by the Spanish Mortgage Law nor the Torrens System (Act 496), cannot improve his standing since Act 3344 itself expresses that registration thereunder would not prejudice prior rights in good faith (see Carumba vs. Court of Appeals, 31 SCRA 558). Registration, however, by the first buyer under Act 3344 can have the effect of constructive notice to the second buyer that can defeat his right as such buyer in good faith (see Arts. 708-709, Civil Code; see also Revilla vs. Galindez, 107 Phil. 480; Taguba vs. Peralta, 132 SCRA 700). Art. 1544 has been held to be inapplicable to execution sales of unregistered land, since the purchaser merely steps into the shoes of the debtor and acquires the latter's interest as of the time the property is sold (Carumba vs. Court of Appeals, 31 SCRA 558; see also Fabian vs. Smith, Bell & Co., 8 Phil. 496) or when there is only one sale (Remalante vs. Tibe, 158 SCRA 138).”[39] (Emphasis supplied)
Santiago was subsequently applied in Bayoca v. Nogales,[40] which held:
“Verily, there is absence of prior registration in good faith by petitioners of the second sale in their favor. As stated in the Santiago case, registration by the first buyer under Act No. 3344 can have the effect of constructive notice to the second buyer that can defeat his right as such buyer. On account of the undisputed fact of registration under Act No. 3344 by [the first buyers], necessarily, there is absent good faith in the registration of the sale by the [second buyers] for which they had been issued certificates of title in their names. x x x.”[41]
Santiago and Bayoca are not in point. In Santiago, the first buyers registered the sale under the Torrens system, as can be inferred from the issuance of the TCT in their names.[42] There was no registration under Act 3344. In Bayoca, when the first buyer registered the sale under Act 3344, the property was still unregistered land.[43] Such registration was therefore considered effectual.

Furthermore, Revilla and Taguba, which are cited in Santiago, are not on all fours with the present case. In Revilla, the first buyer did not register the sale.[44] In Taguba, registration was not an issue.[45]

As can be gathered from the foregoing, constructive notice to the second buyer through registration under Act 3344 does not apply if the property is registered under the Torrens system, as in this case.

We quote below the additional commentary of Justice Vitug, which was omitted in Santiago. This omission was evidently the reason why petitioner misunderstood the context of the citation therein:
"The registration contemplated under Art. 1544 has been held to refer to registration under Act 496 Land Registration Act (now PD 1529) which considers the act of registration as the operative act that binds the land (see Mediante vs. Rosabal, 1 O.G. [12] 900, Garcia vs. Rosabal, 73 Phil 694). On lands covered by the Torrens System, the purchaser acquires such rights and interest as they appear in the certificate of title, unaffected by any prior lien or encumbrance not noted therein. The purchaser is not required to explore farther than what the Torrens title, upon its face, indicates. The only exception is where the purchaser has actual knowledge of a flaw or defect in the title of the seller or of such liens or encumbrances which, as to him, is equivalent to registration (see Sec. 39, Act 496; Bernales vs. IAC, G.R. 75336, 18 October 1988; Hernandez vs. Sales, 69 Phil 744; Tajonera vs. Court of Appeals, L-26677, 27 March 1981),"[46]
Respondent
in Good Faith


The Court of Appeals examined the facts to determine whether respondent was an innocent purchaser for value.[47] After its factual findings revealed that Respondent De Vera was in good faith, it explained thus:
“x x x. Gloria Villafania, [Respondent] De Vera’s vendor, appears to be the registered owner. The subject land was, and still is, registered in the name of Gloria Villafania. There is nothing in her certificate of title and in the circumstances of the transaction or sale which warrant [Respondent] De Vera in supposing that she need[ed] to look beyond the title. She had no notice of the earlier sale of the land to [petitioners]. She ascertained and verified that her vendor was the sole owner and in possession of the subject property by examining her vendor’s title in the Registry of Deeds and actually going to the premises. There is no evidence in the record showing that when she bought the land on October 23, 1997, she knew or had the slightest notice that the same was under litigation in Civil Case No. D-10638 of the Regional Trial Court of Dagupan City, Branch 40, between Gloria Villafania and [Petitioners] Abrigo. She was not even a party to said case. In sum, she testified clearly and positively, without any contrary evidence presented by the [petitioners], that she did not know anything about the earlier sale and claim of the spouses Abrigo, until after she had bought the same, and only then when she bought the same, and only then when she brought an ejectment case with the x x x Municipal Court of Mangaldan, known as Civil Case No. 1452. To the [Respondent] De Vera, the only legal truth upon which she had to rely was that the land is registered in the name of Gloria Villafania, her vendor, and that her title under the law, is absolute and indefeasible. x x x.”[48]
We find no reason to disturb these findings, which petitioners have not rebutted. Spouses Abrigo base their position only on the general averment that respondent should have been more vigilant prior to consummating the sale. They argue that had she inspected the property, she would have found petitioners to be in possession.[49]

This argument is contradicted, however, by the spouses’ own admission that the parents and the sister of Villafania were still the actual occupants in October 1997, when Respondent De Vera purchased the property.[50] The family members may reasonably be assumed to be Villafania’s agents, who had not been shown to have notified respondent of the first sale when she conducted an ocular inspection. Thus, good faith on respondent’s part stands.

WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against petitioners.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Carpio, and Azcuna, JJ., concur.
Ynares-Santiago, J., on leave.



[1] Rollo, pp. 3-22.

[2] Id., pp. 24-31. Former Fifth Division. Penned by Justice Bernardo P. Abesamis, with the concurrence of Justices Hilarion L. Aquino (acting chairman) and Perlita J. Tria Tirona (member).

[3] Id., p. 33.

[4] CA Amended Decision, pp. 7-8; rollo, pp. 30-31.

[5] CA Decision dated November 19, 2001, pp. 2-3; rollo, pp. 163-164. Citations omitted.

[6] Id., pp. 3 & 164.

[7] Id., pp. 5 & 166.

[8] CA Amended Decision dated March 21, 2002, p. 7; rollo, p. 30.

[9] This case was deemed submitted for resolution on May 29, 2003, upon this Court’s receipt of petitioners’ Memorandum signed by Atty. Villamor A. Tolete. Respondent’s Memorandum, signed by Atty. Daniel C. Macaraeg, was received by this Court on May 13, 2003.

[10] Petitioners’ Memorandum, p. 5; rollo, p. 252.

[11] Id., pp. 6 & 253.

[12] Id., pp. 11 & 258.

[13] Gabriel v. Mabanta, 399 SCRA 573, 580, March 26, 2003; Bayoca v. Nogales, 340 SCRA 154, 166, September 12, 2000; Balatbat v. Court of Appeals, 329 Phil. 858, 872, August 28, 1996.

[14] “The Property Registration Decree,” June 11, 1978.

[15] Radiowealth Finance Co. v. Palileo, 274 Phil. 516, May 20, 1991.

[16] Revilla v. Galindez, 107 Phil. 480, 484, March 30, 1960.

[17] §113 of Chapter XIII of the Property Registration Decree (PD 1529) provides:
“SEC. 113. Recording of instruments relating to unregistered lands.– No deed, conveyance, mortgage, lease, or other voluntary instrument affecting land not registered under the Torrens system shall be valid, except as between the parties thereto, unless such instrument shall have been recorded in the manner herein prescribed in the office of the Register of Deeds for the province or city where the land lies.
“x x x x x x x x x.”

The sale by Gloria Villafania to Tigno-Salazar and Cave-Go was registered on June 18, 1993, while the sale by Tigno-Salazar and Cave-Go to the Spouses Abrigo was registered on October 30, 1997. Petitioners’ Memorandum, p. 10; rollo, p. 257.

[18] Formerly Act No. 496, “The Land Registration Act,” November 6, 1902; now PD 1529.

[19] Respondent’s Memorandum, p. 6; rollo, p. 229.

[20] Id., pp. 13 & 236; citing Paras, Civil Code of the Philippines Annotated (1990), Vol. V, p. 154.

[21] Id., pp. 4 & 227.

[22] Ibid.

[23] 8 SCRA 489, July 31, 1963.

[24] 395 SCRA 43, January 13, 2003.

[25] Supra.

[26] 31 SCRA 558, February 18, 1970.

[27] The second paragraph of this provision states: “Upon the expiration of the right of redemption, the purchaser or redemptioner shall be substituted to and acquire all the rights, title, interest and claim of the judgment obligor to the property as of the time of the levy. x x x.” (Italics supplied.)

[28] Radiowealth Finance Co. v. Palileo, supra, pp. 521-522, per Gancayco, J.

[29] Alvarico v. Sola, 383 SCRA 232, 239, June 6, 2002; Legarda v. Saleeby, 31 Phil. 590, 595, October 2, 1915.

[30] Ibid.

[31] Gabriel v. Mabanta, supra; Martinez v. Court of Appeals, 358 SCRA 38, 50, May 21, 2001; Bautista v. Court of Appeals, 230 SCRA 446, 454, February 28, 1994.

[32] Bautista v. Court of Appeals, supra.

[33] 344 Phil. 253, September 5, 1997.

[34] Id., p. 265, per Panganiban, J; citing Cruz v. Cebana, 129 SCRA 656, 663, June 22, 1984, per Teehankee, J (later CJ).

[35] Lu v. Manipon, 381 SCRA 788, 796, May 7, 2002.

[36] Bautista v. Court of Appeals, supra, p. 456; Radiowealth Finance Co. v. Palileo, supra, p. 518.

[37] Radiowealth Finance Co. v. Palileo, supra.

[38] 247 SCRA 336, August 14, 1995.

[39] Id., p. 346, per Melo, J; citing Vitug, Compendium of Civil Law and Jurisprudence (1993), pp. 604-605.

[40] Supra.

[41] Id., p. 167-168, per Gonzaga-Reyes, J.

[42] Supra, p. 339.

[43] Supra, p. 159.

[44] Supra, p. 484.

[45] 132 SCRA 722, 728, October 23, 1984.

[46] Vitug, Compendium of Civil Law and Jurisprudence, supra, p. 604. This paragraph was originally between the two paragraphs cited in Santiago.

[47] “An innocent purchaser for value is one who buys the property of another, without notice that some other person has a right or interest in such property and pays the full price for the same, at the time of such purchase or before he has notice of the claims or interest of some other person in the property.” De la Cruz v. De la Cruz, GR No. 146222, January 15, 2004.

[48] CA Amended Decision, pp. 6-7; rollo, pp. 29-30.

[49] Petitioners’ Memorandum, p. 12; id., p. 259.

[50] Id., pp. 13 & 260.

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