Case Summary (G.R. No. 181359)
Factual Background
On September 2, 1981, Alberto Garcia executed an unnotarized deed of sale in favor of Juanito F. Muertegui over a 7,500–square meter parcel of unregistered land in Dalutan Island, Talahid, Almeira, Biliran, covered by Tax Declaration No. 1996 in Garcia's name. Actual possession thereafter was taken by respondent’s father and brother, who planted coconuts and ipil-ipil and paid real property taxes from 1980 to 1998. On October 17, 1991, Garcia sold the same lot to petitioner Atty. Clemencio C. Sabitsana, Jr. by a notarized deed of absolute sale, which was registered with the Register of Deeds on February 6, 1992 and resulted in issuance of Tax Declaration No. 5327 in Atty. Sabitsana’s name. Petitioners paid some real property taxes and introduced improvements in 1996 that were later destroyed by typhoon.
Prelitigation Correspondence and Registration Contest
When heirs of Domingo Muertegui, Sr. applied for registration under Commonwealth Act No. 141, Atty. Sabitsana sent a letter dated August 24, 1998 to the Department of Environment and Natural Resources opposing the application on the ground that he was the true owner and asking that registration be held in abeyance pending resolution of conflicting ownership. That correspondence precipitated litigation to determine rights and to remove the cloud allegedly cast by petitioners’ registered title.
Complaint and Counterclaim
On April 11, 2000, Juanito, through his attorney-in-fact, filed Civil Case No. B-1097 for quieting of title and preliminary injunction against petitioners, seeking declaration that the 1981 deed of sale in his favor was valid and that the 1991 deed and Tax Declaration No. 5327 in petitioners’ names were null and void, and praying for damages, attorneys fees, and litigation expenses. Petitioners answered and counterclaimed, alleging lack of marital consent in the 1981 sale, good faith acquisition for value, prescription and laches, and lack of jurisdiction of the RTC given the assessed value stated in the tax declaration.
Trial Evidence and Positions
Witnesses for respondent testified that petitioners’ familial lawyer was consulted before the sale to Juanito, that the Muertegui family entered into continuous, adverse possession, and that possession continued through succession. Atty. Sabitsana testified that he had been informed by a family member that the Muertegui family had purchased the lot, but that he found no documentary evidence in assessor’s offices and therefore believed the claim was unsubstantiated; he then purchased the lot from Garcia, informed Caseldita Muertegui in October 1991, took possession, harvested produce, and constructed rip-rap in 1996–1997.
Ruling of the Regional Trial Court
The RTC declared in its October 28, 2002 Decision that the deed of sale dated September 2, 1981 in favor of Juanito was valid and preferred, and that the deed of absolute sale dated October 17, 1991 and Tax Declaration No. 5327 in Atty. Sabitsana’s name were void and of no legal effect. The court held petitioners were not buyers in good faith because Atty. Sabitsana had prior knowledge of the sale to the Muertegui family and had used his legal position to register his purchase ahead of his clients. The RTC applied Article 1544 of the Civil Code in favor of respondent and awarded attorneys fees and litigation expenses.
Appeal to the Court of Appeals and Its Holding
Petitioners appealed to the CA, which in its January 25, 2007 Decision affirmed the RTC in toto. The CA ruled that the absence of the wife’s signature did not render the 1981 sale absolutely void but voidable under Article 173, and that notarization was not determinative of validity. The CA applied Article 1544 and agreed that petitioners lacked good faith because of Atty. Sabitsana’s professional relationship with the Muertegui family and his advance knowledge of their sale, which the CA found tantamount to using legal knowledge to take advantage of clients. The CA sustained the award of attorneys fees and litigation expenses as just and equitable.
Issues Presented to the Supreme Court
Petitioners raised four principal issues: (1) lack of jurisdiction of the RTC given the low assessed value of the lot; (2) erroneous application of Article 1544 instead of P.D. No. 1529 (and the contention that Act No. 3344 or PD 1529 controls sales of unregistered land); (3) that the complaint was barred by laches and prescription; and (4) error in awarding attorneys fees and litigation expenses to respondent.
Petitioners’ Contentions
Petitioners contended that jurisdiction belonged to the first level courts under Republic Act No. 7691 because the assessed value was P1,230.00; that because the lot was unregistered P.D. No. 1529 and Section 113 thereof govern and that the sale to Juanito was valid only inter partes and could not affect petitioners as third parties; that the Muertegui family’s seven‑year silence following petitioners’ October 1991 notice estopped or barred their quieting action by laches or prescription; and that no just or equitable basis existed for attorneys fees because petitioners acted in good faith.
Respondent’s Contentions
Respondent argued that an action to quiet title is incapable of pecuniary estimation and therefore properly within RTC jurisdiction under Rule 63; that Article 1544 applied because of the double sale and the critical inquiry was the buyers’ good or bad faith; that respondent had continuously exercised rights over the lot and earlier actions evidenced persistence rather than laches; and that Article 2208 supported an award of attorneys fees and litigation expenses because petitioners’ bad faith compelled litigation and prejudiced respondent’s rights.
Supreme Court Ruling on Jurisdiction and Remedy
The Supreme Court denied the petition and affirmed the CA. The Court held that the RTC had jurisdiction over the action because a suit to quiet title or to prevent a cloud on title falls squarely within Rule 63 and is properly instituted in the appropriate RTC irrespective of the assessed value stated in tax declarations. The Court treated the action as declaratory and preventive under Article 476 of the Civil Code.
Supreme Court Analysis on Applicable Law for Unregistered Lands
The Court found both the RTC and the CA erred in applying Article 1544 because that provision pertains to transactions involving registered land. For unregistered land, the Court held Act No. 3344, as amended, governs the recording system for instruments affecting unregistered real estate and expressly declares registration to be without prejudice to a third party with a better right. The decisive inquiry, therefore, was which party had the better right.
Supreme Court Finding on Better Right and Validity of Sales
Applying the correct law, the Court found Juanito had the better right because his sale was executed on September 2, 1981, a decade before petitioners’ purchase on October 17, 1991; Garcia no longer had title to convey when he sold to petitioners. The Court reaffirmed the principle nemo dat quod non habet and held that notarization did not affect the validity of the prior sale nor did later registration in petitioners’ favor confer superior rights. The Court cited precedent that registration of sales of unregistered lands does not give rights against a prior buyer with a better claim.
Supreme Court Conclusion on Prescription, Laches, and Estoppel
The Court rejected petitioners’ defenses of prescription, laches and estoppel because their claim rested on a deed that was null and
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Case Syllabus (G.R. No. 181359)
Parties and Procedural Posture
- Spouses Clemencio C. Sabitsana, Jr. and Ma. Rosario M. Sabitsana were the petitioners who acquired a notarized deed of absolute sale dated October 17, 1991 and caused its registration with the Register of Deeds on February 6, 1992.
- Juanito F. Muertegui, represented by his attorney-in-fact Domingo A. Muertegui, Jr. was the respondent who alleged an earlier unnotarized deed of sale in his favor dated September 2, 1981 and filed Civil Case No. B-1097 for quieting of title in the Regional Trial Court, Naval, Biliran.
- The Regional Trial Court rendered judgment on October 28, 2002 declaring the 1981 deed valid and the 1991 deed and Tax Declaration No. 5327 in petitioners’ name void, and awarded attorneys fees and litigation expenses to the respondent.
- The Court of Appeals, in CA-G.R. CV No. 79250, denied petitioners’ appeal via Decision dated January 25, 2007 and denied their Motion for Reconsideration on January 11, 2008.
- The petitioners filed the present Petition for Review on Certiorari assailing the CA Decision and Resolution.
Key Factual Allegations
- Juanito acquired an unnotarized deed of sale from Alberto Garcia on September 2, 1981 and his family took actual, public, adverse and continuous possession of the subject lot and paid real property taxes for the years 1980 to 1998.
- Atty. Clemencio C. Sabitsana, Jr. purchased the same lot from Garcia on October 17, 1991 by a notarized deed of absolute sale, had the sale registered in 1992, and caused Tax Declaration No. 1996 to be cancelled and TD No. 5327 to be issued in his name.
- Petitioners introduced improvements in 1996 which were later destroyed by a typhoon, and petitioners paid certain real property taxes in 1992, 1993, and 1999.
- Petitioners’ counsel status arose from his prior role as the Muertegui family lawyer and from information provided by a family member that the Muertegui family had previously bought the lot.
- On August 24, 1998 petitioners wrote the DENR opposing an application by the Muertegui heirs to register the lot under Commonwealth Act No. 141, and on April 11, 2000 respondent filed the quieting-of-title action.
Trial Court Ruling
- The Regional Trial Court found in favor of Juanito and declared the Deed of Sale dated September 2, 1981 valid and preferred while declaring the Deed of Absolute Sale dated October 17, 1991 and Tax Declaration No. 5327 in petitioners’ name void and of no legal effect.
- The trial court ordered cancellation of TD No. 5327 by the Provincial and Municipal Assessors and awarded P30,000.00 as attorneys fees and P10,000.00 as litigation expenses against Atty. Clemencio C. Sabitsana, Jr..
- The trial court held that petitioners were not buyers in good faith because Atty. Sabitsana, being the Muertegui family lawyer, knew of the prior sale to Juanito and nevertheless raced to register his own purchase.
- The trial court applied Article 1544 of the Civil Code in resolving competing claims to ownership and possession.
Court of Appeals Ruling
- The Court of Appeals affirmed the trial court’s Decision in toto and denied the appeal, holding that the 1981 deed was not rendered void by the absence of the wife’s consent and that notarization did not affect validity.
- The CA applied Article 1544 of the Civil Code and concluded that petitioners were not in good faith because Atty. Sabitsana used his position and confidential knowledge of the Muertegui family to register his purchase ahead of them.
- The CA sustained the award of attorneys fees and litigation expenses to the respondent as just and equitable under the circumstances.
Issues Presented
- Whether the Regional Trial Court had jurisdiction over the action for quieting of title in view of the assessed value of the lot stated as P1,230.00.
- Whether Article 1544 of the Civil Code applied to the double sale of the unregistered lot or whether the Property Registration Decree (P.D.