Title
Spouses Vallido vs. Spouses Pono
Case
G.R. No. 200173
Decision Date
Apr 15, 2013
Martino sold land to Purificacion (unregistered), who sold it to Marianito. Martino later sold the same land to his grandson Esmeraldo, who registered it. SC ruled first buyers (Marianito) had better rights; Esmeraldo failed to prove good faith.
land sale
ownership
disputed land
A

Case Summary (G.R. No. 200173)

Factual Background

Martino Dandan was the registered owner of a 28,214 square meter parcel in Kananga, Leyte under Homestead Patent No. V-21513 and Original Certificate of Title (OCT) No. P-429. On January 4, 1960, Martino sold an 18,214 square meter portion to Purificacion Cerna, and delivered to her the owner's duplicate of OCT No. P-429; the transfer was not recorded in the Registry of Deeds. On May 4, 1973, Purificacion sold that portion to Marianito Pono, delivered the same owner's duplicate to him, and Marianito thereafter registered the parcel for taxation, paid taxes, took possession, and allowed his son and daughter-in-law, Elmer and Juliet, to erect a house thereon; that sale likewise was not recorded. Martino later relocated to Noveleta, Cavite. On June 14, 1990, Martino purportedly sold the whole property to his grandson Esmeraldo Vallido, who lacked a title copy because Martino had previously delivered the owner's duplicate to Purificacion. Martino subsequently petitioned for issuance of a new owner's duplicate of OCT No. P-429 on May 7, 1997, claiming loss; the petition was granted on June 8, 1998. The petitioners registered the 1990 deed on September 17, 1999, and TCT No. TP-13294 issued in their names.

Trial Court Proceedings

The petitioners brought a complaint for quieting of title, recovery of possession of real property, and damages before the RTC, Branch 12, Ormoc City. The respondents, principally Elmer and Juliet, answered and recited the historical chain of transactions beginning with the 1960 sale to Purificacion and the 1973 sale to Marianito, asserting their possession and improvements. On July 20, 2004, the RTC ruled for the petitioners, finding a double sale under Article 1544 of the Civil Code, characterizing the respondents as the first buyers and the petitioners as the second buyers, and deeming the petitioners buyers and registrants in good faith because OCT No. P-429 appeared clean at the time of the 1990 sale and the subsequent registration bore no annotation or encumbrance; the RTC held that the petitioners’ registration conferred a better right. The respondents filed a Notice of Appeal on August 27, 2004.

Court of Appeals Decision

The Court of Appeals reversed and set aside the RTC decision in its December 8, 2011 decision and ruled in favor of the respondents. The CA agreed that a double sale occurred but concluded that the petitioners were neither buyers nor registrants in good faith. The CA emphasized that the respondents were in actual possession and that when land is in the possession of a person other than the vendor, a purchaser must look beyond the certificate of title and inquire into the rights of the occupant; mere registration, the CA held, does not constitute good faith unless good faith accompanied the registration. The CA found that the petitioners failed to prove good faith and therefore the respondents, as prior possessors from 1960, had a better right to the property.

Supreme Court Proceedings and Principal Issue

The petitioners sought review by certiorari. They urged that the CA erred, contending inter alia that the respondents’ appellants brief was filed beyond the extension period and that the RTC’s factual findings should therefore not have been disturbed; they also maintained that they were buyers and registrants in good faith because the title appeared clean and they had no knowledge of the 1960 sale given their residence in Cavite and reliance on Martino’s denial of any sale. The Court treated the timeliness of the appellants brief as a technical issue resolved by the CA and distilled the controlling issue to whether the petitioners were buyers and registrants in good faith.

Parties’ Contentions

The petitioners asserted that at the time of the 1990 sale OCT No. P-429 was clean and free of encumbrances, that they acted in good faith and without notice of the prior unregistered sale because they lived far from the property, and that they relied on Martino’s denial that any sale had been made to Purificacion. The respondents relied on their unregistered but earlier sale from Martino in 1960, their subsequent acquisition from Purificacion in 1973, continuous possession, payment of taxes, and the construction of permanent improvements; they argued these facts established their better right and that the petitioners had the burden to prove good faith.

Supreme Court Ruling

The Supreme Court denied the petition. The Court held that the petitioners failed to prove that they were buyers and registrants in good faith. The Court reasoned first that Esmeraldo was Martino’s grandson and therefore in privity with the vendor; under the doctrine articulated in Pilapil v. Court of Appeals, registration serves to give notice to third persons but privies are not third persons, and the non-registration of the earlier sale is immaterial and binding on the petitioners who are privies. Because of that privity, the petitioners were charged with constructive knowledge of prior dispositions affecting the property and could not claim registrant good faith. The Court further held that the petitioners should have been put on guard by circumstances that required investigation: Martino was not in actual possession at the time of the 1990 sale; Martino did not have the owner’s duplicate copy at the sale; there were existing permanent improvements; and the respondents were in actual possession. The Court applied established precedents that a purchaser dealing in registered land need not ordinarily look beyond the certificate of title but must do so when circumstances would put a prudent buyer on inquiry, citing authority that an ocular inspection and inquiry into the status of occupants is a customary safeguard. The Court found Martino’s statements inconsistent—he later told Esmeraldo the 1960 transaction was only a mortgage while in his petition for issuance of a new owner’s duplicate he claimed not to recall delivering the title copy—and held that the petitioners unreasonably accepted Martino’s denial. Because the petitioners were not in good faith, they could not invoke the indefeasibility of their TCT; the Court cited the principle that indefeasibility does not extend to transferees who take title in bad faith. The Court found the respondents to be possessors in good faith who had made improvements and concluded that ownership should vest in the respondents, who had the prior possessory right. The petition was therefore denied.

Legal Basis and Reasoning

The Court applied the following legal principles and authorities. The burden of proving good faith lies on the second buyer in a double-sale case; an ordinary presumption of good faith is insufficient without proof. Privity between vendor and transferee charges the transferee with constructive notice of prior unregistered dispositions; the rationale in Pilapil v. Court of Appeals was invoked to explain that registration principally protects third persons and does not relieve privies of the effect of prior unregistered transac

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