G.R. No. L-48322 April 8, 1987 FELIPE DAVID and ANTONIA G. DAVID, petitioners, vs.

EULOGIO BANDIN (substituted by his legal heirs, namely: JUANA SILVERIO, JOSE, GABRIEL, ANICETA, VIRGINIA and FELIX, all surnamed Bandin); GREGORIO BANDIN, RAYMUNDA BANDIN, VALENTIN BRIONES, SOFIO BRIONES and AGAPITA RAMOS. respondents.

No. L-49712 April 8, 1987 MAGNO DE LA CRUZ, petitioner, vs. HONORABLE COURT OF APPEALS; EULOGIO BANDIN (substituted by his legal heirs, namely: JUANA, SILVERIO, JOSE, GABRIEL, ANICETA, VIRGINIA and FELIX, all surnamed Bandin); GREGORIO BANDIN, RAYMUNDA BANDIN, SOFIO BRIONES and AGAPITA RAMOS; respondents. No. L-49716 April 8, 1987 JUANITA MARTIN VDA. DE LUCENA MAXIMINA MARTIN VDA. DE COSME, VICTORIA MARTIN VDA. DE OMANBAC, NEMESIO A. MARTIN, LEONORA DE LA CRUZ and AQUILINA DE LA CRUZ, petitioners, vs. EULOGIO BANDIN (substituted by his legal heirs, namely: JUANA, SILVERIO, JOSE, GABRIEL, ANICETA, VIRGINIA and FELIX, all surnamed Bandin);, VALENTIN BRIONES, AGAPITA RAMOS and COURT OF APPEALS, respondents. No. L-49687 April 8,1987 JOSE RAMIREZ and HEIRS OF AMBROCIA P. VDA. DE SOTERO RAMIREZ, petitioners, vs. COURT OF APPEALS and EULOGIO BANDIN (substituted by his legal heirs, namely: JUANA, SILVERIO, JOSE, GABRIEL, ANICETA, VIRGINIA and FELIX, all surnamed BANDIN); GREGORIO BANDIN, RAYMUNDA BANDIN, VALENTIN BRIONES, SOFIO BRIONES and AGAPITA RAMOS, respondents. YAP, J.: These petitions, which were consolidated by resolution of this Court dated February 20, 1980, stemmed from a complaint filed by the herein respondents with the Court of First Instance of Rizal Branch VII, Pasay City, on June 14, 1963, for the recovery and partition of property. The complaint was amended twice to reflect additional pertinent and material facts, such as transfers, partitions, subdivisions and registration of portions of the properties involved, and to bring in other indispensable parties to the case. On April 12, 1975, a decision was rendered by the trial court, in favor of the plaintiffs, declaring, however, that certain properties could no longer be reconveyed to plaintiffs since they had been transferred to purchasers who bought them in good faith for value. Not satisfied with the decision, both plaintiffs and defendants appealed to the Court of Appeals. The plaintiffs' appeal was docketed as CA-G.R. No. 58647-R, while that of defendants as CA-G.R. No. 60511-R. . Both appeals were consolidated, and a decision was rendered by the Court of Appeals on May 19, 1978, which modified the decision of the trial court in that it nullified the transfers made to the defendants who were declared by the trial court as purchasers in good faith.

From the decision of the Court of Appeals, an appeal was taken by the parties adversely affected thereby to this Court. Except for petitioners in G.R. No. L-49716 who seek restoration of the status quo ante, all other petitioners pray that the decision of the trial court be reinstated. The facts antecedent of this petition, as may be gathered from the decision, are as follows: During their lifetime, the spouses Juan Ramos, who died on March 5, 1919, and Fortunate Calibo, who died before 1919, were the owners of two parcels of land situated in Las Pinas, Rizal: 1) A parcel of land situated in Barrio Talon, with an area of 39,887 square meters, under Tax Declaration No. 9614 (Talon property for short); and 2) A parcel of land situated in Barrio Laong, with an area of 15,993 square meters, under Tax Declaration No. 4005, although the actual area when surveyed was 22,285 square meters (Laong property for short). Both spouses died intestate, leaving as heirs two legitimate children, Candida and Victorians Ramos, and granddaughter, Agapita Ramos, daughter of their deceased sora Anastacio. Upon the death of the said spouses, their daughter, Candida Ramos, assumed administration of the properties until her death on February 16, 1955. Victorians Ramos died on December 12,1931. Both Candida and Victoriana Ramos died intestate. Candida Ramos was survived by the following heirs: 1) Victoria Martin-Omanbac, 2) Antonio Martin, 3) Juanita Martin Vda. de Lucena, 4) Maximina Martin Vda. de Cosme, 5) Raymundo Martin, 6) Aquilina de la Cruz, and 7) Leonora de la Cruz. Victoriana's heirs are her children from her two marriages, namely: 1) Eulogio Bandin, 2) Gregorio Bandin, 3) Raymunda Bandin, 4) Valentin Briones, and 5) Sofio Briones. The record shows that sometime in 1943, Candida Ramos prevailed upon her niece, Agapita Ramos, and her nephew, Eulogio Bandin, to sell a portion of the Talon property to the spouses Rufino 0. Miranda and Natividad Guinto. This portion was divided into three lots: Parcel 1, containing an area of 24,363 square meters, declared under Tax Declaration No. 2996 (1948). The spouses Rufino Miranda and Natividad Guinto subsequently sold the said lot to Narciso Velasquez and Albino Miranda. These two later sold the same property to Velasquez Realty Company, Inc., which registered the property and obtained OCT No. 1756 (later cancelled and replaced by TCT No. 165335); Parcel 2, containing an area of 752 square meters, declared under Tax Declaration No. 3358 (1949); and Parcel 3, containing an area of 516 square meters under Tax Declaration No. 3359 (1949). Parcels 2 and 3 were subsequently sold by Rufino Miranda and Natividad Guinto to Jose Ramirez and Sotero Ramirez (survived by Ambrocia Vda. de Martin), respectively, who registered these properties and obtained OCT Nos. 2027 and 2029 in their respective names. The remaining portion of the Talon property was extrajudicially partitioned on September 17, 1955 among the heirs of Candida Ramos, namely: Juanita Martin, Victoria Martin, Maximina M. Vda. de Cosme, Antonio Martin and Raymundo Martin. In 1959, this property was subdivided (Subdivision Plan PSU-173299) into seven lots and adjudicated as follows: 1) To the heirs of Raymundo Martin, namely, Juan, Antonio, Rodrigo, Norma, Bernards, Rufina and Nieves, all surnamed Martin, and Trinidad Bunag Vda. de Martin Lot 1, containing an area of 774 square meters, declared under Tax Declaration No. 5588 (1960). This lot was subsequently sold to Consolacion de la Cruz who was able to register the property in her name under OCT No. 4731 (later cancelled and replaced by TCT Nos. 227470 and 227471). 2) To Juanita Martin Lot 2, containing an area of 774 square meters, declared under Tax Declaration No. 4831, and subsequently titled in her name under OCT No. 10002, issued on December 18, 1973.

3) To Leonora de la Cruz, granddaughter of Candida Ramos by her son Meliton de la Cruz by her first husband Lot 3, containing an area of 346 square meters, declared under Tax Declaration No. 5526 (1960) and subsequently registered under OCT No. 6102, issued on January 29, 1967. 4) To Antonio Martin Lot 4, containing an area of 774 square meters, declared under Tax Declaration No. 4833. The property was subsequently sold by the heirs of Antonio Martin to Nemesio Martin. 5) To Victoria Martin Lot 5, containing an area of 773 square meters, declared under Tax Declaration No. 5590. This lot was later registered by Victoria, to whom OCT No. 3706 was issued on August 22, 1963. She subsequently sold a portion of 300 square meters to Magno de la Cruz on September 25,1963, to whom was issued TCT No. 116450. 6) To Maximina Martin Lot 6, containing an area of 773 square meters, under Tax Declaration No. 5591 (1960). Maximina was able to register the land and was issued OCT No. 3707 on August 22, 1963. She later sold a portion of 300 square meters to Magno de la Cruz, to whom was issued TCT No. 116450. 7) To Aquiline de la Cruz Lot 7, with an area of 428 square meters, declared under Tax Declaration No. 5592 (1960). Aquilina is the granddaughter of Candida Ramos by her son Meliton de la Cruz by her first marriage. Aquilina registered the land in her name in 1967 and was issued OCT No. 6103. The Laong property was sold by Candida Ramos and her children on December 19, 1943 to Hermogenes Lucena, husband of Juanita Martin, one of the daughters of Candida. On September 23, 1959, Juanita (then widowed) sold the property to the spouses Gregorio and Mary Venturanza for P43,236.00 of which P10,000 was paid as down payment, the balance to be paid upon the vendor obtaining Torrens title to the land. On January 21, 1965, the Venturanzas, in a deed of sale also signed by Juanita Martin, conveyed a portion of the property with an area of 15,000 square meters to the spouses Felipe and Antonia David, in liquidation of the latter's investment in the joint real estate venture which they had entered into with the Venturanzas in April 1959. Juanita Martin Vda. de Lucena was able to register the property in her name and was issued OCT No. 8916 on July 1, 1971. The portion sold to the spouses Felipe and Antonia David is presently covered by TCT No. 372092. From the foregoing facts as established by the evidence, the trial court held that the Talon and Laong properties formed part of the estate of the spouses Juan Ramos and Fortunate Calibo, which after their death devolved by right of succession upon their heirs, namely, Candida Ramos, Victorians Ramos and Agapita Ramos, each of whom was entitled to one-third (1/3) pro-indiviso share of the properties. The estate of the deceased spouses was never judicially or extra-judicialy settled among their heirs, who, therefore, remained pro-indiviso co-owners of the said properties, and upon the death of Victorians and Candida, their respective shares in turn passed to their heirs. Accordingly, the trial court declared the plaintiffs, Agapita Ramos, and the heirs of Victorians Ramos, entitled to two- thirds (2/3) pro-indiviso share of the Talon and Laong properties, and ordered the defendants heirs of Candida Ramos to reconvey to plaintiffs their shares in those properties. However, such reconveyance was no longer possible with respect to the portions which, in the meantime, had been sold and disposed of to third parties who were purchasers in good faith and for value. The following parties were held to be purchasers in good faith. 1) defendants Rufino Miranda, Narciso Velasquez, Albina Miranda and Velasquez Realty Co., with respect to 24,636 square meters (Parcel 1) of the Talon property sold by Candida Ramos, Eulogio Bandin and Agapita Ramos in 1943; 2) defendants Jose Ramirez and Ambrocia Vda. de Ramirez (widow of Sotero Ramirez), with respect to 752 square meters (Parcel 2) and 516 square meters (Parcel 3), respectively, of the Talon property, 3) defendant Consolacion de la Cruz, with respect to 774 square meters (Lot 1 of Subdivision Plan PSU-173299); 4) defendant Nemesio Martin, with respect to 774 square meters (Lot 2 of Subdivision Plan); 5) defendant Magno de la Cruz, with respect to 300 square meters sold by Victoria Martin and 300 square meters sold by Maximina Martin (portions of Lots 5 and 6 of Subdivision Plan); 6) defendant spouses Felipe and Antonia David, with respect to 15,000 square meters of the Laong property. Since the foregoing

properties could not be reconveyed to the plaintiffs, the defendants heirs who sold them were ordered to pay the plaintiffs two-thirds (2/3) of the present value of such properties. As stated heretofore, the trial court's decision was upheld by the respondent Court of Appeals, except with respect to the finding that third parties who bought portions of the properties from the defendants heirs were purchasers in good faith This finding was reversed by the respondent appellate court. In fine, the appellate court: a) nullified the sale of the Laong property by Candida Ramos Vda. de Martin and her children in 1943 in favor of Hermogenes Lucena, the husband of Juanita Martin, one of the daughters of Candida, as wen as an subsequent sales, transfers and conveyances of said property, insofar as they affected the two-thirds (2/3) pro-indiviso share of Agapita Ramos and the heirs of Victorians Ramos; b) nullified the sale of portions of the Talon property by Candida Ramos, Eulogio Bandin and Agapita Ramos in 1943 in favor of the spouses Rufino Miranda and Natividad Guinto, and all the subsequent transfers of said properties, insofar as the four-fifteenth (4/15) share of Gregorio Bandin, Raymundo Bandin, Sofio Briones and Valentin Briones were affected; and c) invali dated the deed of extrajudicial partition among the heirs of Candida Ramos over the remaining portion of the Talon property in 1955 and the subdivision thereof into individual lots among said heirs, as well as all subsequent transfers and conveyances of some of said lots, or portions thereof, to third parties, insofar as they affected the two-third (2/3) pro- indiviso share pertaining to Agapita Ramos and the heirs of Victorians Ramos. From the above decision of the Court of Appeals, the petitioners have come to us on separate petitions for review by certiorari. G.R. No. L-49716.: The petitioners are the heirs of Candida Ramos, led by Juanita Martin Vda. de Lucena and joined in by her brothers and sisters who are the children of Candida by her first and second marriages. Primarily, petitioners alleged that the Court of Appeals erred in not declaring that private respondents' claim if any, is barred by prescription; and in annulling and ordering the cancellation of Original Certificate of Title No. 8916 issued in the name of Juanita Martin pursuant to a decision by the land registration court, affirmed by the Court of Appeals in CA G.R. No. 35191-R, which had already become final and executory. Petitioners claim in their brief, apparently referring to the Laong property only, that Juanita Martin, widow of Hermogenes Lucena and daughter of Candida Ramos, had been in possession of the property since 1943 to the exclusion of private respondents. The trial court, however, found that Candida Ramos, until her death on February 15, 1955, administered the Laong property, and that plaintiffs- appellants were given their shares of the fruits thereof, though irregular and at times little, depending on the amount of the harvest. Under Article 494 of the new Civil Code (Article 400 of the old Civil Code), prescription generally does not run in favor of a co-heir or co-owner as long as, he expressly or impliedly recognizes the co-ownership. While an implied or constructive trust prescribes in ten years, the rule does not apply where a fiduciary relation exists and the trustee recognizes the trust. 1 In the case at bar, there is no showing that the rights of the plaintiffs as co-owners were repudiated by Candida Ramos in her lifetime; in fact, the evidence as found by the trial court show the contrary. The court a quo did not sustain the defense of laches and prescription put up by the defendants (herein petitioners) since it was not shown that the plaintiffs were guilty of negligence or slept on their rights. They sent a letter of demand to the heirs of Candida Ramos on April 23, 1963, and filed their complaint against them on June 14, 1963, or within a period of approximately eight (8) years from Candida's death. In sustaining the findings of the trial court, the Court of Appeals did not commit any reversible error. Petitioners further invoke the doctrine of res judicata in that the decree of registration of the property in the name of Juanita Martin as owner by the land registration court was affirmed by the Court of Appeals in its decision dated

July 16, 1969 in CA G.R. No. 35191-R, which had already become final and executory. Both the respondent Court of Appeals and the trial court correctly rejected the petitioners' contention. There can be no res judicata since private respondents were not parties to the above case. Neither can it be claimed that the decree of registration vested ownership in Juanita Martin. The appellate court, citing jurisprudence established by this Court, held that the purpose of the Land Registration Act is not to create or vest title, but to confirm and register title already vested 2 and existing in the applicant for a title. G.R. No. L-48322.: The petitioners spouses Felipe David and Antonia G. David purchased portions of the Laong property, consisting of 15,000 square meters, on February 21, 1965 from the spouses Gregorio and Mary Venturanza, who, in turn, purchased the property from Juanita Martin Vda. de Lucena, on September 23, 1959. At the time both purchases took place, the property in question was still an unregistered land. The land was registered in the name of Juanita Martin only on July 1, 1971, to whom was issued OCT No. 8916. Petitioners contend that the Court of Appellee erred in holding that they are buyers in bad faith, in ordering the cancellation of OCT No. 8916 and all subsequent transfer certificates of title derived therefrom, and in ordering petitioners - to reconvey to respondents their two-third (2/3) pro-indiviso share of the land and to segregate therefrom 10,000 square meters for reconveyance to respondents. In assailing the decision of the appellate court, petitioners invoke the doctrine of incontrovertibility of the decree of registration after one year from issuance, and the doctrine of conclusiveness and indivisibility of titles issued under the Torrens system. Petitioners might have stood on solid ground in invoking the above doctrines if they had purchased the property from the registered owner after the issuance of the decree of registration and the 3 corresponding certificate of title in his name. As the record shows, petitioners bought the property when it was still unregistered land. The defense of having purchased the property in good faith may be availed of only where registered land is involved and the buyer had relied in good faith on the clear title of the registered owner. One who purchases an unregistered land does so at his peril His claim of having bought the land in good faith, i.e. without notice that some other person has a right to, or interest in, the property, would not protect him if it turns out that the seller does not actually own the property. This is what happened in the case at bar. G.R.No. L-49867: In this petition, petitioners Jose Ramirez and the heirs of Ambrocia P. Vda. de Ramirez (widow of Sotero Ramirez), assail the decision of the respondent Court of Appeals declaring them purchasers in bad faith and ordering them to reconvey to the plaintiffs Gregorio Bandin, Raymunda Bandin&A Valentin Briones and Soto Briones, four-fifteenth (4/15) share pro-indiviso of the properties they purchased from the spouses Rufino Miranda and Natividad Guinto. The land in question, containing an area of 516 square meters, more or less, was purchased by Jose Ramirez on June 4, 1949. Sotero Ramirez purchased his land, with an area of 752 square meters on July 9, 1948 and May 10, 1949. These parcels of land purchased by the Ramirezes were part of the portion of the Talon property bought by the spouses Rufino and Natividad Miranda from Candida Ramos, Eulogio Bandin and Agapita Ramos in 1943. The appellate court held that Jose Ramirez and his father Sotero Ramirez were not purchasers in good faith, not having made diligent investigation of the true ownership of the properties they bought, but relied merely on the tax declaration shown to them by the seller, Rufino Miranda. We have no reason to disturb the foregoing findings of the respondent appellate court. Besides, as mentioned earlier, the issue of good faith or bad faith of the buyer is relevant only where the subject of the sale is registered land and the purchaser is buying the same from the registered owner, whose title to the land is clean. In such case, the purchaser who relies on the clean title of the

registered owner is protected if he is a purchaser in good faith for value. However, this is not the situation before us in the instant case, What petitioners bought were unregistered lands. Petitioners contend that the respondents are barred by estoppel and laches from recovering the property in question We have already dealt with this issue above. We find the contention without merit. Petitioners suggest that the portion ordered to be taken from the properties of Jose and Sotero Ramirez should be taken instead from the shares which pertain to and are held by the heirs of Candida Ramos. We do not find the suggestion meritorious. The respondents are entitled to their pro- indiviso share of the property unlawfully sold by Candida Ramos, Agapita Ramos and Eulogio Bandin to the Miranda spouses from whom the petitioners bought the parcels of land in question. Hence, it would not be proper for the court to respondents' right to recover their proindiviso share of the property only from the remaining portion still in the possession of the heirs of Candida Ramos. G.R. No. L-49712: The case of Magno de la Cruz stands on different footing from the other petitions. The property purchased by him from Victoria Martin and Maximina Martin were registered lands, covered by Torrens title. Being a purchaser in good faith for value, Magno de la Cruz is protected by the law. In the absence of a showing that he had actual notice of the defect in the title of the vendors or that he is a buyer in bad faith the deed of sale in his favor and the corresponding certificate of title issued in his name can not be nullified and cancelled. Hence, it was error for the respondent court to invalidate the sale made by Victoria and Maximina Martin in favor of Magno de la Cruz to the extent that it prejudiced the two-third (2/3) pro-indiviso share of respondents in the property and to order petitioner to reconvey said share to respondents. The petition of Magno de la Cruz is meritorious, and the decision appealed from should be modified accordingly. WHEREFORE, in view of all the foregoing, judgment is hereby rendered: 1. Dismissing the petitions in G.R. Nos. L-48322, L-49716 and L-49687; 2. Granting the petition in G.R. No. L-49712, declaring valid the deeds of sale executed by Victoria Martin (Exh. 8Magno de la Cruz) and Maximina Martin (Exh. 4-Magno de la Cruz) in favor of petitioner Magno de la Cruz, as well as Transfer Certificate of Title No. 116450 issued in the latter's name, ordering Victoria Martin and Maximina Martin to pay the respondents two-third (2/3) of the present value of the property sold by them to Magno de la Cruz, and modifying the appealed decision accordingly; and 3. Affirming the appealed decision, except as modified above. No pronouncement as to costs. SO ORDERED. Narvasa, Melencio-Herrera, Cruz, Feliciano and Sarmiento, JJ., concur. Gancayco, J., took no part. G.R. No. L-34500 March 18, 1988 MOISES OLIVARES and JUANITA T. OLIVARES, petitioners-appellants, vs.

THE HONORABLE CARLOS V. GONZALES as Judge of the Court of First Instance of Iloilo (Branch VI), respondent and JACINTO TUVILLA, CEFERINO TUVILLA, and JUAN TUMABINI, respondents-appellees. Mario Guarina III for petitioners-appellants. Enrique Arguelles for respondents-appellees.

MELENCIO-HERRERA, J.: The Disputed Property is a piece of unregistered land located at Tigbauan, Iloilo Identified as Assessor's Lot No. 343. It was previously owned by respondents-appellees Jacinto Tuvilla and Ceferino Tuvilla (the Tuvillas, for short) both of Tigbauan, Iloilo. Sometime in 1955, the Tuvillas executed a "Deed of Sale with Right to Repurchase" in favor of respondent-appellee Juan Tumabini over the Disputed Property in consideration of the sum of P1,350.00. The document was duly acknowledged before a Notary Public but was not recorded in the Registry of Property. Sometime in 1959, the Tuvillas executed a "Deed of Sale with Pacto de Retro" over the Disputed Property in favor of petitioners- appellants, Moises Olivares and Juanita T. Olivares (the Olivareses, for short). This document was acknowledged before a Notary Public and registered with the Registry of Deeds. In 1966, the Tuvillas also executed in favor of the Olivareses a "Deed of Absolute Sale" covering the Disputed Property. Petitioners-appellants have been in possession of the Disputed Property since 1959. On October 11, 1967, respondent-appellee, Juan Tumabini filed Civil Case No. 7410 before Branch I of the then Court of First Instance of Iloilo against the Tuvillas for the consolidation of ownership over the Disputed Property by reason of the alleged failure of the Tuvillas to redeem the property from Tumabini (hereinafter referred to as the Consolidation Case). The Olivareses, however, were not included as parties to the said case. During the pre-trial of the Consolidation Case, counsel for the parties agreed to consider the pacto de retro sale as one of equitable mortgage. Thus, the Trial Court rendered judgment in favor of Tumabini in the amount of P 1,350.00, pursuant to which, the Court subsequently issued a Writ of Execution on October 23, 1968. On November 23, 1968, the Olivareses instituted Civil Case No. 7777 before Branch VI of the former Court of First Instance of Iloilo, for Quieting of Title, against the Tuvillas, Juan Tumabini the Provincial Sheriff and Pyramid Surety (hereinafter, the Quieting of Title Case). The said Court issued a Restraining Order to stop the sale in the Consolidation Case (No. 7410) pending in Branch 1, but the said order was lifted on February 6, 1969. Subsequently, the Consolidation Case (No. 7410), the Disputed Property was sold at public auction and a Writ of Possession was issued in Tumabinis favor. However, the tenant of the Olivareses refused to surrender possession, prompting a citation for contempt. Action thereon was deferred, however, pending termination of Civil Case No. 7777. On July 7, 1970, in the Quieting of Title Case (No. 7777), the Trial Court issued an Order dismissing said case, as follows: Acting upon the motion for dismissal of this case filed by Atty. Enrique Arguelles, counsel for the defendants, it appearing that the instant action has been filed since November 23, 1968 and up to this time plaintiffs failed to exert effort to have the defendants summoned, for failure to

prosecute and lack of interest on the part of the plaintiffs for such unreasonable length of time, as prayed, let this case be dismissed No reconsideration was sought nor any appeal taken by the Olivareses. On July 14, 1971, the same case was refiled, also in Branch VI, docketed as Civil Case No. 8698 (the Refiled Case) which, however, was dismissed by the Court on September 6, 1971 "it appearing that Civil Case No. 7777 previously filed and dismissed by the Court embraces the same subject matter and the same party litigants as the case at bar." On September 20, 1971, the Court denied the Motion for Reconsideration filed by the Olivareses. Hence, this appeal by certiorari. The question posed is whether the dismissal of the Quieting of Title Case (No. 7777) "for failure to prosecute" barred the institution of a subsequent suit, Civil Case No. 8698, by the same plaintiff against the same defendants on the same cause of action. Section 3, Rule 17 of the Rules of Court specifically provides: Sec. 3. Failure to prosecute. If plaintiff fails to appear at the time of the trial, or to prosecute his action for an unreasonable length of time, or to comply with these rules or any order of the court, the action may be dismissed upon motion of the defendant or upon the court's own motion. This dismissal shall have the effect of an adjudication upon the merits, unless otherwise provided by the court. Procedurally speaking, therefore, since the dismissal by the Trial Court was unqualified, it had the effect of an adjudication upon the merits. However, the equities of the case are with the Olivareses. The first sale with pacto de retro by the Tuvillas to Tumabini was unregistered; in contrast, the sale in favor of the Olivareses was duly recorded. The Consolidation Case (Case No. 7410) instituted by Tumabini against the Tuvillas for consolidation of his ownership did not include the Olivareses as parties defendants even though they were then in possession of the Disputed Property. Justice and equity demand, therefore, that their side be heard in the Refiled Case (No. 8698). Then, too, the contempt incident and the matter of the Writ of Possession in the Consolidation Case (No. 7410) were left unresolved pending the outcome of the Quieting of Title Case (No. 7777). In other words, it would be more in keeping with substantial justice if the controversy between the parties to be resolved on the merits rather than on a procedural technicality in the light of the express mandate of the Rules that they be "liberally construed in order to promote their object and to assist the parties in obtaining just, speedy and inexpensive determination of every action and proceeding." The dismissal of actions is based on sound judicial discretion and such discretion "must be exercised wisely and prudently never capriciously, with a view to substantial justice." For having failed to meet that standard it will have to be held that respondent Judge acted with grave abuse of discretion (see Tandoc vs. Tensuan, I, 50835, October 30, 1979, 93 SCRA 880). WHEREFORE, the questioned Order of dismissal, dated September 6, 1971, in Civil Case No. 8698, is hereby SET ASIDE and the said case REMANDED for prompt hearing and determination on the merits. This Decision shag be immediately executory upon promulgation. No costs. SO ORDERED. Yap (Chairman), Paras, Padilla and Sarmiento, JJ., concur. G.R. No. L-28740 February 24, 1981

FERMIN Z. CARAM, JR., petitioner, vs. CLARO L. LAURETA, respondent. FERNANDEZ, J.: This is a petition for certiorari to review the decision of the Court of Appeals promulgated on January 29, 1968 in CA-G. R. NO. 35721-R entitled "Claro L. Laureta, plaintiff-appellee versus Marcos Mata, Codidi Mata and Fermin Caram, Jr., defendants- appellants; Tampino (Mansaca), et al. Intervenors-appellants," affirming the decision of the 1 Court of First Instance of Davao in Civil Case No. 3083. On June 25, 1959, Claro L. Laureta filed in the Court of First Instance of Davao an action for nullity, recovery of ownership and/or reconveyance with damages and attorney's fees against Marcos Mata, Codidi Mata, Fermin Z. 2 Caram, Jr. and the Register of Deeds of Davao City. On June 10, 1945, Marcos Mata conveyed a large tract of agricultural land covered by Original Certificate of Title No. 3019 in favor of Claro Laureta, plaintiff, the respondent herein. The deed of absolute sale in favor of the plaintiff was not registered because it was not acknowledged before a notary public or any other authorized officer. At the time the sale was executed, there was no authorized officer before whom the sale could be acknowledged inasmuch as the civil government in Tagum, Davao was not as yet organized. However, the defendant Marcos Mata delivered to Laureta the peaceful and lawful possession of the premises of the land together with the pertinent papers thereof such as the Owner's Duplicate Original Certificate of Title No. 3019, 3 sketch plan, tax declaration, tax receipts and other papers related thereto. Since June 10, 1945, the plaintiff Laureta had been and is stin in continuous, adverse and notorious occupation of said land, without being molested, disturbed or stopped by any of the defendants or their representatives. In fact, Laureta had been paying realty taxes due thereon and had introduced improvements worth not less than P20,000.00 at the time of the filing 4 of the complaint. On May 5, 1947, the same land covered by Original Certificate of Title No. 3019 was sold by Marcos Mata to defendant Fermin Z. Caram, Jr., petitioner herein. The deed of sale in favor of Caram was acknowledged before Atty. Abelardo Aportadera. On May 22, 1947, Marcos Mata, through Attys. Abelardo Aportadera and Gumercindo Arcilla, filed with the Court of First Instance of Davao a petition for the issuance of a new Owner's Duplicate of Original Certificate of Title No. 3019, alleging as ground therefor the loss of said title in the evacuation place of defendant Marcos Mata in Magugpo, Tagum, Davao. On June 5, 1947, the Court of First Instance of Davao issued an order directing the Register of Deeds of Davao to issue a new Owner's Duplicate Certificate of Title No. 3019 in favor of Marcos Mata and declaring the lost title as null and void. On December 9, 1947, the second sale between Marcos Mata and Fermin Caram, Jr. was registered with the Register of Deeds. On the same date, Transfer 5 Certificate of Title No. 140 was issued in favor of Fermin Caram Jr. On August 29, 1959, the defendants Marcos Mata and Codidi Mata filed their answer with counterclaim admitting the existence of a private absolute deed of sale of his only property in favor of Claro L. Laureta but alleging that he signed the same as he was subjected to duress, threat and intimidation for the plaintiff was the commanding officer of the 10th division USFIP operating in the unoccupied areas of Northern Davao with its headquarters at Project No. 7 (Km. 60, Davao Agusan Highways), in the Municipality of Tagum, Province of Davao; that Laureta's words and requests were laws; that although the defendant Mata did not like to sell his property or sign the document without even understanding the same, he was ordered to accept P650.00 Mindanao Emergency notes; and that due to his fear of harm or danger that will happen to him or to his family, if he refused he had no other 6 alternative but to sign the document. The defendants Marcos Mata and Codidi Mata also admit the existence of a record in the Registry of Deeds regarding a document allegedly signed by him in favor of his co-defendant Fermin Caram, Jr. but denies that he ever signed the document for he knew before hand that he had signed a deed of sale in favor of the plaintiff and

that the plaintiff was in possession of the certificate of title; that if ever his thumb mark appeared in the document purportedly alienating the property to Fermin Caram, did his consent was obtained through fraud and misrepresentation for the defendant Mata is illiterate and ignorant and did not know what he was signing; and 7 that he did not receive a consideration for the said sale. The defendant Fermin Caram Jr. filed his answer on October 23, 1959 alleging that he has no knowledge or information about the previous encumbrances, transactions, and alienations in favor of plaintiff until the filing of 8 the complaints. The trial court rendered a decision dated February 29, 1964, the dispositive portion of which reads:
9

1. Declaring that the deed of sale, Exhibit A, executed by Marcos Mata in favor of Claro L. Laureta stands and prevails over the deed of sale, Exhibit F, in favor of Fermin Caram, Jr.; 2. Declaring as null and void the deed of sale Exhibit F, in favor of Fermin Caram, Jr.; 3. Directing Marcos Mata to acknowledge the deed of sale, Exhibit A, in favor of Claro L. Laureta; 4. Directing Claro L. Laureta to secure the approval of the Secretary of Agriculture and Natural Resources on the deed, Exhibit A, after Marcos Mata shall have acknowledged the same before a notary public; 5. Directing Claro L. Laureta to surrender to the Register of Deeds for the City and Province of Davao the Owner's Duplicate of Original Certificate of Title No. 3019 and the latter to cancel the same; 6. Ordering the Register of Deeds for the City and Province of Davao to cancel Transfer Certificate of Title No. T-140 in the name of Fermin Caram, Jr.; 7. Directing the Register of Deeds for the City and Province of Davao to issue a title in favor of Claro L. Laureta, Filipino, resident of Quezon City, upon presentation of the deed executed by Marcos Mata in his favor, Exhibit A, duly acknowledged by him and approved by the Secretary of Agriculture and Natural Resources, and 8. Dismissing the counterclaim and cross claim of Marcos Mata and Codidi Mata, the counterclaim of Caram, Jr., the answer in intervention, counterclaim and cross-claim of the Mansacas. The Court makes no pronouncement as to costs. SO ORDERED. The defendants appealed from the judgment to the Court of Appeals. 35721- R.
10

The appeal was docketed as CA-G.R. NO.

The Court of Appeals promulgated its decision on January 29, 1968 affirming the judgment of the trial court. In his brief, the petitioner assigns the following errors: I
11

THE RESPONDENT COURT OF APPEALS ERRED IN CONCLUDING THAT IRESPE AND APORTADERA WERE ATTORNEYS-IN-FACT OF PETITIONER CARAM FOR THE PURPOSE OF BUYING THE PROPERTY IN QUESTION. II THE RESPONDENT COURT OF APPEALS ERRED IN CONCLUDING THAT THE EVIDENCE ADDUCED IN THE TRIAL COURT CONSTITUTE LEGAL EVIDENCE OF FRAUD ON THE PART OF IRESPE AND APORTADERA AT TRIBUTABLE TO PETITIONER. III THE RESPONDENT COURT OF APPEALS COMMITTED GRAVE ERROR OF LAW IN HOLDING THAT KNOWLEDGE OF IRESPE AND APORTADERA OF A PRIOR UNREGISTERED SALE OF A TITLED PROPERTY ATTRIBUTABLE TO PETITIONER AND EQUIVALENT IN LAW OF REGISTRATION OF SAID SALE. IV THE RESPONDENT COURT OF APPEALS ERRED IN NOT HOLDING THAT AN ACTION FOR RECONVEYANCE ON THE GROUND OF FRAUD PRESCRIBES WITHIN FOUR (4) YEARS. The petitioner assails the finding of the trial court that the second sale of the property was made through his representatives, Pedro Irespe and Atty. Abelardo Aportadera. He argues that Pedro Irespe was acting merely as a broker or intermediary with the specific task and duty to pay Marcos Mata the sum of P1,000.00 for the latter's property and to see to it that the requisite deed of sale covering the purchase was properly executed by Marcos Mata; that the Identity of the property to be bought and the price of the purchase had already been agreed upon by the parties; and that the other alleged representative, Atty. Aportadera, merely acted as a notary public in the execution of the deed of sale. The contention of the petitioner has no merit. The facts of record show that Mata, the vendor, and Caram, the second vendee had never met. During the trial, Marcos Mata testified that he knows Atty. Aportadera but did not 12 know Caram. Thus, the sale of the property could have only been through Caram's representatives, Irespe and Aportadera. The petitioner, in his answer, admitted that Atty. Aportadera acted as his notary public and attorney13 in-fact at the same time in the purchase of the property. The petitioner contends that he cannot be considered to have acted in bad faith because there is no direct proof showing that Irespe and Aportadera, his alleged agents, had knowledge of the first sale to Laureta. This contention is also without merit. The Court of Appeals, in affirming the decision of the trial court, said:
14

The trial court, in holding that appellant Caram. Jr. was not a purchaser in good faith, at the time he bought the same property from appellant Mata, on May 5, 1947, entirely discredited the testimony of Aportadera. Thus it stated in its decision: The testimony of Atty. Aportadera quoted elsewhere in this decision is hollow. There is every reason to believe that Irespe and he had known of the sale of the property in question to Laureta on the day Mata and Irespe, accompanied by Leaning Mansaca, went to the office of Atty. Aportadera for the sale of the same property to Caram, Jr., represented by Irespe as attorney-infact. Ining Mansaca was with the two Irespe and Mata to engage the services 6f Atty.

Aportadera in the annulment of the sale of his land to Laureta. When Leaning Mansaca narrated to Atty. Aportadera the circumstances under which his property had been sold to Laureta, he must have included in the narration the sale of the land of Mata, for the two properties had been sold on the same occassion and under the same circumstances. Even as early as immediately after liberation, Irespe, who was the witness in most of the cases filed by Atty. Aportadera in his capacity as Provincial Fiscal of Davao against Laureta, must have known of the purchases of lands made by Laureta when he was regimental commander, one of which was the sale made by Mata. It was not a mere coincidence that Irespe was made guardian ad litem of Leaning Mansaca, at the suggestion of Atty. Aportadera and attorney-in-fact of Caram, Jr. The Court cannot help being convinced that Irespe, attorney-in-fact of Caram, Jr. had knowledge of the prior existing transaction, Exhibit A, between Mata and Laureta over the land, subject matter of this litigation, when the deed, Exhibit F, was executed by Mata in favor of Caram, Jr. And this knowledge has the effect of registration as to Caram, Jr. RA pp. 123-124) We agree with His Honor's conclusion on this particular point, on two grounds the first, the same concerns matters affecting the credibility of a witness of which the findings of the trial court command great weight, and second, the same is borne out by the testimony of Atty. Aportadera himself. (t.s.n., pp. 187-190, 213-215, Restauro). Even if Irespe and Aportadera did not have actual knowledge of the first sale, still their actions have not satisfied the requirement of good faith. Bad faith is not based solely on the fact that a vendee had knowledge of the defect or lack of title of his vendor. In the case of Leung Yee vs. F. L. Strong Machinery Co. and Williamson, this Court 15 held: One who purchases real estate with knowledge of a defect or lack of title in his vendor can not claim that he has acquired title thereto in good faith, as against the true owner of the land or of an interest therein, and the same rule must be applied to one who has knowledge of facts which should have put him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the title of his vendor. In the instant case, Irespe and Aportadera had knowledge of circumstances which ought to have put them an inquiry. Both of them knew that Mata's certificate of title together with other papers pertaining to the land was 16 taken by soldiers under the command of Col. Claro L. Laureta. Added to this is the fact that at the time of the second sale Laureta was already in possession of the land. Irespe and Aportadera should have investigated the nature of Laureta's possession. If they failed to exercise the ordinary care expected of a buyer of real estate they must suffer the consequences. The rule of caveat emptor requires the purchaser to be aware of the supposed title of the vendor and one who buys without checking the vendor's title takes all the risks and losses consequent to 17 such failure. The principle that a person dealing with the owner of the registered land is not bound to go behind the certificate 18 and inquire into transactions the existence of which is not there intimated should not apply in this case. It was of common knowledge that at the time the soldiers of Laureta took the documents from Mata, the civil government of Tagum was not yet established and that there were no officials to ratify contracts of sale and make them registerable. Obviously, Aportadera and Irespe knew that even if Mata previously had sold t he Disputed such sale could not have been registered. There is no doubt then that Irespe and Aportadera, acting as agents of Caram, purchased the property of Mata in bad faith. Applying the principle of agency, Caram as principal, should also be deemed to have acted in bad faith. Article 1544 of the New Civil Code provides that:

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 recordered it in the Registry of Property. Should there be no inscription, the ownership shag 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. (1473) Since Caram was a registrant in bad faith, the situation is as if there was no registration at all.
19

The question to be determined now is, who was first in possession in good faith? A possessor in good faith is one 20 who is not aware that there exists in his title or mode of acquisition any flaw which invalidates it. Laureta was first in possession of the property. He is also a possessor in good faith. It is true that Mata had alleged that the 21 deed of sale in favor of Laureta was procured by force. Such defect, however, was cured when, after the lapse of four years from the time the intimidation ceased, Marcos Mata lost both his rights to file an action for annulment or to set up nullity of the contract as a defense in an action to enforce the same. Anent the fourth error assigned, the petitioner contends that the second deed of sale, Exhibit "F", is a voidable contract. Being a voidable contract, the action for annulment of the same on the ground of fraud must be brought within four (4) years from the discovery of the fraud. In the case at bar, Laureta is deemed to have discovered that the land in question has been sold to Caram to his prejudice on December 9, 1947, when the Deed of Sale, Exhibit "F" was recorded and entered in the Original Certificate of Title by the Register of Deeds and a new Certificate of Title No. 140 was issued in the name of Caram. Therefore, when the present case was filed on June 29, 1959, plaintiff's cause of action had long prescribed. The petitioner's conclusion that the second deed of sale, "Exhibit F", is a voidable contract is not correct. I n order that fraud can be a ground for the annulment of a contract, it must be employed prior to or simultaneous to the, consent or creation of the contract. The fraud or dolo causante must be that which determines or is the essential cause of the contract. Dolo causante as a ground for the annulment of contract is specifically described in Article 1338 of the New Civil Code of the Philippines as "insidious words or machinations of one of the contracting parties" which induced the other to enter into a contract, and "without them, he would not have agreed to". The second deed of sale in favor of Caram is not a voidable contract. No evidence whatsoever was shown that through insidious words or machinations, the representatives of Caram, Irespe and Aportadera had induced Mata to enter into the contract. Since the second deed of sale is not a voidable contract, Article 1391, Civil Code of the Philippines which provides that the action for annulment shall be brought within four (4) years from the time of the discovery of fraud does not apply. Moreover, Laureta has been in continuous possession of the land since he bought it in June 1945. A more important reason why Laureta's action could not have prescribed is that the second contract of sale, having been registered in bad faith, is null and void. Article 1410 of the Civil Code of the Philippines provides that any action or defense for the declaration of the inexistence of a contract does not prescribe. In a Memorandum of Authorities submitted to this Court on March 13, 1978, the petitioner insists that the action of Laureta against Caram has prescribed because the second contract of sale is not void under Article 23 1409 of the Civil Code of the Philippines which enumerates the kinds of contracts which are considered void.
22

Moreover, Article 1544 of the New Civil Code of the Philippines does not declare void a second sale of immovable registered in bad faith. The fact that the second contract is not considered void under Article 1409 and that Article 1544 does not declare void a deed of sale registered in bad faith does not mean that said contract is not void. Article 1544 specifically provides who shall be the owner in case of a double sale of an immovable property. To give full effect to this provision, the status of the two contracts must be declared valid so that one vendee may contract must be declared void to cut off all rights which may arise from said contract. Otherwise, Article 1544 win be meaningless. The first sale in favor of Laureta prevails over the sale in favor of Caram. WHEREFORE, the petition is hereby denied and the decision of the Court of Appeals sought to be reviewed is affirmed, without pronouncement as to costs. SO ORDERED. Makasiar Guerrero, De Castro* and Melencio-Herrera G.R. No. 85082 February 25, 1991 SPOUSES PASTOR VALDEZ and VIRGINIA VALDEZ, petitioners, vs. HONORABLE COURT OF APPEALS AND FELICIDAD VIERNES, FRANCISCO ANTE, AND ANTONIO ANTE, respondents. Sumulong Law Offices for petitioners. Antonio A. Ante for respondents Ante. Jose A. Rico for respondent Viernes.

GANCAYCO, J.:p This is a case of double sale of real property where both vendees registered the sales with the Register of Deeds and each produced their respective owner's duplicate copy of the certificate of title to the property. Spouses Francisco Ante and Manuela Ante were the registered owners of a parcel of land located at 20th Avenue, Murphy, Quezon City, with an area of approximately 625.70 square meters as evidenced by Transfer Certificate of Title (TCT) No. 141582 issued by the Register of Deeds of Quezon City. Said spouses executed a special power of attorney in favor of their son, Antonio Ante, a lawyer, authorizing him to execute any document conveying by way of mortgage or sale a portion or the whole of said property, to receive payment and dispose of the same as he may 1 deem fit and proper under the premises. Antonio Ante offered to sell the lot to Eliseo Viernes, who was occupying the same with the permission of Ante. Viernes, however, turned down the offer as he did not have money. Antonio Ante then told Viernes that he will 2 instead sell the property to Pastor Valdez and Virginia Valdez. Antonio Ante had the said lot subdivided into Lot A with an area of 280 square meters and Lot B with an area or 345.70 square meters, each lot having its corresponding technical description.

On June 15, 1980, Antonio Ante, as attorney in fact, executed a deed of sale of Lot A in favor of spouses Pastor 3 Valdez and Virginia Valdez, for and in consideration of the amount of P112,000.00 On February 12, 1987, in the same capacity, Antonio Ante sold to said Valdez spouses, Lot B for the amount of 4 P138,000.00. The Valdez spouses demanded from Antonio Ante the delivery of the owner's duplicate copy of TCT No. 141582 covering said two (2) lots. Ante promised them that he will deliver the title to them in a few days. In the meanwhile petitioners started fencing the whole lot with cement hollow blocks in the presence of spouses Eliseo and Felicidad Viernes. Except for the gate, it took them two weeks to finish fencing the whole lot. On said occasion the Viernes spouses were informed by the Valdez spouses that they were fencing the same as they purchased the land from Antonio Ante. As Ante failed to deliver the owner's duplicate certificate of title demanded by the Valdez spouses, the latter filed their affidavit of adverse claim over the subject lot with the Register of Deeds of Quezon City on September 6, 5 1982 as the vendees of the property. Upon inquiries made, the Valdez spouses learned that Antonio Ante had delivered the owner's duplicate certificate of title as a collateral to one Dr. Camilo Garma of Purdue Street., Cubao Quezon City to secure his rentals in arrears in the amount of P9,000.00. On September 13, 1983, upon the prodding of the Valdez spouses, Antonio Ante wrote to Dr. & Mrs. Garma to request them to entrust the owner's duplicate copy of the title of the questioned lot 6 to the Valdez spouses with the assurance that Ante will pay his indebtedness to them. The Garma spouses turned over to the Valdez spouses the said owner's duplicate certificate of title after said Valdez spouses paid for the obligation of Antonio Ante to the Garma spouses. The Valdez spouses then proceeded to register the two deeds of sale dated June 15, 1980 and February 12, 7 1981 with the Register of Deeds of Quezon City by presenting the owner's duplicate copy of the title. They were, however, informed that the said owner's duplicate certificate of title had been declared null and void per order of Judge Tutaan dated November 10, 1982. They also found out that spouses Francisco and Manuela Ante earlier filed a petition for the issuance of a new owner's duplicate certificate of title and to declare null and void the lost owner's duplicate certificate of title. The Valdez spouses also discovered that the Register of Deeds cancelled TCT No. 141582 and in lieu thereof issued TCT No. 293889 in the name of Felicidad Viernes on the basis of a deed of assignment of the same property dated February 17, 1982 executed by Antonio Ante in her favor. When Virginia Valdez inquired from Antonio Ante why he executed the said deed of assignment when he had previously sold the same lot to them, Ante replied that they could sue him in court. Thus, the Valdezes filed their adverse claim over the lot covered by TCT No. 293889 in the name of Felicidad Viernes. They filed the complaint in Barangay office of San Roque, Quezon City against Felicidad Viernes but as no amicable settlement was reached, the Valdezes filed a complaint in the Regional Trial Court of Quezon City seeking among others, that the order dated November 10, 1982 of the Court of First Instance of Quezon City authorizing the issuance of a new owner's duplicate certificate of title in the name of Francisca Ante be declared null any void; that the deed of assignment dated February 17, 1982 executed by Antonio Ante in favor of Felicidad Viernes be cancelled and revoked; that TCT No. 293889 in the name of Felicidad Viernes in the Register of Deeds of Quezon City be cancelled and declared null and void; that the Register of Deeds of Quezon City be ordered to reinstate, revalidate and give full force and effect to the owner's duplicate copy of TCT No. 141582 in the name of spouses Francisco and Manuela Ante and declare petitioners as the true and lawful owners of the property; ordering

respondents Viernes and all persons claiming right under them to vacate the property, and to pay damages and costs to petitioners. After trial on the merits before which the Antes were declared in default, a decision was rendered by the trial court on April 9, 1986, the dispositive part of which reads as follows: WHEREFORE, the complaint is dismissed as against defendants Vierneses, and defendants Antes are hereby ordered to pay to plaintiff, as prayed for in their complaint, as follows: Defendant Antes are hereby ordered to pay actual damages in the amount of P250,000.00 to plaintiffs. Defendants Antes are hereby ordered to pay moral and exemplary damages in the amount of P15,000.00 and exemplary damages in the amount of P5,000.00. Defendants Antes, are hereby ordered to pay P5,000.00 for attorney's fees. SO ORDERED.
8

Not satisfied therewith the Valdezes interposed an appeal therefrom to the Court of Appeals wherein in due course a decision was rendered on September 12, 1988, affirming in toto the appealed decision, with costs against the appellants. Hence this petition for review on certiorari filed by the Valdezes wherein the following issues are raised: 1. Whether the Order dated November 10, 1983 declaring as null and void the Owner's copy of Transfer Certificate of Title No. 141582 and ordering the issuance of a new Owner's copy of said title should be set aside having been secured fraudulently and in bad faith by Francisco Ante and Antonio Ante who had already sold the property to the spouses Pastor and Virginia Valdez and who knew fully well that the said Owner's copy of said title has never been lost. 2. As between plaintiff-spouses Pastor and Virginia Valdez, petitioners in this case and defendant Felicidad Viernes, one of the private respondents, who is entitled to the subject lot? 3. Who is entitled to damages? The petition is impressed with merit. Article 1544 of the Civil Code provides as follows: 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.
9

From the aforesaid provision of the law, it is clear that if movable property is sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith. However, should the subject of the sale be immovable property, the ownership shall vest in the person acquiring it who in good faith first recorded it in the registry of property. Should none of the vendees inscribe the sale in the Registry of Property, then the ownership of the subject real property 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 this case, Lot A of the subject property was sold to the petitioners by Antonio Ante, as attorney-in-fact, on June 10 15, 1980, while Lot B was sold by the same attorney-in-fact to petitioners on February 12, 1981. Since the owner's copy of TCT No. 141582 was not delivered in due time to the petitioners by Antonio Ante despite his promise to deliver the same in a few days, petitioners registered their notice of adverse claim over the said property on September 6, 1982 with the Register of Deeds of Quezon City wherein it was duly annotated as follows: PE-3004/T-141582 Affidavit of Adverse Claim Filed under sworn statement of Pastor Valdez & Virginia C. Valdez claiming that they are the vendees of the property described herein, but the title was not delivered (Doc. 253, Page 51, Bk. I of the Not. Pub. of Q. City, Prudencio W. Valido) Date of Instrument August 19, 1982 Date of Inscription Sept. 6, 1982
11

However, earlier, that is on February 17, 1982, a Deed of Assignment of the same property was executed by 12 Antonio Ante in favor of respondent Felicidad Viernes. Ante filed a petition for the issuance of another owner's duplicate copy of TCT No. 141582 with the then Court of First Instance of Quezon City on the ground that the owner's duplicate copy had been lost. The petition was granted in an order dated November 10, 1983 declaring null and void the lost owner's duplicate copy of the title and ordering the issuance of a new owner's duplicate copy of the title in favor of the Antes. Said owner's duplicate copy was delivered by Ante to respondent Viernes who thereafter together with the Deed of Assignment presented the same to the Register of Deeds of Quezon City for registration on November 11, 1982. Thus, on the basis thereof, TCT No. 141582 was cancelled and TCT No. 293889 was issued in the name of respondent Felicidad Viernes. Petitioners again filed an adverse claim this time on the property covered by TCT No. 293889 in the name of respondent Viernes. From the foregoing set of facts there can be no question that the sale of the subject lot to petitioners was made long before the execution of the Deed of Assignment of said lot to respondent Viernes and that petitioners annotated their adverse claim as vendees of the property as early as September 6, 1982 with the Register of Deeds of Quezon City. On the other hand the deed of Assignment in favor of Viernes of the said lot was registered with the Register of Deeds of Quezon City only on November 11, 1982 whereby a new title was issued in the name of Viernes as above stated. The rule is clear that a prior right is accorded to the vendee who first recorded his right in good faith over an 13 immovable property. In this case, the petitioners acquired subject lot in good faith and for valuable consideration from the Antes and as such owners petitioners fenced the property taking possession thereof. Thus, when petitioners annotated their adverse claim in the Register of Deeds of Quezon City they thereby established a 14 superior right to the property in question as against respondent Viernes.

On the other hand, respondent Viernes cannot claim good faith in the purchase of the subject lot and the subsequent registration of the Deed of Assignment in her favor. Even before the petitioners purchased the lot from the Antes respondent Viernes' husband was first given the option to purchase the same by Antonio Ante but he declined because he had no money and so he was informed that it would be sold to petitioners. After petitioners purchased the lot they immediately fenced the same with the knowledge and without objection of respondent Viernes and her husband and they were informed by the petitioners about their purchase of the same. Moreover, when petitioners annotated their adverse claim as vendees of the property with the Register of Deeds of Quezon City, it was effectively a notice to the whole world including respondent Viernes. Respondent Ante obviously in collusion with respondent Viernes sold the same property to Viernes which was earlier sold to petitioners, by virtue of a subsequent Deed of Assignment. It was fraudulently made to appear that the owner's duplicate copy of TCT No. 141582 was lost through a petition filed with the trial court to nullify the said owner's duplicate copy and for the issuance of another owner's duplicate copy. Unfortunately, such fraud was unmasked as early as July 14, 1981 when respondent Francisco Ante, in Civil Case No. 29617, filed an urgent motion for the issuance of a subpoena and subpoena duces tecum to require Paz Garma of 8 Purdue Street, Cubao, Quezon City to produce before the court on July 16, 1981 at 2:00 o'clock p.m. at the scheduled pre-trial of the case, the owner's duplicate copy of TCT No. 141582 issued by the Register of Deeds in the name of the Antes as the same was entrusted to Paz Garma as a realtor for the proposed sale of the property 15 which did not materialize. Respondent Viernes admitted in her answer dated January 7, 1984 that she knew of the filing in court of said urgent motion and that the branch clerk of court issued the 16 correspondingsubpoena. Thus, respondent Ante, as well as respondent Viernes, knew that the owner's duplicate copy of certificate of title No. 141582 was never lost, consequently the filing of the petition in court for the issuance of a new one was attended with fraud and gross misrepresentation. As a matter of fact, as hereinabove discussed, upon the urging of petitioners, respondent Antonio Ante wrote to 17 the Garma spouses to entrust the TCT to petitioners on September 30, 1983 and when petitioners paid the standing account of Ante to the Garmas said owner's duplicate copy was delivered by the Garmas to the petitioners. The bad faith of respondents Viernes and Ante is obvious. Further, even while the notice of adverse claim of September 6, 1982 filed by the petitioners on TCT No. 141582 in the Register of Deeds was still existing and had not been cancelled, on November 11, 1982 the Register of Deeds nevertheless cancelled said TCT and issued a new title in favor of respondent Viernes. The annotation was not even carried over nor was it ordered cancelled under the new title issued to respondent Viernes. The Register of Deeds and/or his subordinates apparently yielded to the fraudulent design of respondents Viernes and Ante. An examination of the decision of the trial court dated April 9, 1986 shows that there are no findings of facts to 18 serve as basis for its conclusions. Section 14, Article VIII of the Constitution mandates as follows: No decision shall be rendered by any court without expressing therein clearly and distinctly the factsand the law on which it is based. No petition for review or motion for reconsideration of a decision shall be refused due course or denied without stating the legal basis therefor. (Emphasis supplied.) Section 1, Rule 36 of the Rules of Court also provides clearly as follows: Sec. 1. Rendition of judgments. All judgments determining the merits of cases shall be in writing personally and directly prepared by the judge, stating clearly and distinctly the facts and the law on which it is based, signed by him, and filed with the clerk of the court. (Emphasis supplied.)

That is the reason why this Court, through Administrative Circular No. 1 dated January 28, 1988, reminded all judges "to make complete findings of facts in their decisions, and scrutinize closely the legal aspects of the case in the light of the evidence presented. They should avoid the tendency to generalize and form conclusions without detailing the facts from which such conclusions are deduced." Of course, when a petition for review or motion for reconsideration of a decision of the court is denied due course, or is otherwise denied, it is not necessary that such findings of facts be made. However, the denial must state the legal basis thereof. In the present case, the three-paged decision of the trial court contained in the first two pages a statement of the allegations of the pleadings of the parties and enumerates the witnesses presented and the exhibits marked during the trial. Thereafter, the trial court arrived at the following conclusion: After considering the evidence on record, this Court finds that plaintiff have failed to prove their case as against defendant Felicidad Viernes, but proved their case against defaulted defendants Antes. The Court finds that there is no sufficient proof of knowledge or bad faith on the part of defendant Vierneses, and on the basis of existing jurisprudence, a third person who in good faith purchases and registers a property cannot be deprived of his title as against plaintiff who had 19 previously purchased same property but failed to register the same. This is not what is contemplated under the Constitution and the Rules as a clear and distinct statement of the facts on the basis of which the decision is rendered. The foregoing one paragraph statement constitute a mere conclusion of facts and of law arrived at by the trial court without stating the facts which serve as the basis thereof. Indeed the conclusion of fact therein that petitioners had not registered the sale to them is traversed by the records which show on the contrary, petitioners earlier registered the sale to them. The court statement in the decision that a party has proven his case while the other has not, is not the findings of facts contemplated by the Constitution and the rules to be clearly and distinctly stated. Unfortunately, the appellate court overlooked this fatal defect in the appealed decision. It merely adopted the alleged findings of facts of the trial court. Although it made some findings on how the deed of assignment in favor of respondent Viernes came about, it is far from complete and is hardly a substantial compliance with the mandate aforestated. As it is now, this Court has before it a challenged decision that failed to state clearly and distinctly the facts on which it is predicated. This Court has said again and again that it is not a trier of facts and that it relies, on the factual findings of the lower court and the appellate court which are conclusive. But as it is, in this case, the Court has to wade through the records and make its own findings of facts, rather than further delay the disposition of the case by remanding the records for further proceedings. Hence, the appealed decision should be struck down. WHEREFORE, the petition is GRANTED. The appealed decision of the appellate court dated September 12, 1988 is hereby SET ASIDE and another judgment is hereby rendered declaring the order of the trial court dated November 10, 1982 null and void and reinstating the owner's duplicate copy of TCT No. 141582 in the possession of the petitioners; declaring the petitioners to have the superior right to the property in question and to be the true and lawful owners of the same; directing the Register of Deeds of Quezon City to cancel TCT No. 293889 in the name of respondent Felicidad Viernes and to issue a new title in favor of petitioners spouses Pastor and Virginia Valdez upon the presentation of the owner's duplicate copy of TCT No. 141582; directing respondent Felicidad Viernes and other persons claiming rights under her residing in the premises of the land in question to vacate the same immediately and to remove whatever improvement she has placed in the premises; and ordering private respondents to jointly and severally pay the petitioners the amounts of P15,000.00 as moral damages, P5,000.00

exemplary damages, and P20,000.00 as attorney's fees. The docket fees for the amount of damages and attorney's fees awarded to the petitioners, if not yet duly paid, shall constitute a prior lien in favor of the government, before the satisfaction of the judgment in favor of the petitioners. Costs against private respondents. SO ORDERED. Narvasa, Cruz, Grio-Aquino and Medialdea, JJ., concur.

[G.R. No. 104482. January 22, 1996]

BELINDA TAREDO, for herself and in representation of her brothers and sisters, and TEOFILA CORPUZ TANEDO, representing her minor daughter VERNA TANEDO, petitioners, vs. THE COURT OF APPEALS, SPOUSES RICARDO M. TAREDO AND TERESITA BARERA TAREDO,respondents. DECISION PANGANIBAN, J.: Is a sale of future inheritance valid? In multiple sales of the same real property, who has preference in ownership? What is the probative value of the lower courts finding of good faith in registration of such sales in the registry of property? These are the main questions raised in this Petition for review on certiorari under Rule 45 of 1 2 the Rules of Court to set aside and reverse the Decision of the Court of Appeals in CA-G.R. CV NO. 24987 promulgated on September 26, 1991 affirming the decision of the Regional Trial Court, Branch 63, Third Judicial Region, Tarlac, Tarlac in Civil Case No. 6328, and its Resolution denying reconsideration thereof, promulgated on May 27, 1992. By the Courts Resolution on October 25, 1995, this case (along with several others) was transferred from the First to the Third Division and after due deliberation, the Court assigned it to the undersigned ponenle for the writing of this Decision.

The Facts On October 20, 1962, Lazardo Taedo executed a notarized deed of absolute sale in favor of his eldest brother, Ricardo Taedo, and the latters wife, Teresita Barera, private respondents herein, whereby he conveyed to the latter in consideration of P1,500.00, one hectare of whatever share I shall have over Lot No. 191 of the cadastral survey of Gerona, Province of Tarlac and covered by Title T-l3829 of the Register of Deeds of Tarlac, the said property being his future inheritance from his parents (Exh. 1). Upon the death of his father Matias, Lazaro executed an Affidavit of Conformity dated February 28, 1980 (Exh. 3) to re-affirm, respect. acknowledge and validate the sale I made in 1962. On January 13, 1981, Lazaro executed another notarized deed of sale in favor of private respondents covering his undivided ONE TWELVE (1/12) of a parcel of land known as Lot 191 x x (Exh. 4). He acknowledged therein his receipt of P 10,000.00 as consideration therefor. In February 1981, Ricardo learned that Lazaro sold the same property to his children, petitioners herein, through a deed of sale dated December 29, 1980 (Exh. E). On June 7, 1982, private respondents recorded the Deed of Sale (Exh. 4) in their favor in the Registry of Deeds and the corresponding entry was made in Transfer Certificate of Title No. 166451 (Exh. 5). Petitioners on July 16, 1982 filed a complaint for rescission (plus damages) of the deeds of sale executed by Lazaro in favor of private respondents covering the property inherited by Lazaro from his father.

Petitioners claimed that their father, Lazaro, executed an Absolute Deed of Sale dated December 29, 1980 (Exit. E), conveying to his ten children his allotted portion under the extrajudicial partition executed by the heirs of Matias, which deed included the land in litigation (Lot 191). Petitioners also presented in evidence: (1) a private writing purportedly prepared and signed by Matias dated December 28, 1978, stating that it was his desire that whatever inheritance Lazaro would receive from him should be given to his (Lazaros) children (Exh. A); (2) a typewritten document dated March 10, 1979 sig ned by Lazaro in the presence of two witnesses, wherein he confirmed that he would voluntarily abide by the wishes of his father, Matias, to give to his (Lazaros) children all the property he would inherit from the latter (Exh. B); and (3) a letter dated January 1, 1980 of Lazaro to his daughter, Carmela, stating that his share in the extrajudicial settlement of the estate of his father was intended for his children, petitioners herein (Exh. C). Private respondents, however presented in evidence a Deed of Revocation of a Deed of Sale dated March 12, 1981 (Exh. 6), wherein Lazaro revoked the sale in favor of petitioners for the reason that it was simulated or fictitious - without any consideration whatsoever. Shortly after the case a quo was filed, Lazaro executed a sworn statement (Exh. G) which virtually repudiated the contents of the Deed of Revocation of a Deed of Sale (Exh. 6) and the Deed of Sale (Exh. 4) in favor of private respondents. However, Lazaro testified that he sold the property to Ricardo, and that it was a lawyer who induced him to execute a deed of sale in favor of his children after giving him five pesos (P5.00) to buy a drink (TSN September 18, 1985, pp. 204-205). The trial court decided in favor of private respondents, holding that petitioners failed to adduce a preponderance of evidence to support (their) claim. On appeal, the Court of Appeals affirmed the decision of the trial court, ruling that the Deed of Sale dated January 13, 1981 (Exh. 9) was valid and that its registration in good faith vested title in said respondents.

The Issues Petitioners raised the following errors in the respondent Court, which they also now allege in the instant Petition: I. The trial court erred in concluding that the Contract of Sale of October 2 0, 1962 (Exhibit 7, Answer) is merely voidable or annulable and not void ab initio pursuant to paragraph 2 of Article 1347 of the New Civil Code involving as it does a future inheritance. II. The trial court erred in holding that defendants-appellees acted in good faith in registering the deed of sale of January 13, 1981 (Exhibit 9) with the Register of Deeds of Tarlac and therefore ownership of the land in question passed on to defendants-appellees. III. The trial court erred in ignoring and failing to consider the testimonial and documentary evidence of plaintiffsappellants which clearly established by preponderance of evidence that they are indeed the legitimate and lawful owners of the property in question. IV. The decision is contrary to law and the facts of the case and the conclusions drawn from the established facts are illogical and off-tangent. From the foregoing, the issues may be restated as follows: 1. Is the sale of a future inheritance valid?

2. Was the subsequent execution on January 13, 1981 (and registration with the Registry of Property) of a deed of sale covering the same property to the same buyers valid? 3. May this Court review the findings of the respondent Court (a) holding that the buyers acted in good faith in registering the said subsequent deed of sale and (b) in failing to consider petitioners evidence? Are the conclusions of the respondent Court illogical and off -tangent?

The Courts Ruling At the outset, let it be clear that the errors which are reviewable by this Court in this petition for review on certiorari are only those allegedly committed by the respondent Court of Appeals and not directly those of the trial court, which is not a party here. The assignment of errors in the petition quoted above are therefore totally misplaced, and for that reason, the petition should be dismissed. But in order to give the parties substantial justice we have decided to delve into the issues as above re-stated. The errors attributed by petitioners to the latter (trial) court will be discussed only insofar as they are relevant to the appellate courts assailed Decision and Resolution. The sale made in 1962 involving future inheritance is not really at issue here. In context, the assailed Decision 3 conceded it may be legally correct that a contract of sale of anticipated future inheritance is null and void. But to remove all doubts, we hereby categorically rule that, pursuant to Article 1347 of the Civil Code, (n)o contract may be entered into upon a future inheritance except in cases expressly authorized by law. Consequently, said contract made in 1962 is not valid and cannot be the source of any right nor the creator of any obligation between the parties. Hence, the affidavit of conformity dated February 28, 1980, insofar as it sought to validate or ratify the 1962 sale, is also useless and, in the words of the respondent Court, suffers from the same infirmity. Even private 4 respondents in their memorandum concede this. However, the documents that are critical to the resolution of this case are: (a) the deed of sale of January 13, 1981 in favor of private respondents covering Lazaros undivided inheritance of one-twelfth (1/12) share in Lot No. 191, which was subsequently registered on June 7, 1982; and (b) the deed of sale dated December 29, 1980 in favor of petitioners covering the same property. These two documents were executed after the death of Matias (and his spouse) and after a deed of extrajudicial settlement of his (Matias) estate was executed, thus vesting in Lazaro actual title over said property. In other words, these dispositions, though conflicting, were no longer infected with the infirmities of the 1962 sale. Petitioners contend that what was sold on January 13, 1981 was only one-half hectare out of Lot No. 191, citing as authority the trial courts decision. As earlier pointed out, what is on review in these proceedings by this Court is the Court of Appeals decision - which correctly identified the subject matter of the January 13, 1981 sale to be the entire undivided 1/12 share of Lazaro in Lot No. 191 and which is the same property disposed of on December 29, 1980 in favor of petitioners. Critical in determining which of these two deeds should be given effect is the registration of the sale in favor of private respondents with the register of deeds on June 7, 1982. Article 1544 of the Civil Code governs the preferential rights of vendees in cases of multiple sales, as follows: 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. The property in question is land, an immovable, and following the above-quoted law, ownership shall belong to the buyer who in good faith registers it first in the registry of property. Thus, although the deed of sale in favor of private respondents was later than the one in favor of petitioners, ownership would vest in the former because of the undisputed fact of registration. On the other hand, petitioners have not registered the sale to them at all. Petitioners contend that they were in possession of the property and that private respondents never took possession thereof. As between two purchasers, the one who registered the sale in his favor has a preferred right over the other who has not registered his title, even if the latter is in actual possession of the immovable 5 property. As to third issue, while petitioners conceded the fact of registration, they nevertheless contended that it was done in bad faith. On this issue, the respondent Court ruled: Under the second assignment of error, plaintiffs-appellants contend that defendants-appellees acted in bad faith when they registered the Deed of Sale in their favor as appellee Ricardo already knew of the execution of the deed of sale in favor of the plaintiffs; appellants cite the testimony of plaintiff Belinda Tafledo to the effect that defendant Ricardo Taedo called her up on January 4 or 5, 1981 to tell her that he was already the owner of the land in question but the contract of sale between our father and us were (sic) already consumated (pp. 9 -10, tsn, January 6, 1984). This testimony is obviously self-serving, and because it was a telephone conversation, the deed of sale dated December 29, 1980 was not shown; Belinda merely told her uncle that there was already a document showing that plaintiffs are the owners (p. 80). Ricardo Taedo controverted this and testified that he learned for the first time of the deed of sale executed by Lazaro in favor of his children about a month or sometime in 6 February 1981 (p. 111, tsn, Nov. 28, 1984). x x x The respondent Court, reviewing the trial courts findings, refused to overturn the latters assessment of the testimonial evidence, as follows: We are not prepared to set aside the finding of the lower court upholding Ricardo Tanedos testimony, as it involves a matter of credibility of witnesses which the trial judge, who presided at the hearing, was in a better position to resolve. (Court of Appeals Decision, p. 6.) In this connection, we note the tenacious allegations made by petitioners, both in their basic petition and in their memorandum, as follows: 1. The respondent Court allegedly ignored the claimed fact that respondent Ricardo by fr aud and deceit and with foreknowledge that the property in question had already been sold to petitioners, made Lazaro execute the deed of January 13, 1981; 2. There is allegedly adequate evidence to show that only 1/2 of the purchase price of P10,000.00 was paid at the time of the execution of the deed of sale, contrary to the written acknowledgment, thus showing bad faith; 3. There is allegedly sufficient evidence showing that the deed of revocation of the sale in favor of petitioners was tainted with fraud or deceit. 4. There is allegedly enough evidence to show that private respondents took undue advantage over the weakness and unschooled and pitiful situation of Lazaro Tafledo . . . and that respondent Ricardo Taedo exercised moral ascendancy over his younger brother he being the eldest brother and who reached fourth year college of law and at one time a former Vice-Governor of Tarlac, while his younger brother only attained first year high school x x x ;

5. The respondent Court erred in not giving credence to petitioners evidence, especially Lazaro Taedos Sinumpaang Salaysay dated July 27, 1982 stating that Ricardo Taedo deceived the former in executing the deed of sale in favor of private respondents. To be sure, there are indeed many conflicting documents and testimonies as well as arguments over their probative value and significance. Suffice it to say, however, that all the above contentions involve questions of fact, appreciation of evidence and credibility of witnesses, which are not proper in this review. It is well-settled that the Supreme Court is not a trier of facts. In petitions for review under Rule 45 of the Revised Rules of Court, only questions of law may be raised and passed upon. Absent any whimsical or capricious exercise of judgment, and unless the lack of any basis for the conclusions made by the lower courts be amply demonstrated, the Supreme Court will not disturb their findings. At most, it appears that petitioners have shown that their evidence was not believed by both the trial and the appellate courts, and that the said courts tended to give more credence to the evidence presented by private respondents. But this in itself is not a reason for setting aside such findings. We are far from convinced that both courts gravely abused their respective authorities and judicial prerogatives. As held in the recent case of Chua Tiong Tay vs. Court of Appeals and Goidrock Construction and Development 7 Corp.: The Court has consistently held that the factual findings of the trial court, as well as the Court of Appeals, are final and conclusive and may not be reviewed on appeal. Among the exceptional circumstances where a reassessment of facts found by the lower courts is allowed are when the conclusion is a finding grounded entirely on speculation, surmises or conjectures; when the inference made is manifestly absurd, mistaken or Impossible; when there is grave abuse of discretion in the appreciation of facts; when the judgment is premised on a misapprehension of facts; when the findings went beyond the issues of the case and the same are contrary to the admissions of both appellant and appellee. After a careful study of the case at bench, we find none of the above grounds present to justify the re-evaluation of the findings of fact made by the courts below. In the same vein, the ruling in the recent case of South Sea Surety and Insurance Company, Inc. vs. Hon. Court [8] of Appeals, et al. is equally applicable to the present case: We see no valid reason to discard the factual conclusions of the appellate court. x x x (I)t is not the function of this Court to assess and evaluate all over again the evidence, testimonial and documentary, adduced by the parties, particularly where, such as here, the findings of both the trial court and the appellate court on the matter coincide. (italics supplied) WHEREFORE, the petition is DENIED and the assailed Decision of the Court of Appeals is AFFIRMED. No Costs. SO ORDERED. Narvasa, C.J. (Chairman), Davide, Jr., Melo, and Francisco, JJ., concur.

[G.R. No. 156973. June 4, 2004]

SPOUSES TOMAS OCCEA and SILVINA OCCEA, petitioners, vs. LYDIA MORALES OBSIANA ESPONILLA, ELSA MORALES OBSIANA SALAZAR and DARFROSA OBSIANA SALAZAR ESPONILLA, respondents. DECISION PUNO, J.:

The case at bar involves a portion of the 1,198-square meter residential lot (lot no. 265) situated in Sibalom, Antique, originally owned by spouses Nicolas and Irene Tordesillas under OCT No. 1130. The Tordesillas spouses had three (3) children, namely: Harod, Angela and Rosario, the latter having been survived by her two (2) children, Arnold and Lilia de la Flor. After the death of the Tordesillas spouses, the lot was inherited by their children Harod and Angela, and [1] grandchildren Arnold and Lilia. In 1951, the heirs executed a Deed of Pacto de RetroSale in favor of Alberta Morales covering the southwestern portion of the lot with an area of 748 square meters. Three (3) years later, in 1954, Arnold and Lilia executed a Deed of Definite Sale of Shares, Rights, Interests [2] and Participations over the same 748 sq. m. lot in favor of AlbertaMorales. The notarized deed also attested that the lot sold by vendors Arnold and Lilia to Alberta were their share in the estate of their deceased parents. Alberta possessed the lot as owner, constructed a house on it and appointed a caretaker to oversee her property. Thereafter, in July 1956, vendor Arnold de la Flor borrowed the OCT from Alberta covering the lot. He [3] executed an Affidavit acknowledging receipt of the OCT in trust and undertook to return said title free from changes, modifications or cancellations. In 1966, Arnold and Angela, nephew and daughter respectively of the Tordesillas spouses, without the [4] knowledge of Alberta, executed a Deed of Extrajudicial Settlement declaring the two of them as the only coowners of the undivided 1,198 sq. m. lot no. 265, without acknowledging their previous sale of 748 sq. m. thereof to Alberta. A number of times, thereafter, Alberta and her nieces asked Arnold for the OCT of the land but Arnold just kept on promising to return it. In 1983, Arnold executed an Affidavit of Settlement of the Estate of Angela who died in 1978 without issue, declaring himself as the sole heir of Angela and thus consolidating the title of the entire lot in his name. In 1985, vendee Alberta Morales died. Her nieces-heirs, Lydia, Elsa and Dafrosa, succeeded in the ownership of the lot. Months later, as the heirs were about to leave for the United States, they asked Arnold to deliver to them the title to the land so they can register it in their name. Arnold repeatedly promised to do so but failed to deliver the title to them. On December 4, 1986, after Albertas heirs left for the States, Arnold used the OCT he borrowed fr om the deceased vendee Alberta Morales, subdivided the entire lot no. 265 into three sublots, and registered them all under his name, viz: lot no. 265-A (with TCT No. 16895), lot no. 265-B (with TCT No. 16896) and lot no. 265-C (with TCT No. 16897). He then paid the real estate taxes on the property. On August 13, 1990, Arnold sold lot nos. 265-B & C to spouses Tomas and Sylvina Occea, which included the [6] 748 sq. m. portion previously sold to Alberta Morales. A Deed of Absolute Sale over said lots was executed to the Occea spouses and titles were transferred to their names. In 1993, after the death of Arnold, the three (3) nieces-heirs of Alberta Morales learned about the second sale of their lot to the Occea spouses when they were notified by caretaker Abas that they were being ejected [7] from the land. In 1994, the heirs filed a case for annulment of sale and cancellation of titles, with damages, against the second vendees Occea spouses. In their complaint, they alleged that the Occeas purchased the land in bad faith as they were aware that the lots sold to them had already been sold to Alberta Morales in 1954. They averred that before the sale, when Tomas Occea conducted an ocular inspection of the lots, Morito Abas, the caretaker appointed by Alberta Morales to oversee her property, warned them not to push through with the sale as the land was no longer owned by vendor Arnold as the latter had previously sold the lot to Alberta Morales who had a house constructed thereon. For their part, the Occea spouses claimed that the OCT in the name of the original owners of the lots, the Tordesillas spouses, was cancelled after it was subdivided between Angela and Arnold in 1969; that new TCTs had been issued in the latters names; that they were unaware that the subject lots were already previously sold to Morales as they denied that Tomas had a talk with caretaker Abas on the matter; that as of December 4, 1987, the TCTs covering the lots were in the name of Arnold and his wife, without any adverse claim annotated thereon; that vendor Arnold represented to them that the occupants they saw on the land were squatters and that he merely
[5]

tolerated their presence; that they did not personally investigate the alleged squatters on the land and merely relied on the representation of vendor Arnold; that sometime in 1966-1967, Arnold and his co-heir Angela caused the survey of the original lot and subdivided it into 3 lots, without opposition from Morales or her heirs. Thus, three (3) TCTs were issued in 1969 to Arnold and Angela and, two of the lots were then sold to the Occea spouses, again without objection from Alberta Morales. The Occea spouses alleged that they were buyers in good faith as the titles to the subject lots were free from liens or encumbrances when they purchased them. They claimed that in 1989,Arnold offered to sell the subject lots to them. On August 13, 1990, after they verified with the Antique Registry of Deeds that Arnolds TCTs were clean and unencumbered, Arnold signed the instrument of sale over the subject lots in favor of the Occeas for P100,000.00 and new titles were issued in their names. The Occeas likewise set up the defenses of laches and prescription. They argue that Alberta and plaintiffsheirs were barred from prosecuting their action as they failed to assert their right for forty (40) years. Firstly, they point out that vendor Arnold and Angela subdivided the entire lot in 1966 and declared themselves as the only coowners thereof in the deed of extrajudicial settlement. Alberta Morales failed to oppose the inclusion of her 748 sq. m. lot in the deed. Thus, the title to the entire lot no. 256 was transferred to the names of Arnold and Angela. Secondly, preparatory to the division of the lots, vendor Arnold had the land surveyed but Alberta again failed to oppose the same. Finally, Alberta and her heirs who are claiming adverse rights over the land based on the 1951 Deed of Pacto de Retro Sale and the 1954 Deed of Definite Sale of Shares failed for 40 years to annotate their adverse claims on the new titles issued to Arnold and Angela, enabling the latter to possess a clean title and transfer them to the Occea spouses. After trial, the lower court rendered a decision declaring the Occea spouses as buyers in good faith and ruled that the action of the heirs was time-barred. On appeal by Albertas heirs, the Court of Appeals reversed the decision of the trial court. It found that the Occeas purchased the land in bad faith and that the action filed by Albertas heirs was not barred by prescription or laches. The dispositive portion reads: WHEREFORE, the instant appeal is hereby GRANTED. Accordingly, the assailed decision is hereby REVERSED and SET ASIDE and a new one is rendered declaring the Deed of Absolute Sale dated August 13, 1990 executed between Arnold de la Flor in favor of defendants-appellees null and void and ordering the cancellation of Transfer Certificate of Title Nos. 16896, 16897, T-18241 and T-18242. SO ORDERED.
[8]

Hence this appeal where petitioner-spouses Occea raise the following issues: I WHETHER OR NOT A VERBAL INFORMATION COULD BE MADE TO PREVAIL OVER A CLEAN CERTIFICATE OF TITLE OF A REGISTERED LAND WHICH IS FREE OF ANY LIEN OR ENCUMBRANCE ANNOTATED ON ITS CERTIFICATE OF TITLE OR ANY ADVERSE CLAIM RECORDED WITH THE REGISTER OF DEEDS. II WHETHER OR NOT A BUYER OF A REGISTERED LAND IS OBLIGATED TO MAKE INQUIRIES OF ANY POSSIBLE DEFECT OR ADVERSE CLAIM AFFECTING ITS OWNERSHIP WHICH DOES NOT APPEAR ON THE CERTIFICATE OF TITLE. III

WHETHER OR NOT THE PERIOD OF MORE THAN FORTY (40) YEARS WITHOUT POSITIVE ACTION TAKEN BY RESPONDENTS, AS WELL AS BY ALBERTA MORALES, TO PROTECT THEIR INTEREST CAN BE CONSIDERED LACHES AND THUS THEIR PRESENT ACTION HAS PRESCRIBED. On the first two issues, petitioner-spouses claim that they were purchasers of the land in good faith as the law does not obligate them to go beyond a clean certificate of title to determine the condition of the property. They argue that a person dealing with registered land is only charged with notice of the burden on the property annotated on the title. When there is nothing on the title to indicate any cloud or vice in the ownership of the property or any encumbrance thereon, the purchaser is not required to explore further than the title in quest of any hidden defect or inchoate right that may subsequently defeat his right thereto. They claim they had every right to purchase the land despite the verbal warning made by caretaker Abas as the information was mere hearsay and cannot prevail over the title of the land which was free from any encumbrance. Their arguments do not persuade. The petition at bar presents a case of double sale of an immovable property. Article 1544 of the New Civil Code provides that in case an immovable property is sold to different vendees, the ownership shall belong: (1) to the person acquiring it who in good faith first recorded it in the Registry of Property; (2) should there be no inscription, the ownership shall pertain to the person who in good faith was first in possession; and, (3) in the absence thereof, to the person who presents the oldest title, provided there is good faith. In all cases, good faith is essential. It is the basic premise of the preferential rights granted to the one [9] claiming ownership over an immovable. What is material is whether the second buyer first registers the second [10] sale in good faith, i.e., without knowledge of any defect in the title of the property sold. The defense of indefeasibility of a Torrens title does not extend to a transferee who takes the certificate of title in bad faith, with [11] notice of a flaw. The governing principle of prius tempore, potior jure (first in time, stronger in right) enunciated under Art. 1544 has been clarified, thus: x x x Knowledge by the first buyer of the second sale cannot defeat the first buyers 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. Cabaa (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 and Crisostomo vs. CA, G.R. No. 95843, 02 [12] September 1992). In the case at bar, we find that petitioner-spouses failed to prove good faith in their purchase and registration of the land. A purchaser in good faith and for value is one who buys property without notice that some other person has a right to or interest in such property and pays its fair price before he has notice of the adverse claims and interest of another person in the same property. So it is that the honesty of intention which constitutes good faith implies a freedom from knowledge of circumstances which ought to put a person on inquiry. At the trial, Tomas Occea admitted that he found houses built on the land during its ocular inspection prior to his purchase. He relied on the representation of vendor Arnold that these houses were owned by squatters and that he was merely tolerating their presence on the land. Tomas should have verified from the occupants of the land the nature and authority of their possession instead of merely relying on the representation of the vendor that they were squatters, having seen for himself that the land was occupied by persons other than the vendor who was not in possession of the land at that time. The settled rule is that a buyer of real property in the possession of persons other than the seller must be wary and should investigate the rights of those in possession. Without such inquiry, the buyer can hardly be regarded as a buyer in good faith and cannot have any right over the [13] property. A purchaser cannot simply close his eyes to facts which should put a reasonable man on his guard and [14] then claim that he acted in good faith under the belief that there was no defect in the title of his vendor. His

mere refusal to believe that such defect exists or his willful closing of his eyes to the possibility of the existence of a defect in his vendors title will not make him an innocent purchaser for value if it later develops that the ti tle was in fact defective, and it appears that he would have notice of the defect had he acted with that measure of precaution which may reasonably be required of a prudent man in a similar situation. Indeed, the general rule is that one who deals with property registered under the Torrens system need not go beyond the same, but only has to rely on the title. He is charged with notice only of such burdens and claims as are annotated on the title. However, this principle does not apply when the party has actual knowledge of facts and circumstances that would impel a reasonably cautious man to make such inquiry or when the purchaser has knowledge of a defect or the lack of title in his vendor or of sufficient facts to induce a reasonably prudent man to inquire into the status of the title of the property in litigation. One who falls within the exception can neither be [15] denominated an innocent purchaser for value nor a purchaser in good faith. The evidence of the private respondents show that when Tomas Occea conducted an ocular inspection of the land prior to the second sale, Abas, the caretaker of the house which Alberta Morales built on the land, personally informed Tomas that the lot had been previously sold by the same vendor Arnold to Alberta Morales. With this information, the Occeas were obliged to look beyond the title of their vendor and make further inquiries from the occupants of the land as to their authority and right to possess it. However, despite this information about a prior sale, the Occeas proceeded with the purchase in haste. They did not inquire from Abas how they could get in touch with the heirs or representatives of Alberta to verify the ownership of the land. Neither do the records reveal that they exerted effort to examine the documents pertaining to the first sale. Having discovered that the land they intended to buy was occupied by a person other than the vendor not in actual possession thereof, it was incumbent upon the petitioners to verify the extent of the occupants possessory [16] rights. The Occeas did nothing and chose to ignore and disbelieve Abas statement. On the third issue, we hold that the action to annul title filed by respondents-heirs is not barred by laches and prescription. Firstly, laches is a creation of equity and its application is controlled by equitable considerations. Laches cannot be used to defeat justice or perpetuate fraud and injustice. Neither should its application be used to prevent the rightful owners of a property from recovering what has been fraudulently [17] registered in the name of another. Secondly, prescription does not apply when the person seeking annulment of title or reconveyance is in possession of the lot because the action partakes of a suit to quiet title which is [18] imprescriptible. In this case, Morales had actual possession of the land when she had a house built thereon and had appointed a caretaker to oversee her property. Her undisturbed possession of the land for a period of fifty (50) long years gave her and her heirs a continuing right to seek the aid of a court of equity to determine the [19] [20] nature of the claim of ownership of petitioner-spouses. As held by this Court in Faja vs. Court of Appeals: x x x There is settled jurisprudence that one who is in actual possession of a piece of land claiming to be owner thereof may wait until his possession is disturbed or his title attacked before taking steps to vindicate his right, the reason for the rule being, that his undisturbed possession gives him a continuing right to seek the aid of a court of equity to ascertain and determine the nature of the adverse claim and its effect on his own title, which right can be claimed only by one who is in possession. x x x The right to quiet title to the property, seek its reconveyance and annul any certificate of title covering it accrued only from the time the one in possession was made aware of a claim adverse to his own, and it is only then that the statutory period of prescription commences to run against such possessor. In the case at bar, Morales caretaker became aware of the second sale to petitioner-spouses only in 1991 when he received from the latter a notice to vacate the land. Respondents-heirs did not sleep on their rights for in 1994, they filed their action to annul petitioners title over the land. It likewise bears to stress that when vendor Arnold reacquired title to the subject property by means of fraud and concealment after he has sold it to Alberta Morales, a constructive trust was created in favor of Morales and her heirs. As the defrauded parties who were in actual possession of the property, an action of the respondents-heirs to enforce the trust and recover the property [21] cannot prescribe. They may vindicate their right over the property regardless of the lapse of time. Hence, the rule that registration of the property has the effect of constructive notice to the whole world cannot be availed of by petitioners and the defense of prescription cannot be successfully raised against respondents.

In sum, the general rule is that registration under the Torrens system is the operative act which gives validity to the transfer of title on the land. However, it does not create or vest title especially where a party has actual knowledge of the claimants actual, open and notorious possession of the property at the time of his [22] registration. A buyer in bad faith has no right over the land. As petitioner-spouses failed to register the subject land in good faith, ownership of the land pertains to respondent-heirs who first possessed it in good faith. IN VIEW WHEREOF, the petition is DISMISSED. No costs. SO ORDERED. Quisumbing, Austria-Martinez, Callejo, Sr., and Tinga, JJ., concur.