FRANK N.

LIU, deceased, substituted by his surviving spouse Diana Liu, and children, namely: Walter, Milton, Frank, Jr., Henry and Jockson, all surnamed Liu, Rebecca Liu Shui and Pearl Liu Rodriguez, petitioners, vs. ALFREDO LOY, JR., TERESITA A. LOY and ESTATE OF JOSE VAO, respondents. G.R. No. 145982 July 3, 2003 FACTS: Teodoro Vao (Teodoro), as attorney-in-fact of Jose Vao, sold seven lots to Benito Liu, through petitioner Frank Liu (Frank), and to Cirilo Pangalo. The lots sold to Benito Liu were Lot Nos. 5, 6, 13, 14, and 15 while the lots sold to Cirilo Pangalo were Lot Nos. 14 and 15. When Jose Vao passed away Benito Liu stopped further payments but after the Supreme Court declared valid the will of his father, Teodoro informed Frank that he could already transfer the titles to the buyers names upon payment of the balance of the purchase price. It was only after nine years that Frank responded that he was ready to pay the balance of the purchase price of the seven lots after he had purchased the lots formerly sold to Benito Liu and Cirilo Panglao. He requested for the execution of a deed of sale of the lots in his name and the delivery of the titles to him. Despite repeated demands by Frank, Teodoro sold Lot No. 6 to respondent Teresita Loy. Frank then filed a complaint against Teodoro for specific performance, execution of deed of absolute sale, issuance of certificates of title and construction of subdivision roads, before the Court of First Instance and a notice of lis pendens on the seven lots was filed before the Register of Deeds. A year after, Teodoro sold Lot No. 5 to respondent Alfredo Loy. When the complaint filed by Frank was dismissed, he filed his claim to the probate court which was subsequently granted. Milagros Vao, who succeeded as administratrix of the Estate of Jose Vao, executed a deed of conveyance covering the seven lots in favor of Frank. The probate court, however, also approved the sale to respondents Teresita and Alfredo Loy upon their motion and new titles were issued under their name. As a result, Frank Liu filed a complaint for reconveyance or annulment of title of Lot Nos. 5 and 6. The trial court confirmed the unilateral extrajudicial rescission of the contract by the late Teodoro Vao and it was later on affirmed by the Court of Appeals. ISSUE: Whether the registration by the Loys of their contracts of sale made them the first registrants in good faith to defeat petitioners claim as prior buyers. HELD: No, registration by the Loys of their contracts of sale did not defeat the right of petitioner as prior buyers because the person who signed the Loys contracts was not the registered owner. The registered owner of Lot Nos. 5 and 6 was the Estate of Jose Vao. Teodoro Vao was the seller in the contract of sale with Alfredo Loy, Jr., while the Estate of Jose Vao was the seller in the contract of sale with Teresita Loy. Teodoro Vao signed both contracts of sale. The rule is well-settled that one who buys from a person who is not the registered owner is not a purchaser in good faith. This is because purchasers were under notice to inquire why the land was not registered in the name of the person who executed the contracts of sale. In this case, the Loys were under notice that the lots belonged to the Estate of Jose Vao and any sale of the lots required court approval. Moreover, the contracts of the Loys did not convey ownership of the lots to them as against third persons because there was no approval of the sale by the probate court and registration with the Register of Deeds. The Court ruled that registration of the contracts without court approval would be ineffective to bind third persons, especially creditors of the estate. Otherwise, this will open the door to fraud on creditors of the estate.