COMPILATION OF CASES ON SALES

TOPIC: DOUBLES SALES

TITLE: CONSOLIDATED RURAL BANK (CAGAYAN VALLEY) INC. VS. COURT OF APPEALS
CITATION: G.R. NO. 132161 JANUARY 17, 2005

FACTS: Rizal, Anselmo, Gregorio, Filomeno and Domingo Madrid were the registered owners of Lot No. 7036-A situated
in San Mateo, Isabela per Transfer Certificate of Title (TCT) No. T-8121 issued by the Register of Deeds of Isabela in
September 1956.

On 23 and 24 October 1956, Lot No. 7036-A was subdivided into several lots under subdivision plan Psd- 50390. One of
the resulting subdivision lots was Lot No. 7036-A-7 with an area of Five Thousand Nine Hundred Fifty-Eight (5,958) square
meters was under Rizal Madrid. He sold this lot to Aleja Gamiao and Felisa Dayag to which his brothers Anselmo, Gregorio,
Filomeno and Domingo offered no objection as evidenced by their Joint Affidavit dated 14 August 1957. The deed of sale
was not registered with the Office of the Register of Deeds of Isabela. However, Gamiao and Dayag declared the property
for taxation purposes in their names on March 1964 under Tax Declaration No. 7981.

In 1964, Gamiao and Dayag sold the southern half of Lot No. 7036-A-7, denominated as
Lot No. 7036-A-7-B, to Teodoro dela Cruz, and the northern half, identified as Lot No. 7036-A-7-A,
to Restituto Hernandez. Dela Cruz and Hernandez then took possession of and cultivated the portions of the property
respectively sold to them. In 1986, Hernandez donated the northern half to his daughter, Evangeline Hernandez-del
Rosario.The children of Dela Cruz continued possession of the southern half after their fathers death on in 1970.

In a Deed of Sale dated June 1976, the Madrid brothers conveyed all their rights and interests over Lot No. 7036-A-7 to
Pacifico Marquez, which the former confirmed on February 1983. The deed of sale was registered with the Office of the
Register of Deeds of Isabela on March 1982.

Subsequently, Marquez subdivided Lot No. 7036-A-7 into eight (8) lots. On the same date, Marquez and his spouse,
Mercedita Mariana, mortgaged Lots Nos. 7036-A-7-A to 7036-A-7-D to the Consolidated Rural Bank, Inc. of Cagayan Valley
(hereafter, CRB) to secure a loan of One Hundred Thousand Pesos (P100,000.00). These deeds of real estate mortgage
were registered with the Office of the Register of Deeds in April 1984.

In February 1985, Marquez mortgaged Lot No. 7036-A-7-E likewise to the Rural Bank of Cauayan (RBC) to secure a loan of
Ten Thousand Pesos (P10,000.00). As Marquez defaulted in the payment of his loan, CRB caused the foreclosure of the
mortgages in its favor and the lots were sold to it as the highest bidder in April 1986.

ISSUE:

RULING:

Article 1544 of the Civil Code reads, thus:

ART. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to
the person who may have first taken possession thereof in good faith, if it should be movable property.

Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first
recorded it in the Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who in good faith was first in possession;
and, in the absence thereof, to the person who presents the oldest title, provided there is good faith.
The provision is not applicable in the present case. It contemplates a case of double or multiple sales by a single vendor.
More specifically, it covers a situation where a single vendor sold one and the same immovable property to two or more
buyers. According to a noted civil law author, it is necessary that the conveyance must have been made by a party who
has an existing right in the thing and the power to dispose of it. It cannot be invoked where the two different contracts of
sale are made by two different persons, one of them not being the owner of the property sold. And even if the sale was
made by the same person, if the second sale was made when such person was no longer the owner of the property,
because it had been acquired by the first purchaser in full dominion, the second purchaser cannot acquire any right.

In the case at bar, the subject property was not transferred to several purchasers by a single vendor. In the first deed of
sale, the vendors were Gamiao and Dayag whose right to the subject property originated from their acquisition thereof
from Rizal Madrid with the conformity of all the other Madrid brothers in 1957, followed by their declaration of the
property in its entirety for taxation purposes in their names. On the other hand, the vendors in the other or later deed
were the Madrid brothers but at that time they were no longer the owners since they had long before disposed of the
property in favor of Gamiao and Dayag.

Carpio v. Exevea

In order that tradition may be considered performed, it is necessary that the requisites which it implies must have
been fulfilled, and one of the indispensable requisites, according to the most exact Roman concept, is that the
conveyor had the right and the will to convey the thing. The intention to transfer is not sufficient; it only
constitutes the will. It is, furthermore, necessary that the conveyor could juridically perform that act; that he had
the right to do so, since a right which he did not possess could not be vested by him in the transferee.

This is what Article 1473 (now Art 1544) has failed to express: the necessity for the preexistence of the right on
the part of the conveyor. But even if the article does not express it, it would be understood, in our opinion, that
that circumstance constitutes one of the assumptions upon which the article is based.

This construction is not repugnant to the text of Article 1473, and not only is it not contrary to it, but it explains
and justifies the same.

In a situation where not all the requisites are present which would warrant the application of Art. 1544, the principle of
prior tempore, potior jure or simply he who is first in time is preferred in right, should apply. The only essential requisite
of this rule is priority in time; in other words, the only one who can invoke this is the first vendee. Undisputedly, he is a
purchaser in good faith because at the time he bought the real property, there was still no sale to a second vendee. In the
instant case, the sale to the Heirs by Gamiao and Dayag, who first bought it from Rizal Madrid, was anterior to the sale by
the Madrid brothers to Marquez. The Heirs also had possessed the subject property first in time. Thus, applying the
principle, the Heirs, without a scintilla of doubt, have a superior right to the subject property.

Moreover, it is an established principle that no one can give what one does not havenemo dat quod non habet.
Accordingly, one can sell only what one owns or is authorized to sell, and the buyer can acquire no more than what the
seller can transfer legally. In this case, since the Madrid brothers were no longer the owners of the subject property at the
time of the sale to Marquez, the latter did not acquire any right to it.

In any event, assuming arguendo that Article 1544 applies to the present case, the claim of Marquez still cannot prevail
over the right of the Heirs since according to the evidence he was not a purchaser and registrant in good faith.

Following Article 1544, in the double sale of an immovable, the rules of preference are:
a. The first registrant in good faith;
b. Should there be no entry, the first in possession in good faith; and
c. In the absence thereof, the buyer who presents the oldest title in good faith.

Prior registration of the subject property does not by itself confer ownership or a better right over the property. Article
1544 requires that before the second buyer can obtain priority over the first, he must show that he acted in good faith
throughout (i.e., in ignorance of the first sale and of the first buyers rights) from the time of acquisition until the title is
transferred to him by registration or failing registration, by delivery of possession.

In the instant case, the actions of Marquez have not satisfied the requirement of good faith from the time of the purchase
of the subject property to the time of registration. Found by the Court of Appeals, Marquez knew at the time of the sale
that the subject property was being claimed or taken by the Heirs. This was a detail which could indicate a defect in the
vendors title which he failed to inquire into. Marquez also admitted that he did not take possession of the property and
at the time he testified he did not even know who was in possession.

One who purchases real property which is in actual possession of others should, at least, make some inquiry concerning
the rights of those in possession. The actual possession by people other than the vendor should, at least, put the purchaser
upon inquiry. He can scarcely, in the absence of such inquiry, be regarded as a bona fide purchaser as against such
possessions. 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 vendors title takes all the risks and losses consequent to such failure.

It is further perplexing that Marquez did not fight for the possession of the property if it were true that he had a better
right to it. In our opinion, there were circumstances at the time of the sale, and even at the time of registration, which
would reasonably require a purchaser of real property to investigate to determine whether defects existed in his vendors
title. Instead, Marquez willfully closed his eyes to the possibility of the existence of these flaws. For failure to exercise the
measure of precaution which may be required of a prudent man in a like situation, he cannot be called a purchaser in
good faith.

Spouses Mathay v. Court of Appeals

Although it is a recognized principle that a person dealing on a registered land need not go beyond its certificate
of title, it is also a firmly settled rule that where there are circumstances which would put a party on guard and
prompt him to investigate or inspect the property being sold to him, such as the presence of occupants/tenants
thereon, it is, of course, expected from the purchaser of a valued piece of land to inquire first into the status or
nature of possession of the occupants, i.e., whether or not the occupants possess the land en concepto de dueo,
in concept of owner. As is the common practice in the real estate industry, an ocular inspection of the premises
involved is a safeguard a cautious and prudent purchaser usually takes. Should he find out that the land he intends
to buy is occupied by anybody else other than the seller who, as in this case, is not in actual possession, it would
then be incumbent upon the purchaser to verify the extent of the occupants possessory rights. The failure of a
prospective buyer to take such precautionary steps would mean negligence on his part and would thereby
preclude him from claiming or invoking the rights of a purchaser in good faith.

Crisostomo v. Court of Appeals

It is a well-settled rule that a purchaser or mortgagee cannot close his eyes to facts which should put a reasonable
man upon his guard, and then claim that he acted in good faith under the belief that there was no defect in the
title of the vendor or mortgagor. 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 the vendors or mortgagors title, will not make him an innocent
purchaser or mortgagee for value, if it afterwards develops that the title was in fact defective, and it appears that
he had such notice of the defects as would have led to its discovery had he acted with the measure of a prudent
man in a like situation.

Banks, their business being impressed with public interest, are expected to exercise more care and prudence than private
individuals in their dealings, even those involving registered lands. Hence, for merely relying on the certificates of title and
for its failure to ascertain the status of the mortgaged properties as is the standard procedure in its operations, we agree
with the Court of Appeals that CRB is a mortgagee in bad faith.

In a situation where a party has actual knowledge of the claimants actual, open and notorious possession of the
disputed property at the time of registration, as in this case, the actual notice and knowledge are equivalent to
registration, because to hold otherwise would be to tolerate fraud and the Torrens system cannot be used to shield
fraud.

While certificates of title are indefeasible, unassailable and binding against the whole world, they merely confirm or
record title already existing and vested. They cannot be used to protect a usurper from the true owner, nor can they be
used for the perpetration of fraud; neither do they permit one to enrich himself at the expense of others.

TOPIC: DOUBLES SALES

TITLE: RADIOWELATH FINANCE COMPANY VS. MANUELITO S. PALILEO
CITATION: G.R. NO. 83432 MAY 20, 1991

DOCTRINE: If the same piece of land was sold to two different purchasers, to whom shall ownership belong?

Article 1544 of the Civil Code provides that in case of double sale of an immovable property, ownership shall be
transferred:
1. To the person acquiring it who in good faith first recorded it in the Registry of Property;
2. In default thereof, to the person who in good faith was first in possession; and
3. In default thereof, to the person who presents the oldest title, provided there is good faith.

There is no ambiguity regarding the application of the law with respect to lands registered under the Torrens System.
Section 51 of Presidential Decree No. 1529 (amending Section 50 of Act No. 496 clearly provides that the act of registration
is the operative act to convey or affect registered lands insofar as third persons are concerned. Thus, a person dealing
with registered land is not required to go behind the register to determine the condition of the property. He is only charged
with notice of the burdens on the property which are noted on the face of the register or certificate of title. Following this
principle, this Court has time and again held that a purchaser in good faith of registered land (covered by a Torrens Title)
acquires a good title as against all the transferees thereof whose right is not recorded in the registry of deeds at the time
of the sale.

FACTS: On April 13, 1970, spouses Enrique Castro and Herminia R. Castro sold to respondent Manuelito Palileo, a parcel
of unregistered coconut land situated in Candiis, Mansayaw, Mainit, Surigao del Norte. The sale is evidenced by a notarized
Deed of Absolute Sale. The deed was not registered in the Registry of Property for unregistered lands in the province of
Surigao del Norte. Since the execution of the deed of sale, Palileo who was then employed at Lianga Surigao del Sur,
exercised acts of ownership over the land through his mother Rafaela Palileo, as administratrix or overseer. Palileo has
continuously paid the real estate taxes on said land from 1971 until the present.

In 1976, a judgment was rendered against Castro in a Civil case to pay petitioner Radiowealth Finance Company the sum
of P22,350.35 with interest thereon at the rate of 16% per annum from November 2, 1975 until fully paid, and the further
sum of P2,235.03 as attorney's fees, and to pay the costs.

Pursuant to the issued writ of execution, Deputy Provincial Sheriff Leopoldo Risma, levied upon and finally sold at public
auction the subject land that defendant Enrique Castro had sold to appellee Manuelito Palileo on April 13,1970. A
certificate of sale was executed by the Provincial Sheriff in favor of Radiowealth Finance Company, being the only bidder.
After the period of redemption has (sic) expired, a deed of final sale was also executed by the same Provincial Sheriff. Both
the certificate of sale and the deed of final sale were registered with the Registry of Deeds.

Learning of what happened to the land, private respondent Manuelito Palileo filed an action for quieting of title over the
same.

ISSUE: WON the rule in Article 1544 is applicable to a parcel of unregistered land purchased at a judicial sale.
RULING:

The property in question was already sold to private respondent by its previous owner before the execution sale is
evidenced by a deed of sale. Said deed of sale is notarized and is presumed authentic. There is no substantive proof to
support petitioner's allegation that the document is fictitious or simulated. Private respondent was not a mere
administrator of the property. That he exercised acts of ownership through his mother also remains undisputed.

What the Provincial Sheriff levied upon and sold to petitioner is a parcel of land that does not belong to Enrique Castro,
the judgment debtor, hence the execution is contrary to the directive contained in the writ of execution which
commanded that the lands and buildings belonging to Enrique Castro be sold to satisfy the execution.

There is no doubt that had the property in question been a registered land, this case would have been decided in favor of
petitioner since it was petitioner that had its claim first recorded in the Registry of Deeds. For, as already mentioned
earlier, it is the act of registration that operates to convey and affect registered land. Therefore, a bona fide purchaser of
a registered land at an execution sale acquires a good title as against a prior transferee, if such transfer was unrecorded.

However, it must be stressed that this case deals with a parcel of unregistered land and a different set of rules applies.

Under Act No. 3344, registration of instruments affecting unregistered lands is "without prejudice to a third party with a
better right". The afore-quoted phrase has been held by this Court to mean that the mere registration of a sale in one's
favor does not give him any right over the land if the vendor was not anymore the owner of the land having previously
sold the same to somebody else even if the earlier sale was unrecorded.

The case of Carumba vs. Court of Appeals is a case in point. It was held therein that Article 1544 of the Civil Code has no
application to land not registered under Act No. 496. Like in the case at bar, Carumba dealt with a double sale of the same
unregistered land. The first sale was made by the original owners and was unrecorded while the second was an execution
sale that resulted from a complaint for a sum of money filed against the said original owners. Applying Section 35, Rule 39
of the Revised Rules of Court, this Court held that Article 1544 of the Civil Code cannot be invoked to benefit the purchaser
at the execution sale though the latter was a buyer in good faith and even if this second sale was registered. It was
explained that this is because the purchaser of unregistered land at a sheriffs execution sale only steps into the shoes of
the judgment debtor, and merely acquires the latter's interest in the property sold as of the time the property was levied
upon.

Applying this principle, the Court of Appeals correctly held that the execution sale of the unregistered land in favor of
petitioner is of no effect because the land no longer belonged to the judgment debtor as of the time of the said execution
sale.

TOPIC: DOUBLES SALES

TITLE: RAYMUNDO DE LEON VS. BENITA ONG
CITATION: G.R. NO. 170405 FEBRUARY 2, 2010

FACTS: On March 10, 1993, petitioner Raymundo S. de Leon sold three parcels of land with improvements situated in
Antipolo, Rizal to respondent Benita T. Ong. As these properties were mortgaged to Real Savings and Loan Association,
Incorporated (RSLAI), petitioner and respondent executed a notarized deed of absolute sale with assumption of mortgage.

Pursuant to this deed, respondent gave petitioner 415,500 as partial payment. Petitioner, on the other hand, handed
the keys to the properties and wrote a letter informing RSLAI of the sale and authorizing it to accept payment from
respondent and release the certificates of title.
Thereafter, respondent undertook repairs and made improvements on the properties. Respondent likewise informed
RSLAI of her agreement with petitioner for her to assume petitioners outstanding loan. RSLAI required her to undergo
credit investigation.

Subsequently, respondent learned that petitioner again sold the same properties to one Leona Viloria after March 10,
1993 and changed the locks, rendering the keys he gave her useless. Respondent thus proceeded to RSLAI to inquire about
the credit investigation. However, she was informed that petitioner had already paid the amount due and had taken back
the certificates of title.

ARGUMENTS:

Petitioner insists that he entered into a contract to sell since the validity of the transaction was subject to a suspensive
condition, that is, the approval by RSLAI of respondents assumption of mortgage. Because RSLAI did not allow respondent
to assume his (petitioners) obligation, the condition never materialized. Consequently, there was no sale.

Respondent, on the other hand, asserts that they entered into a contract of sale as petitioner already conveyed full
ownership of the subject properties upon the execution of the deed.

ISSUES:

1. WON the parties entered into a contract of sale or contract to sell.

2. WON the second sale is a void sale or a double sale.

RULINGS:

CONTRACT OF SALE

In a contract of sale, the seller conveys ownership of the property to the buyer upon the perfection of the contract. Should
the buyer default in the payment of the purchase price, the seller may either sue for the collection thereof or have the
contract judicially resolved and set aside. The non-payment of the price is therefore a negative resolutory condition.

On the other hand, a contract to sell is subject to a positive suspensive condition. The buyer does not acquire ownership
of the property until he fully pays the purchase price. For this reason, if the buyer defaults in the payment thereof, the
seller can only sue for damages.

The deed executed by the parties (as previously quoted) stated that petitioner sold the properties to respondent "in a
manner absolute and irrevocable" for a sum of 1.1 million. With regard to the manner of payment, it required respondent
to pay 415,500 in cash to petitioner upon the execution of the deed, with the balance payable directly to RSLAI (on behalf
of petitioner) within a reasonable time. Nothing in said instrument implied that petitioner reserved ownership of the
properties until the full payment of the purchase price. On the contrary, the terms and conditions of the deed only affected
the manner of payment, not the immediate transfer of ownership (upon the execution of the notarized contract) from
petitioner as seller to respondent as buyer. Otherwise stated, the said terms and conditions pertained to the performance
of the contract, not the perfection thereof nor the transfer of ownership.

Settled is the rule that the seller is obliged to transfer title over the properties and deliver the same to the buyer. In this
regard, Article 1498 of the Civil Code provides that, as a rule, the execution of a notarized deed of sale is equivalent to the
delivery of a thing sold.

In this instance, petitioner executed a notarized deed of absolute sale in favor of respondent. Moreover, not only did
petitioner turn over the keys to the properties to respondent, he also authorized RSLAI to receive payment from
respondent and release his certificates of title to her. The totality of petitioners acts clearly indicates that he had
unqualifiedly delivered and transferred ownership of the properties to respondent. Clearly, it was a contract of sale the
parties entered into.

Furthermore, even assuming arguendo that the agreement of the parties was subject to the condition that RSLAI had to
approve the assumption of mortgage, the said condition was considered fulfilled as petitioner prevented its fulfillment by
paying his outstanding obligation and taking back the certificates of title without even notifying respondent. In this
connection, Article 1186 of the Civil Code provides:

Article 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment.

DOUBLE SALE

This case involves a double sale as the disputed properties were sold validly on two separate occasions by the same seller
to the two different buyers in good faith.

Article 1544 of the Civil Code provides:

Article 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.

A purchaser in good faith is one who buys the property of another without notice that some other person has a right to,
or an interest in, such property and pays a full and fair price for the same at the time of such purchase, or before he has
notice of some other persons claim or interest in the property. The law requires, on the part of the buyer, lack of notice
of a defect in the title of the seller and payment in full of the fair price at the time of the sale or prior to having notice of
any defect in the sellers title.

Was respondent a purchaser in good faith? Yes.

Respondent purchased the properties, knowing they were encumbered only by the mortgage to RSLAI. According to her
agreement with petitioner, respondent had the obligation to assume the balance of petitioners outstanding obligation to
RSLAI. Consequently, respondent informed RSLAI of the sale and of her assumption of petitioners obligation. However,
because petitioner surreptitiously paid his outstanding obligation and took back her certificates of title, petitioner himself
rendered respondents obligation to assume petitioners indebtedness to RSLAI impossible to perform.

Respondent was not aware of any interest in or a claim on the properties other than the mortgage to RSLAI which she
undertook to assume. Moreover, Viloria bought the properties from petitioner after the latter sold them to respondent.
Respondent was therefore a purchaser in good faith. Hence, the rules on double sale are applicable.

Article 1544 of the Civil Code provides that when neither buyer registered the sale of the properties with the registrar of
deeds, the one who took prior possession of the properties shall be the lawful owner thereof.

In this instance, petitioner delivered the properties to respondent when he executed the notarized deed and handed over
to respondent the keys to the properties. For this reason, respondent took actual possession and exercised control thereof
by making repairs and improvements thereon. Clearly, the sale was perfected and consummated on March 10, 1993. Thus,
respondent became the lawful owner of the properties.

TOPIC: DOUBLES SALES

TITLE: REV. FR. DANTE MARTINEZ VS. COURT OF APPEALS
CITATION: G.R. NO. 123547 MAY 21, 2001

FACTS: In February 1981, private respondents Godofredo De la Paz and his sister Manuela De la Paz, married to Maximo
Hipolito, entered into an oral contract with petitioner Rev. Fr. Dante Martinez, then Assistant parish priest of Cabanatuan
City, for the sale of Lot No. 1337-A-3 at the Villa Fe Subdivision in Cabanatuan City for the sum of P15,000.00. At the time
of the sale, the lot was still registered in the name of Claudia De la Paz, mother of private respondents, although the latter
had already sold it to private respondent Manuela de la Paz by virtue of a Deed of Absolute Sale dated May 26, 1976.

Manuela subsequently registered the sale in her name in October 1981. When the land was offered for sale to petitioner,
private respondents De la Paz were accompanied by their mother, since petitioner dealt with the De la Pazes as a family
and not individually. He was assured by them that the lot belonged to Manuela De la Paz.

After giving the agreed downpayment, petitioner started the construction of a house on the lot after securing a building
permit from the City Engineers Office on April 23, 1981, with the written consent of the then registered owner, Claudia de
la Paz. Petitioner likewise began paying the real estate taxes on said property. Construction on the house was completed
on October 6, 1981. Since then, petitioner and his family have maintained their residence there.

On January 31, 1983, petitioner completed payment of the lot for which private respondents De la Paz executed two
documents.

However, private respondents De la Paz never delivered the Deed of Sale they promised to petitioner.

In the meantime, in a Deed of Absolute Sale with Right to Repurchase dated October 28, 1981 private respondents De la
Paz sold three lots with right to repurchase the same within one year to private respondents spouses Reynaldo and Susan
Veneracion for the sum of P150,000.00. One of the lots sold was the lot previously sold to petitioner. Private respondents
Veneracion never took actual possession of any of these lots during the period of redemption, but all titles to the lots
were given to him.
Petitioner discovered that the lot he was occupying with his family had been sold to the spouses Veneracion after receiving
a letter from private respondent Reynaldo Veneracion on March 19, 1986, claiming ownership of the land and demanding
that they vacate the property and remove their improvements thereon. Petitioner, in turn, demanded through counsel
the execution of the deed of sale from private respondents De la Paz and informed Reynaldo Veneracion that he was the
owner of the property as he had previously purchased the same from private respondents De la Paz.

ISSUE: WON the respondents are buyers in good faith of the lot in dispute as to make them the absolute owners thereof
in accordance with Art. 1544 of the Civil Code on double sale of immovable property.

RULING:

This case, involves double sale and, on this matter, Art. 1544 of the Civil Code provides that where immovable property is
the subject of a double sale, ownership shall be transferred (1) to the person acquiring it who in good faith first recorded
it to the Registry of Property; (2) in default thereof, to the person who in good faith was first in possession; and (3) in
default thereof, to the person who presents the oldest title. The requirement of the law, where title to the property is
recorded in the Register of Deeds, is two-fold: acquisition in good faith and recording in good faith. To be entitled to
priority, the second purchaser must not only prove prior recording of his title but that he acted in good faith, i.e., without
knowledge or notice of a prior sale to another. The presence of good faith should be ascertained from the circumstances
surrounding the purchase of the land.

The requisites for considering a contract of sale with a right of repurchase as an equitable mortgage are:

1. Tthat the parties entered into a contract denominated as a contract of sale and
2. That their intention was to secure an existing debt by way of mortgage.
A contract of sale with right to repurchase gives rise to the presumption that it is an equitable mortgage in any of the
following cases:
1. When the price of a sale with a right to repurchase is unusually inadequate;
2. When the vendor remains in possession as lessee or otherwise;
3. When, upon or after the expiration of the right to repurchase, another instrument extending the period of
redemption or granting a new period is executed;
4. When the purchaser retains for himself a part of the purchase price;
5. When the vendor binds himself to pay the taxes on the thing sold;
6. In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall
secure the payment of a debt or the performance of any other obligation.

In case of doubt, a contract purporting to be a sale with right to repurchase shall be construed as an equitable
mortgage.

In this case, the following circumstances indicate that the private respondents intended the transaction to be an equitable
mortgage and not a contract of sale: (1) Private respondents Veneracion never took actual possession of the three lots;
(2) Private respondents De la Paz remained in possession of the Melencio lot which was co-owned by them and where
they resided; (3) During the period between the first sale and the second sale to private respondents Veneracion, they
never made any effort to take possession of the properties; and (4) when the period of redemption had expired and
private respondents Veneracion were informed by the De la Pazes that they are offering the lots for sale to another person
for P200,000.00, they never objected. To the contrary, they offered to purchase the two lots for P180,000.00 when they
found that a certain Mr. Tecson was prepared to purchase it for the same amount. Thus, it is clear from these
circumstances that both private respondents never intended the first sale to be a contract of sale, but merely that of
mortgage to secure a debt of P150,000.00.

With regard to the second sale, which is the true contract of sale between the parties, it should be noted that this Court
in several cases, has ruled that a purchaser who is aware of facts which should put a reasonable man upon his guard
cannot turn a blind eye and later claim that he acted in good faith. Reynaldo knew that there were already occupants on
the property as early as 1981. The fact that there are persons, other than the vendors, in actual possession of the disputed
lot should have put private respondents on inquiry as to the nature of petitioners right over the property. But he never
talked to petitioner to verify the nature of his right. He merely relied on the assurance of private respondent Godofredo
De la Paz, who was not even the owner of the lot in question, that he would take care of the matter. This does not meet
the standard of good faith.

Art. 1357 and Art. 1358, in relation to Art. 1403(2) of the Civil Code, requires that the sale of real property must be in
writing for it to be enforceable. It need not be notarized. If the sale has not been put in writing, either of the contracting
parties can compel the other to observe such requirement. This is what petitioner did when he repeatedly demanded that
a Deed of Absolute Sale be executed in his favor by private respondents De la Paz. There is nothing in the above provisions
which require that a contract of sale of realty must be executed in a public document. In any event, it has been shown
that private respondents Veneracion had knowledge of facts which would put them on inquiry as to the nature of
petitioners occupancy of the disputed lot.

TOPIC: DOUBLES SALES

TITLE: LORENZO BERICO VS. COURT OF APPEALS
CITATION: G.R. NO. 96306 AUGUST 20, 1993

FACTS: A certain Jose de los Santos owned a 98,254 square-meter parcel of land designated as Lot No. 785, PLs-32 located
at Balo-Andang, San Ramon, San Pascual Masbate. In October 1961, Jose sold, in a private document , a 2 1/4 hectare
portion thereof to the private respondents. In November 1963, however, he executed another deed of sale which he
acknowledged before a notary public. Private respondents took possession of the portion sold to them immediately after
the 1961 sale and declared the same for taxation purposes in the name of private respondent Ciriaco Flores; private
respondents likewise paid the taxes thereon.

On 3 January 1963, Jose de los Santos sold one-half of Lot No. 785 to petitioner Lorenzo Berico. Thereafter, in March
1963, Jose's minor children sold to the same petitioner the remaining half. Jose de los Santos represented his children in
this transaction.

Petitioner Berico was aware of the 1961 sale of a portion of the lot to the private respondents and of the latter's possession
thereof.

Despite such knowledge and recognition of the sale in favor of and the possession of the property by the private
respondents, petitioner Berico registered in June 1968 the two deeds of sale in his favor and caused the cancellation of
OCT No. P-671; the latter also secured the issuance in his name of Transfer Certificate of Title (TCT) No. T-1346. He paid
the appropriate taxes thereon only from 1973 to 1986. It appears, however, that he declared the property for taxation
purposes in his wife's name in 1968.

On the other hand, it was only in November 1978 that the private respondents registered the deed of sale in their favor
after discovering the cancellation of OCT No. P-671 and issuance in favor of petitioner Berico of TCT No. T- 1346.

ISSUE: In the double sale of an immovable property under Article 1544 of the Civil Code, does prescription bar an action
by the first vendees, who are in possession of the said property, against the second vendee for the annulment of a transfer
certificate of title over the property procured by the latter who has knowledge of the first sale and who recognizes the
first vendees' possession?

RULING:

Petitioners insist that an "action founded on fraud prescribed in four (4) years or one based on constructive trust is barred
after the lapse of ten (10) years because the issuance of title is constructive notice to the public, including the petitioner.
They aver that TCT No. T-1346 was issued in petitioner Lorenzo Berico's name on 5 June 1968, and it was only on 14
December 1978 or after the lapse of "10 years, 6 months and 9 days" that the private res pondents filed the complaint
for annulment of title. Hence, the same was filed after the expiration of the proper prescriptive period. Petitioners
maintain that at the time they purchased the property, the certificate of title "was clean"; it did not show that any portion
thereof had been sold to the private respondents.

As already adverted to, the action is governed by Article 1544 of the Civil Code which prescribes the rules in determining
the rights of the vendees in the double sale of property.

It is clear that in the double sale of an immovable, as obtains in this case, the ownership of the property shall belong to
the vendee who, in good faith, first recorded the sale in the Registry of Property. The term "good faith" in the second
paragraph is not found in the corresponding paragraph of Article 1473 of the old Civil Code from which Article 1544 of the
new Civil Code was taken. However, In the 1918 case of Leung Yee vs. F.L. Strong Machinery Co. and Williamson, this Court
ruled that the force and effect accorded by law to an inscription in a public registry presupposes good faith on the part of
the person who enters such inscription. Thus:

It has been suggested that since the provisions of article 1473 of the Civil Code require "good faith," in express
terms, in relation to "possession" and "title," but contain no express requirement as to "good faith" in relation to
the "inscription" of the property in the registry, it must be presumed that good faith is not an essential requisite
of registration in order that it may have the effect contemplated in this article. We cannot agree with this
contention. It could not have been the intention of the legislator to base the preferential right secured under this
article of the code upon an inscription of title in bad faith. Such an interpretation placed upon the language of this
section would open wide the door to fraud and collusion. The public records cannot be converted into instruments
 of fraud and oppression by one who secures an inscription therein in bad faith. The force and effect given by law
to an inscription in a public record presupposes the good faith of him who enters such inscription; and rights
created by statute, which are predicated upon an inscription in a public registry, do not and cannot accrue under
an inscription "in bad faith," to the benefit of the person who thus makes the inscription."

As this Court stated in Palanca vs. Director of Lands, the record to which Article 1473 of the Civil Code refers is that made
in good faith, for the law will not protect anything done in bad faith.

It therefore goes without saying that the rights conferred by Article 1473 of the old Civil Code, now Article 1544 of the
new Civil Code, "upon one of the two purchasers of the same real property who has registered his title in the registry of
deeds, do not come into being if the registration is not made in good faith." Otherwise stated, in order that a purchaser
of realty may merit the protection of the second paragraph of Article 1544, the said purchaser must act in good faith in
registering his deed of sale. Verily, good faith is the fundamental premise of the preferential rights established in the said
Article. Hence, mere registration is not enough; good faith must concur with it.

Since the petitioners had prior knowledge of the sale of the questioned portion to the private respondents and even
recognized and respected the latter's possession thereof, they acted with gross and evident bad faith in registering the
deed of sale and in obtaining TCT No. T-1346 in their favor. Thus, the registration of the deed of sale was ineffectual and
vested upon them no preferential rights to the property in derogation of the rights of the private respondents. The
subsequent issuance of TCT No. T-1346, to the extent that it affects the latter's property, conferred no better right than
the registration which was the source of the authority to issue the said title. The spring cannot rise higher than its source.
Considering, therefore, that as of that time the private respondents had not as yet registered the sale in their favor, the
third paragraph of Article 1544 should then apply. Accordingly, since it has been proven that the private respondents were
the anterior possessors in good faith, ownership of the questioned portion vested in them by the sheer force of the said
third paragraph. Besides, the private respondents subsequently registered the deed of sale in their favor on 8 November
1978. For all legal intents and purposes, they were the first to register the deed of conveyance. There can be no question
that since they were the first vendees, their registration enjoyed the presumption of good faith.

Petitioners cannot seek refuge in the theory of implied or constructive trust and its corresponding rule on prescription.
No trust, be it express or implied, is involved in the instant case. It cannot be inferred, as the petitioners suggest, from the
fraudulent inclusion of the private respondents' property in TCT No. T-1346. Such a position probably stems from the
petitioners' erroneous reading of Article 1456 of the new Civil Code which provides:

Art. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered
a trustee of an implied trust for the benefit of the person from whom the property comes.

It is to be emphasized that the private respondents never parted with the ownership and possession of that portion of Lot
No. 785 which they had purchased from Jose de los Santos; nor did the petitioners ever enter into possession thereof. As
earlier stated, the issuance of TCT No. T-1346 did not operate to vest upon the latter ownership over the private
respondents' property. That act has never been recognized as a mode of acquiring ownership. As a matter of fact, even
the original registration of immovable property does not vest title thereto; it is merely evidence of such title over a
particular property. The Torrens system of land registration should not be used as a means to perpetrate fraud against
the rightful owner of real property. Registration, to be effective, must be made in good faith.

Since the private respondents did not part with their ownership and possession of that portion of Lot No. 785 which they
had purchased from Jose de los Santos in 1961, and since the petitioners had prior knowledge of such acquisition and
possession, it cannot be said that the latter "acquired" the same through fraud. The fraud mentioned in Article 1544 is
understood to be either actual or constructive fraud. Actual fraud is intentional fraud; it consists in deception, intentionally
practiced to induce another to part with property or to surrender some legal right, and which accomplishes the end
designed. Constructive fraud, on the other hand, is a breach of legal or equitable duty which, irrespective of the moral
guilt of the fraud feasor, the law declares fraudulent because of its tendency to deceive others, to violate public or private
confidence, or to injure public interests. The latter usually proceeds from a breach of duty arising out of a fiduciary or
confidential relationship. In the instant case, none of the elements of both kinds of fraud exists. Petitioners practiced no
deception on the private respondents to induce the latter to part with the ownership or deliver the possession of the
property to them. Moreover, no fiduciary relations existed between the two parties.

In a more real sense, and insofar as prescription is concerned, petitioners may only acquire ownership of the questioned
property assuming that they did not register the deed of sale in their favor through extraordinary acquisitive
prescription under Article 1137 of the Civil Code, and not by ordinary acquisitive prescription since they cannot claim just
title or good faith.

Finally, the complaint for annulment of title filed by the private respondents is substantially one for the quieting of title
to quiet their title against a cloud cast by the claim of the petitioners. It is settled that an action to quiet title does not
prescribe.