Republic of the
Supreme Court
FIRST DIVISION
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SPOUSES RAMY and ZENAIDA
PUDADERA, |
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G.R. No. 170073 |
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Petitioners, |
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Present: |
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- versus - |
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IRENEO MAGALLANES and the late
DAISY TERESA CORTEL MAGALLANES substituted by her children, NELLY M. MARQUEZ,
ELISEO MAGALLANES and ANGEL MAGALLANES, |
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VELASCO, JR., LEONARDO-DE CASTRO, PEREZ, JJ. Promulgated: |
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Respondents. |
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October 18, 2010 |
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D E C I S I O N
One is considered a buyer in bad faith not only when
he purchases real estate with knowledge of a defect or lack of title in his
seller but also when he has knowledge of facts which should have alerted him to
conduct further inquiry or investigation.
This Petition for Review on Certiorari seeks
to reverse and set aside the Court of Appeal’s (CA’s) June 6, 2005 Decision[1]
in CA-G.R. CV No. 55850, which affirmed the September 3, 1996 Decision[2]
of the Regional Trial Court (RTC) of Iloilo City, Branch 39 in Civil Case No.
22234. Likewise assailed is the
September 20, 2005 Resolution[3]
denying petitioners’ motion for reconsideration.
Factual Antecedents
Belen Consing
Lazaro (Lazaro) was the absolute owner of a parcel of land, Lot 11-E, with an
area of 5,333 square meters (sq. m.) located in the District of Arevalo, Iloilo
City and covered by Transfer Certificate of Title (TCT) No. T-51250. On March
13, 1979, Lazaro sold a 400 sq. m. portion of Lot 11-E to Daisy Teresa Cortel
Magallanes (Magallanes) for the sum of P22,000.00 under a “Contract To
Sale”[4]
[sic] payable in two years. On July 21,
1980, upon full payment of the monthly installments, Lazaro executed a “Deed of
Definite Sale”[5]
in favor of Magallanes. Thereafter,
Magallanes had the lot fenced and had a nipa hut constructed thereon.
The other
portions of Lot 11-E were, likewise, sold by Lazaro to several buyers, namely,
Elizabeth Norada, Jose Macaluda, Jose Melocoton, Nonilon Esteya, Angeles Palma,
Medina Anduyan, Evangelina Anas and Mario Gonzales.[6]
On July 14, 1980, Lazaro executed a
“Partition Agreement”[7]
in favor of Magallanes and the aforesaid buyers delineating the portions to be
owned by each buyer. Under this
agreement, Magallanes and Mario Gonzales were assigned an 800 sq. m. portion of
It appears that
the “Partition Agreement” became the subject of legal disputes because Lazaro
refused to turn over the mother title, TCT No. T-51250, of
On November 23,
1981, Lazaro sold P8,000.00.[11] As a result, a new title, TCT No. T-58606,[12]
was issued in the name of Spouses Natividad. Due to this development, Magallanes pursued
her claims against Spouses Natividad by filing a civil case for specific
performance, injunction and damages. On
September 2, 1983, Magallanes caused the annotation of a notice of lis
pendens at the back of TCT No. T-58606.[13]
Subsequently, Spouses Natividad
subdivided Lot 11-E-8 into two,
The civil case
filed by Magallanes was later dismissed by the trial court for lack of
jurisdiction as per an Order dated September 16, 1985 which was inscribed at
the back of TCT No. T-58606 on July 7, 1986.[14]
Four days prior to this inscription or
on July 3, 1986, Spouses Natividad sold Lot 11-E-8-A (subject lot) to
petitioner Ramy Pudadera (who later married petitioner Zenaida Pudadera on July
31, 1989) as evidenced by a “Deed of Sale”[15]
for the sum of P25,000.00. As a
consequence, a new title, TCT No. 72734,[16]
was issued in the name of the latter.
Sometime
thereafter Magallanes caused the construction of two houses of strong materials
on the subject lot. On April 20, 1990,
petitioners filed an action for forcible entry against Magallanes with the
Municipal Trial Court in Cities of Iloilo City, Branch 2. On July 17, 1991, the
trial court dismissed the action.[17]
It held that Magallanes was first in
possession of the subject lot by virtue of the “Deed of Definite Sale” dated
July 21, 1980 between Lazaro and Magallanes. After the aforesaid sale, Magallanes filled
the lot with soil; put up a fence; and built a small hut thereon. On the other hand, the trial court found that
when petitioner Ramy Pudadera bought the subject lot from Spouses Natividad on
July 3, 1986, the former had notice that someone else was already in possession
of the subject lot.
Having
failed to recover the possession of the subject lot through the aforesaid
forcible entry case, petitioners commenced the subject action for Recovery of
Ownership, Quieting of Title and Damages against Magallanes and her husband,
Ireneo, in a Complaint[18]
dated February 25, 1995. Petitioners
alleged that they are the absolute owners of
In her Answer,[19]
Magallanes countered that she is the absolute lawful owner of Lot 11-E-8-A;
that Lot 11-E-8-A belongs to her while Lot 11-E-8-B belongs to Mario Gonzales;
that petitioners had prior knowledge of the sale between her and Lazaro; that
she enclosed Lot 11-E-8-A with a fence, constructed a house and caused soil
fillings on said lot which petitioners were aware of; and that she has been in
actual possession of the said lot from March 11, 1979 up to the present. She prayed that TCT No. T-72734 in the name of
petitioner Ramy Pudadera be cancelled and a new one be issued in her name.
During the
pendency of this case, Magallanes passed away and was substituted by her heirs,
herein respondents.
Ruling of the Regional Trial Court
On September 6, 1996, the trial court rendered
judgment in favor of respondents, viz:
WHEREFORE, premises considered, judgment is hereby
rendered in favor of the [respondents] and against the [petitioners]:
1.
Declaring the
[respondent] Daisy Teresa Cortel Magallanes, substituted by her heirs, Nelly M.
Magallanes, Eliseo Magallanes and Angel Magallanes and Ireneo Magallanes, as
the rightful owners of Lot 11-E-8-A, Psd-06-002539, which is now covered by
Transfer Certificate of Title No. T-72734, still in the name of Ramy Pudadera,
situated in the District of Arevalo, Iloilo City, with an area of 400 square
meters more or less;
2.
The
[petitioners] spouses Ramy Pudadera and Zenaida Pudadera are hereby ordered to
execute the necessary Deed of Reconveyance in favor of the above-named parties,
namely[,] Nelly M. Magallanes, Eliseo Magallanes, x x x Angel Magallanes, and
Ireneo Magallanes;
3.
Ordering the
[petitioners] to pay jointly and severally the [respondents] the amount of P10,000.00
as attorney’s fees and the costs of the suit.
SO ORDERED.[20]
The trial court ruled that respondents are the rightful owners of the
subject lot which was sold by Lazaro to their predecessor-in-interest,
Magallanes, on July 21, 1980. When
Lazaro sold the subject lot for a second time to Spouses Natividad on November
23, 1981, no rights were transmitted because, by then, Magallanes was already
the owner thereof. For the same reason, when Spouses Natividad subsequently
sold the subject lot to petitioners on July 3, 1986, nothing was transferred to
the latter.
The trial court further
held that petitioners cannot be considered buyers in good faith and for value
because after Magallanes bought the subject lot from Lazaro, Magallanes
immediately took possession of the lot, and constructed a fence with barbed
wire around the property. The presence
of these structures should, thus, have alerted petitioners to the possible flaw
in the title of the Spouses Natividad considering that petitioners visited the
subject lot several times before purchasing the same. Neither can petitioners claim that the title
of the subject lot was clean considering that a notice of lis pendens
was annotated thereon in connection with a civil case that Magallanes filed
against Spouses Natividad involving the subject lot. Although the notice of lis pendens was
subsequently cancelled on July 7, 1986, the deed of sale between petitioners
and Spouses Natividad was executed on July 3, 1986 or four days before said
cancellation. Thus, petitioners had notice that the subject
property was under litigation. Since
respondents are the rightful owners of the subject lot, petitioners should
execute a deed of conveyance in favor of the former so that a new title may be
issued in the name of the respondents.
Ruling of the Court of Appeals
On June 6, 2005,
the CA rendered the assailed Decision:
WHEREFORE, with all the foregoing, the decision of the Regional Trial Court,
Branch 39,
All
other claims and counterclaims are hereby dismissed for lack of factual and
legal basis.
No
pronouncement as to cost.
SO
ORDERED.[21]
In affirming the ruling of the trial court, the appellate court reasoned
that under the rule on double sale what finds relevance is whether the second
buyer registered the second sale in good faith, that is, without knowledge of
any defect in the title of the seller. Petitioners’ predecessor-in-interest,
Spouses Natividad, were not registrants in good faith. When Magallanes first
bought the subject lot from Lazaro on July 21, 1980, Magallanes took possession
of the same and had it fenced and filled with soil. This was made way ahead of the November 23,
1981 Deed of Sale between Lazaro and Spouses Natividad. With so much movement and transactions
involving the subject lot and given that Lyn Lazaro-Natividad is the niece of
Lazaro, the appellate court found it hard to believe that the Spouses Natividad
were completely unaware of any controversy over the subject lot.
The CA, likewise,
agreed with the trial court that at the time petitioners acquired the subject
lot from Spouses Natividad on July 3, 1986, a notice of lis pendens was
still annotated at the back of TCT No. T-58606 due to a civil case filed by
Magallanes against Spouses Natividad. Although the case was subsequently
dismissed by the trial court for lack of jurisdiction, the notice of lis
pendens was still subsisting at the time of the sale of the subject lot
between Spouses Natividad and petitioners on July 3, 1986 because the lis
pendens notice was cancelled only on July 7, 1986. Consequently,
petitioners cannot be considered buyers and registrants in good faith because
they were aware of a flaw in the title of the Spouses Natividad prior to their
purchase thereof.
Issues
1.
The Court of Appeals erred in not considering the
judicial admissions of Magallanes as well as the documentary evidence showing
that she was claiming a different lot, Lot No. 11-E-8-B, and not Lot 11-E-8-A
which is registered in the name of petitioners under TCT No. T-72734,
consequently, its findings that Magallanes is the rightful owner of
2.
The Court of Appeals erred in applying the principle of
innocent purchasers for value and in good faith to petitioners. Granting that
the said principle may be applied, the Court of Appeals erred in finding that
petitioners are not innocent purchasers for value;
3.
The Court of Appeals erred in affirming the award of
attorney’s fees against the petitioners.[22]
Petitioners’ Arguments
Petitioners postulate that the subject lot is
different from the lot which Magallanes bought from Lazaro. As per Magallanes’ testimony in the ejectment
case, she applied for the zoning permit for Lot 11-E-8-B and not
Petitioners further argue that the rule on notice of lis pendens was improperly applied in this case. The trial court’s order dismissing the civil case filed by Magallanes against Spouses Natividad had long become final and executory before petitioners bought the subject lot from Spouses Natividad. While it is true that the order of dismissal was annotated at the back of TCT No. T-58606 only on July 7, 1986 or four days after the sale between Spouses Natividad and petitioners, the cancellation of the notice of lis pendens was a mere formality. In legal contemplation, the notice was, at the time of the sale on July 3, 1986, ineffective. Citing Spouses Po Lam v. Court of Appeals,[23] petitioners contend that the then existing court order for the cancellation of the lis pendens notice at the time of the sale made them buyers in good faith.
Finally, petitioners question the award of attorney’s fees in favor of respondents for lack of basis. Petitioners claim that they should be awarded damages because respondents unlawfully prevented them from taking possession of the subject lot.
Respondents’ Arguments
Respondents counter that they are in
possession of, and claiming ownership over the subject lot, i.e., Lot 11-E-8-A,
and not
After executing the contract to sell,
Magallanes immediately took possession of the subject lot; constructed a fence
with barbed wire; and filled it up with soil in preparation for the
construction of concrete houses. She
also built a nipa hut and stayed therein since 1979 up to her demise. Respondents emphasize that upon payment of
the full purchase price under the contract to sell and the execution of the
deed of sale, Magallanes undertook steps to protect her rights due to the
refusal of Lazaro to surrender the mother title of the subject lot. Magallanes recorded an adverse claim at the
back of the mother title of the subject lot and an initial notice of lis
pendens thereon. She then filed a civil
case against Lazaro, and, later on, against Lazaro’s successors-in-interest,
Spouses Natividad, which resulted in the inscription of a notice of lis pendens
on TCT No. 51250 and TCT No. T-58606.
When petitioners bought the subject lot from Spouses Natividad on July
3, 1986, the said notice of lis pendens was subsisting because the court
dismissal of said case was inscribed on the title only on July 7, 1986. Petitioners cannot, therefore, be considered
buyers in good faith.
5. That it was ascertained in our investigation that the entire lot occupied by [Magallanes] (lot 11-E-8-A) is the very same lot claimed by the [petitioners], as pointed out by its representative.[25] (Emphasis supplied.)
After losing in the aforesaid forcible entry case,
petitioners commenced the subject action for quieting of title and recovery of
ownership over
The notice of lis pendens at the back of the mother title of the subject lot was already ordered cancelled at the time of the sale of the subject lot to petitioners, hence, said notice cannot be made a basis for finding petitioners as buyers in bad faith.
A notice of lis pendens at the back of the
mother title (i.e., TCT No. T-58606) of Lot 11-E-8-A was inscribed on September
2, 1983 in connection with the civil case for specific performance, injunction
and damages which Magallanes filed against Spouses Natividad. This case was subsequently dismissed by the
trial court for lack of jurisdiction in an Order dated September 16, 1985 which
has already become final and executory as per the Certification dated June 16,
1986 issued by the Branch Clerk of Court of the RTC of Iloilo City, Branch 33.[26] The aforesaid court dismissal was, however,
inscribed only on July 7, 1986 or three days after the sale of the subject lot
to petitioners.[27]
Based on these established facts, petitioners
correctly argue that the said notice of lis pendens cannot be made the
basis for holding that they are buyers in bad faith. Indeed, at the time of the sale of the subject
lot by Spouses Natividad to petitioners on July 7, 1986, the civil case filed
by Magallanes against Spouses Natividad had long been dismissed for lack of
jurisdiction and the said order of dismissal had become final and executory. In Spouses
Po Lam v. Court of Appeals,[28]
the buyers similarly bought a property while a notice of lis pendens was
subsisting on its title. Nonetheless, we
ruled that the buyers cannot be considered in bad faith because the alleged
flaw, the notice of lis pendens, was already being ordered cancelled at
the time of the sale and the cancellation of the notice terminated the effects
of such notice.[29]
This notwithstanding, petitioners cannot be
considered buyers in good faith because, as will be discussed hereunder, they
were aware of other circumstances pointing to a possible flaw in the
title of Spouses Natividad prior to the sale of the subject lot. Despite these circumstances, petitioners did
not take steps to ascertain the status of the subject lot but instead proceeded
with the purchase of the same.
One
who buys a property with knowledge of facts which should put him upon inquiry
or investigation as to a possible defect in the title of the seller acts in bad
faith.
Lot 11-E-8, of which the subject lot (i.e.,
After the aforesaid sale, it appears Lazaro refused
to turnover the mother title of
Subsequently, Spouses Natividad subdivided Lot
11-E-8 into two, i.e.,
The question before us, then, is who between
petitioners and respondents have a better right over
Article 1544 of the Civil Code provides:
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.
Thus, in case of a double sale of immovables, ownership shall belong to “(1)
the first registrant in good faith; (2) then, the first possessor in good
faith; and (3) finally, the buyer who in good faith presents the oldest title.”[30]
However, mere registration is not enough
to confer ownership. The law requires
that the second buyer must have acquired and registered the immovable property in
good faith. In order for the second buyer to displace the first buyer, the
following must be shown: “(1) the second buyer must show that he acted in good
faith (i.e., in ignorance of the first sale and of the first
buyer’s rights) from the time of acquisition until title is transferred to him
by registration or failing registration, by delivery of possession; and (2) the
second buyer must show continuing good faith and innocence or lack of knowledge
of the first sale until his contract ripens into full ownership through prior
registration as provided by law.”[31]
One is considered a purchaser in good faith if he
buys the 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.[32]
Well-settled is the rule that every person dealing with registered land may
safely rely on the correctness of the certificate of title issued therefor and
the law will in no way oblige him to go beyond the certificate to determine the
condition of the property.[33]
“However, this rule shall 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.”[34]
“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
vendor’s title will not make him an innocent purchaser for value if it later
develops that the title was in fact defective, and it appears that he had such
notice of the defect had he acted with that measure of precaution which may
reasonably be required of a prudent man in a like situation.”[35]
In the case at bar,
both the trial court and CA found that petitioners were not buyers and
registrants in good faith owing to the fact that Magallanes constructed a fence
and small hut on the subject lot and has been in actual physical possession
since 1979. Hence, petitioners were
aware or should have been aware of Magallanes’ prior physical possession and
claim of ownership over the subject lot when they visited the lot on several
occasions prior to the sale thereof. Thus, the trial court held:
This Court
believes the version of [Magallanes], that when she bought the property from
[Lazaro], she took immediate possession of the 400-square meter portion and
constructed a fence [with] barbed wire surrounding the said property. She also
constructed a house made of nipa, bamboo and concrete materials. This fact was
even confirmed by [petitioner] Zenaida Pudadera in her testimony.
This Court
cannot believe the testimony of [petitioner] Zenaida Pudadera that they were
the ones who constructed the fence surrounding the 400-square meter portion,
because there was already an existing fence made of bamboos and barbed wire put
up by [Magallanes]. When the [petitioners] therefore, visited the land in
question, several times before the purchase, particularly [petitioner] Ramy
Pudadera, he must have seen the fence surrounding the property in question. He
should have been curious why there was an existing fence surrounding the
property? [sic] He should have asked or verified as to the status of the said
property. A real estate buyer must exercise ordinary care in buying x x x real
estate, especially the existence of the fence in this case which must have [alerted
him to inquire] whether someone was already in possession of the property in
question.[36]
We find no sufficient reason to disturb these findings. The factual findings of the trial court are
accorded great weight and respect and are even binding on this Court
particularly where, as here, the findings of the trial and appellate courts
concur.[37]
Although this rule is subject to certain exceptions, we find none obtaining in
this case.
Petitioners next argue that since the second sale
involves Lazaro and their predecessor-in-interest, Spouses Natividad, due
process requires that Spouses Natividad should first be allowed to establish
that they (Spouses Natividad) are second buyers and first registrants in good
faith before any finding on petitioners’ own good faith can be made considering
that they (petitioners) merely acquired their title from Spouses Natividad. Petitioners lament that Spouses Natividad were
not impleaded in this case. Thus, the
finding that petitioners acted in bad faith was improper.
The argument fails on two grounds.
First, as previously explained, the evidence duly
established that petitioners were aware of facts pointing to a possible flaw in
the title of Spouses Natividad when they visited the subject lot on several
occasions prior to the sale. This, by
itself, was sufficient basis to rule that they acted in bad faith. Stated differently, the presence or absence of
good faith on the part of Spouses Natividad during the second sale involving
the subject lot will not erase the bad faith of petitioners in purchasing the
subject lot from Spouses Natividad.
Second, petitioners miscomprehend the right to due
process. The records indicate that at no
instance during the trial of this case were they prevented from presenting
evidence, including the testimonies of Spouses Natividad, to support their
claims. Thus, they were not denied their
day in court. Petitioners seem to forget
that they were the ones who filed this action to recover ownership and quiet
title against Magallanes. If petitioners
intended to bolster their claim of good faith by impleading the Spouses
Natividad in this case, there was nothing to prevent them from doing so. Time and again, we have ruled that the burden
of proof to establish the status of a purchaser and registrant in good faith
lies upon the one who asserts it.[38]
This onus probandi cannot be
discharged by mere invocation of the legal presumption of good faith.[39]
In sum, petitioners were negligent in not taking the
necessary steps to determine the status of the subject lot despite the presence
of circumstances which would have impelled a reasonably cautious man to do so. Thus, we affirm the findings of the lower
courts that they cannot be considered buyers and registrants in good faith. Magallanes, as the first buyer and actual
possessor, was correctly adjudged by the trial court as the rightful owner of
the subject lot and the conveyance thereof in favor of her heirs, herein
respondents, is proper under the premises. In addition, the trial court should be ordered
to cause the cancellation of TCT No. T-72734 by the Register of Deeds of Iloilo
City and the issuance of a new certificate of title in the names of
respondents.[40] This is without prejudice to any remedy which
petitioners may have against Spouses Natividad and/or Lazaro.
The
award of attorney’s fees is improper.
On the issue of the propriety of attorney’s fees
which the trial court awarded in favor of respondents, we are inclined to agree
with petitioners that the same should be deleted for lack of basis. An award of attorney’s fees is the exception
rather than the rule.[41]
“The right to litigate is so precious
that a penalty should not be charged on those who may exercise it erroneously.”[42]
It is not given merely because the
defendant prevails and the action is later declared to be unfounded unless
there was a deliberate intent to cause prejudice to the other party.[43]
We find the evidence of bad faith on the
part of petitioners in instituting the subject action to be wanting. Thus, we
delete the award of attorney’s fees.
WHEREFORE, the petition is PARTIALLY GRANTED.
The June 6, 2005 Decision and September
20, 2005 Resolution of the Court of Appeals in CA-G.R. CV No. 55850 are AFFIRMED
with the following MODIFICATIONS: (1) The Regional Trial Court of
Iloilo City, Branch 39 is ORDERED to cause the cancellation by the
Register of Deeds of Iloilo City of TCT No. T-72734 and the issuance, in lieu
thereof, of the corresponding certificate of title in the names of respondents,
heirs of Daisy Teresa Cortel Magallanes, and (2) The award of attorney’s fees
in favor of respondents is DELETED.
No pronouncement as to costs.
SO ORDERED.
MARIANO C.
Associate Justice
WE
CONCUR:
RENATO C. CORONA
Chief Justice
Chairperson
JOSE
Associate Justice
C E R T I F I C A T I O N
Pursuant
to Section 13, Article VIII of the Constitution, it is hereby certified that
the conclusions in the above Decision had been reached in consultation before
the case was assigned to the writer of the opinion of the Court’s Division.
RENATO C. CORONA
Chief Justice
[1] Rollo, pp. 10-17; penned by
Associate Justice Pampio A. Abarintos and concurred in by Associate Justices
Mercedes Gozo-Dadole and Ramon M. Bato, Jr.
[2] Records, pp. 271-282; penned by Judge Jose
G. Abdallah.
[3] Rollo, p. 29; penned by Associate
Justice Pampio A. Abarintos and concurred in by Associate Justices Vicente L.
Yap and Ramon M. Bato, Jr.
[4] Records, p. 28; should be contract to sell
as stated in the body of said contract and as per the terms thereof.
[5]
[6]
[7]
[8]
[9]
[10]
[11]
[12]
[13]
[14]
[15]
[16]
[17]
[18]
[19]
[20]
[21] Rollo, p. 16.
[22]
[23] 400 Phil. 858 (2000).
[24] Records, p. 11.
[25]
[26]
[27]
[28] Supra note
23.
[29]
[30] Spouses Abrigo v. De Vera, 476 Phil.
641, 650 (2004).
[31] Cheng v. Genato, 360 Phil. 891, 910
(1998).
[32] Hemedes v. Court of Appeals, 374
Phil. 692, 719-720 (1999).
[33]
[34] Sigaya v. Mayuga, 504 Phil. 600, 614
(2005).
[35]
[36] Records, pp. 278-279.
[37] Uraca v. Court of Appeals, 344 Phil.
253, 267 (1997).
[38] Supra note 34 at 613.
[39]
[40] Bautista v. Court of Appeals, 379
Phil. 386, 402 (2000).
[41] Albenson Enterprises Corp. v. Court of
Appeals, G.R. No. 88694, January 11, 1993, 217 SCRA 16, 31.
[42] De la Peña v. Court of Appeals, G.R.
No. 81827, March 28, 1994, 231 SCRA 456, 462.
[43]