Tuesday, August 18, 2015

The core issue in this case is whether the petitioners are buyers and registrants in good faith.


“x x x.

The core issue in this case is whether the petitioners are buyers and registrants in good faith.

It is undisputed that there is a double sale and that the respondents are the first buyers while the petitioners are the second buyers. The burden of proving good faith lies with the second buyer (petitioners herein) which is not discharged by simply invoking the ordinary presumption of good faith.2 

After an assiduous assessment of the evidentiary records, this Court holds that the petitioners are NOT buyers in good faith as they failed to discharge their burden of proof.

Notably, it is admitted that Martino is the grandfather of Esmeraldo. As an heir, petitioner Esmeraldo cannot be considered as a third party to the prior transaction between Martino and Purificacion. In Pilapil v. Court of Appeals,3  it was written:

The purpose of the registration is to give notice to third persons. And, privies are not third persons. The vendor’s heirs are his privies. Against them, failure to register will not vitiate or annul the vendee’s right of ownership conferred by such unregistered deed of sale.
The non-registration of the deed of sale between Martino and Purificacion is immaterial as it is binding on the petitioners who are privies.4  Based on the privity between petitioner Esmeraldo and Martino, the petitioner as a second buyer is charged with constructive knowledge of prior dispositions or encumbrances affecting the subject property. The second buyer who has actual or constructive knowledge of the prior sale cannot be a registrant in good faith.5

Moreover,  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 expected from the purchaser of a valued piece of land to inquire first into the status or nature of possession of the occupants. As in the common practice in the real estate industry, an ocular inspection of the premises involved is a safeguard that 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 occupant’s possessory rights. The failure of a prospective buyer to take such precautionary steps would mean negligence on his part and would preclude him from claiming or invoking the rights of a “purchaser in good faith.”6  It has been held that “the registration of a later sale must be done in good faith to entitle the registrant to priority in ownership over the vendee in an earlier sale.”7 

There are several indicia that should have placed the petitioners on guard and prompted them to investigate or inspect the property being sold to them. First, Martino, as seller, did not have possession of the subject property. Second, during the sale on July 4, 1990, Martino did not have the owner’s duplicate copy of the title. Third, there were existing permanent improvements on the landFourth, the respondents were in actual possession of the land. These circumstances are too glaring to be overlooked and should have prompted the petitioners, as prospective buyers, to investigate or inspect the land. Where the vendor is not in possession of the property, the prospective vendees are obligated to investigate the rights of one in possession.8 

X x x.

As the petitioners cannot be considered buyers in good faith, they cannot lean on the indefeasibility of their TCT in view of the doctrine that the defense of indefeasibility of a torrens title does not extend to transferees who take the certificate of title in bad faith.11  The Court cannot ascribe good faith to those who have not shown any diligence in protecting their rights.12 

Lastly, it is uncontroverted that the respondents were occupying the land since January 4, 1960 based on the deed of sale between Martino and Purificacion. They have also made improvements on the land by erecting a house of mixed permanent materials thereon, which was also admitted by the petitioners.13   The respondents, without a doubt, are possessors in good faith. Ownership should therefore vest in the respondents because they were first in possession of the property in good faith.14 

X x x.”