Buason vs. Panuyas

In a double sale of land registered under the Land Registration Act, the buyer who recorded the sale in the Registry of Deeds has the better right, and a sale made by an agent without knowledge of the principal's death is valid and fully effective as to third persons who contracted with him in good faith.

The spouses Buenaventura Dayao and Eugenia Vega had acquired by homestead patent a 14.8413-hectare parcel in Muñoz, Nueva Ecija, covered by original certificate of title No. 1187. Disposition of registered land was governed by the Land Registration Act's system of annotation and registration, while the effects of death upon agency and of successive sales were governed by the old and new Civil Code.

In their lifetime the spouses Buenaventura Dayao and Eugenia Vega acquired by homestead patent a parcel of land at barrio Gabaldon, municipality of Muñoz, province of Nueva Ecija, containing 14.8413 hectares and covered by original certificate of title No. 1187. On 29 October 1930 they executed a power of attorney authorizing Eustaquio Bayuga to engage counsel to prosecute their case against Leonardo Gambito for annulment of a contract of sale of the parcel (Civil No. 5787 of the same court) and, after termination of the case in their favor, to sell the land and deduct from the proceeds whatever expenses he had incurred in the litigation.

Buenaventura Dayao died on 14 March 1934, leaving his wife Eugenia Vega and children Pablo, Teodoro, Fortunata and Juliana, all surnamed Dayao. On 21 March 1939 the four children executed a deed of sale conveying 12.8413 hectares of the parcel to the spouses Manuel Buason and Lolita M. Reyes, with their mother Eugenia Vega affixing her thumbmark to the deed as witness. The Buason spouses took possession through their tenants in 1939 but did not register the sale.

Thereafter, on 18 July 1944, Eustaquio Bayuga sold 8 hectares of the same parcel to the spouses Mariano Panuyas and Sotera B. Cruz. The power of attorney had been annotated on the back of original certificate of title No. 1187 as Entry No. 16836/H-1187, and the Bayuga sale to the Panuyas spouses was likewise annotated thereon as Entry No. 778/H-1187. Bayuga died on 25 March 1946 and Eugenia Vega died in 1954.

The Buason spouses then sued for delivery of possession of the portion held by Panuyas, nullification of the Bayuga sale and cancellation of transfer certificate of title No. 8419 issued in the names of Panuyas and his wife, validation of their own 1939 deed, and P9,600 as damages and attorney's fees plus costs. Panuyas defended on the grounds of good-faith purchase for value, prescription, failure to state a cause of action, unenforceability under the statute of frauds, and laches, and counterclaimed for P5,000 actual and P10,000 moral damages for a clearly unfounded suit. After trial the Court of First Instance found the action barred by the statute of limitations and dismissed the complaint.

• Termination of Agency by Death: Petitioner argued that the death of the principal on 14 March 1934 ended the authority of the agent, rendering null and void the 18 July 1944 sale of 8 hectares by Eustaquio Bayuga to appellee and his wife.
• Validity of Prior Sale: Petitioner maintained that the 21 March 1939 deed of sale executed in their favor by the Dayao children was valid and entitled them to possession, cancellation of transfer certificate of title No. 8419, and damages.

• Good-Faith Purchase: Respondent countered that he and his wife were buyers in good faith and for valuable consideration, without actual knowledge of the previous sale, and entitled to rely on the certificate of title and the recorded authority of the agent.
• Prescription and Laches: Respondent argued that appellants' causes of action were barred by the statute of limitations and that appellants were guilty of laches.
• Failure to State a Cause and Statute of Frauds: Respondent maintained that the complaint stated no cause of action and that the claim sued upon was unenforceable under the statute of frauds.
• Counterclaim for Damages: Respondent sought P5,000 as actual damages and P10,000 as moral damages for bringing a clearly unfounded suit that depreciated the value of the land and injured his reputation.

• Double Sale of Registered Land: Whether, in a double sale of land registered under the Land Registration Act, the buyer who recorded the sale prevails over the prior buyer who did not record.
• Post-Mortem Act of Agent: Whether the sale executed by the agent after the principal's death is null and void where the agent had no knowledge of the demise and the third persons contracted in good faith.

• Double Sale of Registered Land: Yes. The recorded buyer prevails, registration under the Land Registration Act determining priority where the second buyers had no actual knowledge of the prior unrecorded sale and relied on the face of the title and the recorded agency.
• Post-Mortem Act of Agent: No. The sale was not void, Article 1738 of the old Civil Code (Article 1931, new Civil Code) validating acts done by an agent without knowledge of the principal's death as to third persons who contracted in good faith.

• Double Sale of Registered Land: Applied was the rule for double sale of registered land that he who recorded in the Registry of Deeds has the better right. Appellants did not register their 21 March 1939 purchase of 12.8413 hectares, while both the 29 October 1930 power of attorney and the 18 July 1944 sale to appellee and his wife were annotated on the back of original certificate of title No. 1187. It not having been shown that appellee and his wife had actual knowledge of the previous sale, reliance on the face of the registered owners' title and on the recorded authority of the agent was justified, so priority belonged to the recorded sale.
• Post-Mortem Act of Agent: Although agency is extinguished by the principal's death, validity as to third persons turns on the agent's knowledge under Article 1738, old Civil Code (Article 1931, new Civil Code). It had not been shown that Bayuga knew of Buenaventura Dayao's death on 14 March 1934 when the 1944 sale was made. Absent such knowledge, anything done by the agent is valid and fully effective with respect to third persons contracting in good faith, sustaining the sale to appellee and his wife.

• Double sale of registered land — priority of registration — Where the same registered land is sold to different buyers, ownership belongs to the person who first recorded the sale in the Registry of Deeds, pursuant to Article 1473, old Civil Code (Article 1544, new Civil Code). Applied here to prefer the Panuyas spouses, whose deed was annotated on the original certificate of title, over the Buason spouses, whose earlier deed was never registered.
• Reliance on Torrens title — A purchaser without actual knowledge of a prior unregistered transaction has the right to rely on the face of the certificate of title, including authority of an agent recorded thereon. Applied to protect appellee and his wife, who had no actual knowledge of the 1939 sale.
• Agency — validity of post-mortem acts as to good-faith third persons — Under Article 1738, old Civil Code (Article 1931, new Civil Code), anything done by the agent without knowledge of the death of the principal or of any other cause extinguishing the agency is valid and fully effective with respect to third persons who contracted with him in good faith. Applied to sustain the 1944 sale despite the principal's 1934 death, there being no showing the agent knew of the demise.
• Agency — extinguishment by death of principal — Agency is extinguished by the death of the principal under Article 1732, old Civil Code (Article 1919, new Civil Code). Invoked by appellants to attack the agent's sale, but held qualified in its effects by the good-faith rule preserving transactions with innocent third persons.

• "In the absence of such knowledge, they had a right to rely on the face of the certificate of title of the registered owners and of the authority conferred by them upon the agent also recorded on the back of the certificate of title." — States the basis for protecting the recorded buyers as innocent purchasers entitled to rely on the Torrens title and the annotated agency.
• "As this is a case of double sale of land registered under the Land Registration Act, he who recorded the sale in the Registry of Deeds has a better right than he who did not." — Formulates the controlling priority rule for double sales of registered land applied to resolve the conflicting claims.
• "Anything done by the agent, without knowledge of the death of the principal or of any other cause which extinguishes the agency, is valid and shall be fully effective with respect to third persons who may have contracted with him in good faith" — Quotes the statutory exception that preserved the agent's post-mortem sale in favor of good-faith buyers.

• Article 1473, old Civil Code; Article 1544, new Civil Code — Governs double sales; provides that in case of double sale, ownership passes to the person who in good faith first recorded the transaction in the Registry of Property. Applied to award preference to appellee, who recorded, over appellants, who did not.
• Article 1732, old Civil Code; Article 1919, new Civil Code — Provides that agency is extinguished by the death of the principal, among other causes. Invoked by appellants to void the 1944 sale made ten years after the principal's death.
• Article 1738, old Civil Code; Article 1931, new Civil Code — Validates acts done by an agent without knowledge of the principal's death or other extinguishing cause as to third persons contracting in good faith. Applied to uphold the agent's sale to appellee despite the earlier death of the principal.
• Land Registration Act — registration and annotation — Requires registration/annotation on the certificate of title to affect registered land. Applied through the annotated power of attorney (Entry No. 16836/H-1187) and annotated sale (Entry No. 778/H-1187) to support appellee's reliance and priority.

Paras, C.J., Bengzon, Montemayor, Reyes, A., Bautista Angelo, Labrador, Concepcion and Endencia, JJ., concur.