Consolidated Rural Bank vs. Court of Appeals

Article 1544 on double sale is inapplicable when the same immovable is sold by two different vendors, one of whom no longer owns the property; the principle of prior tempore, potior jure applies, giving preference to the first buyer.

The Madrid brothers originally owned Lot No. 7036-A-7. In 1957, Rizal Madrid sold the lot to Gamiao and Dayag, with the conformity of his brothers. In 1964, Gamiao and Dayag subdivided and sold the lot to Teodoro dela Cruz and Restituto Hernandez, who took possession. In 1976, the Madrid brothers sold the same lot to Marquez, who registered the sale, obtained titles, and mortgaged the lots to Consolidated Rural Bank (CRB) and Rural Bank of Cauayan (RBC). CRB foreclosed on the mortgage. The Heirs of dela Cruz filed a complaint for reconveyance.

• Original Ownership and First Sale: The Madrid brothers owned Lot 7036-A. In 1957, Rizal Madrid sold Lot 7036-A-7 to Gamiao and Dayag, with the other brothers executing a Joint Affidavit of non-objection a day before the sale. The deed was unregistered, but Gamiao and Dayag declared the property for taxation in 1964.
• Subdivision and Second Sale: In 1964, Gamiao and Dayag sold the southern half to Teodoro dela Cruz and the northern half to Restituto Hernandez. Both buyers took possession and cultivated the land.
• Third Sale and Mortgages: In 1976, the Madrid brothers sold the entire Lot 7036-A-7 to Marquez, who registered it in 1982. Marquez obtained TCTs in 1984 and mortgaged portions to CRB and RBC. CRB foreclosed in 1986. Marquez also sold a portion to Calixto in 1985.
• Action for Reconveyance: In 1986, the Heirs of dela Cruz sued for reconveyance, asserting the nullity of Marquez's titles and the mortgages. Evangeline del Rosario (Hernandez's successor) intervened but lost her appellate standing for failing to pay docket fees.

• Lack of Good Faith by Heirs: The Court of Appeals erred in awarding the property to the Heirs absent a finding that they possessed in good faith, or that their predecessors, Gamiao and Dayag, ever took possession.
• Defect in Prior Sale: The joint affidavit confirming the sale to Gamiao and Dayag was executed a day before the actual sale, evidencing bad faith.
• Registered Owner Prevails: Marquez's right as the registered owner prevails, and CRB is a mortgagee in good faith entitled to rely on the certificates of title.

• Good Faith Irrelevant: The requirement of good faith in possession finds no application in cases where there is no second sale by the same vendor.
• Priority of First Sale: The Heirs' right originated from a prior sale by the owners who still had the right to dispose of the property.

• Applicability of Art. 1544: Whether Article 1544 on double sale applies when the same immovable property is sold by two different vendors.
• Good Faith of Second Buyer and Mortgagee: Whether Marquez was a buyer in good faith and CRB a mortgagee in good faith.
• Good Faith of First Buyer: Whether the Heirs must prove their good faith possession and the possession of their predecessors to prevail.

• Applicability of Art. 1544: Article 1544 is inapplicable because it contemplates a double or multiple sale by a single vendor. Here, the first sale was made by Gamiao and Dayag, and the second by the Madrid brothers who no longer owned the property. The principle of prior tempore, potior jure applies, giving preference to the first buyer.
• Good Faith of Second Buyer and Mortgagee: Marquez was not a buyer in good faith because he knew the property was being claimed by the Heirs and failed to inquire into the rights of the actual possessors. CRB was a mortgagee in bad faith for merely relying on titles without ascertaining the status of the property per standard banking practice; banks are expected to exercise more care and prudence than private individuals.
• Good Faith of First Buyer: The requirement of good faith possession finds no application where there is no second sale. Teodoro dela Cruz possessed the property long before the second sale, making him a possessor in good faith under Art. 526. Proof of possession by Gamiao and Dayag is unnecessary as the validity of the sale to them was uncontested, and tax declarations indicate possession.

• Double Sale (Art. 1544) — Requires sale by a single vendor who has the right to dispose of the property at the time of the sales. Inapplicable if sales are made by different persons, or if the second sale is made by someone who no longer owns the property.
• Prior Tempore, Potior Jure — He who is first in time is preferred in right. Applies when Art. 1544 is inapplicable. Only requisite is priority in time.
• Nemo Dat Quod Non Habet — No one can give what one does not have. A buyer acquires no more than what the seller can legally transfer.
• Good Faith of Purchasers/Mortgagees — A purchaser must inquire into the rights of actual possessors; failure to do so constitutes bad faith. Banks must exercise more care and prudence than private individuals.

• "Article 1544 x x x 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."
• "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."
• "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."
• "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."

• Carpio v. Exevea, (CA) 38 Off. Gaz. 1356 (1936) — Followed. Established that Art. 1473 (now 1544) presupposes the right of the vendor to dispose of the thing sold; registration does not validate acts or contracts which are void when the vendor no longer has rights over the property.
• Spouses Mathay v. Court of Appeals, 356 Phil. 870 (1998) — Followed. Purchasers of valued land must inquire into the status or nature of possession of occupants; failure to do so precludes claiming the rights of a purchaser in good faith.
• Crisostomo v. Court of Appeals, 274 Phil. 1134 (1991) — Followed. A mortgagee cannot close their eyes to facts which should put a reasonable person on guard and then claim good faith.

• Article 1544, Civil Code — Governs double sales. Held inapplicable because the sales were made by two different vendors, one of whom no longer had the right to dispose of the property.
• Article 526, Civil Code — Defines a possessor in good faith as one who is not aware of any flaw invalidating their title or mode of acquisition. Applied to affirm that Teodoro dela Cruz was a possessor in good faith, having taken possession long before the second sale.
• Article 527, Civil Code — Presumes good faith, and he who alleges bad faith has the burden of proof. Cited by the RTC, but the Supreme Court found Marquez failed to overcome this presumption's standard of prudent inquiry.

Puno (Chairman), Austria-Martinez, Callejo, Sr., and Chico-Nazario