Naval vs. Court of Appeals

In a double sale of unregistered land, the buyer who first registers the sale under Act No. 3344 acquires a superior right over a subsequent buyer, because such registration serves as constructive notice to the whole world, rendering the subsequent buyer's claim of good faith unavailing and preventing the seller from transferring ownership under the principle of nemo dat quod non habet.

Ildefonso A. Naval owned an unregistered parcel of land in Sto. Tomas, Magarao, Camarines Sur. On December 2, 1969, Ildefonso sold the 858 sq. m. property to Gregorio B. Galarosa. This sale was recorded in the Registry of Property of the Registry of Deeds of Camarines Sur on December 3, 1969, pursuant to Act No. 3344. Galarosa subsequently sold portions of the land to respondents Conrado Rodrigo Balilla, Jaime Nacion, spouses Ireneo and Ester Moya, and Juanito Camalla between 1976 and 1987. All respondents occupied their respective portions, introduced improvements, and paid the taxes due thereon. In 1972, Ildefonso sold the same property to his great-granddaughter, petitioner Juanita Naval. On April 1, 1975, the Register of Deeds issued OCT No. RP-5386 (29791) in the petitioner's name, covering 733 sq. m. of the subject land.

• 1969 Sale to Galarosa: Ildefonso A. Naval sold an 858 sq. m. unregistered parcel of land to Gregorio B. Galarosa on December 2, 1969. The deed of sale was registered with the Registry of Deeds of Camarines Sur on December 3, 1969, pursuant to Act No. 3344.
• Subsequent Sales to Respondents: Gregorio Galarosa sold portions of the land to respondents Conrado Rodrigo Balilla (1976), Jaime Nacion (1977), spouses Ireneo and Ester Moya (1977), and Juanito Camalla (1987). All respondents occupied their purchased portions, built improvements, and paid the corresponding taxes.
• 1972 Sale to Petitioner: Petitioner Juanita Naval, the great granddaughter of Ildefonso, claimed to have purchased the subject land from Ildefonso in 1972.
• Issuance of OCT: On April 1, 1975, the Register of Deeds of Camarines Sur issued OCT No. RP-5386 (29791) in the name of the petitioner, covering 733 sq. m. of the subject land.
• Initial Legal Action: On November 10, 1977, the petitioner filed a complaint for recovery of possession (Civil Case No. 306), which was subsequently dismissed without prejudice for failure to prosecute for an unreasonable length of time.
• Re-filed Action: Almost 20 years later, on April 21, 1997, the petitioner re-filed the complaint for recovery of possession with damages against the respondents before the MCTC (Civil Case No. 994).

• Invalidity of Prior Sale: Petitioner argued that the sale between Ildefonso and Gregorio and its subsequent registration had no legal effect because the subject land was declared in the name of Agrifina Avila, and the tax declaration cancelled by Gregorio was that of Gregorio Boñaga, thereby assailing Gregorio's right over the subject land.
• Superiority of Torrens Title: Petitioner claimed superior rights over the subject land by virtue of the OCT issued in her name.
• Bad Faith of Respondents: Petitioner contended that respondents could not have possessed the lots in good faith because they had knowledge of the existence of the OCT.
• Tax Declarations as Evidence: Petitioner assailed the Court of Appeals' ruling that the respondents' payment of taxes was evidence of lawful possession and ownership.

• Constructive Notice: Respondents countered that the registered sale by Ildefonso to Gregorio in 1969, from whom they derived their claims, vested them with a better right, as registration under Act No. 3344 served as constructive notice to the whole world, including the petitioner.
• Lack of Evidence of Petitioner's Purchase: Respondents argued that the petitioner, who claimed to have purchased the subject land from Ildefonso in 1972, failed to present evidence to prove such acquisition.

• Applicability of Art. 1544: Whether Article 1544 of the Civil Code on double sale applies to unregistered land.
• Superior Right to the Property: Whether respondents have a superior right to the unregistered land based on the prior registration of the sale under Act No. 3344.
• Indefeasibility vs. Reconveyance: Whether the issuance of an OCT in favor of the petitioner bars an action for reconveyance by respondents who are in actual possession of the property.

• Applicability of Art. 1544: Article 1544 was held inapplicable because the subject land was unregistered at the time of the first sale. The registration contemplated under Article 1544 refers to registration under the Torrens System, where the act of registration is the operative act that binds the land.
• Superior Right to the Property: Respondents possess a superior right over the subject property. The applicable law is Act No. 3344, under which registration by the first buyer constitutes constructive notice to subsequent buyers, defeating their right as buyers in good faith. Furthermore, because Ildefonso no longer owned the subject land at the time of the 1972 sale to the petitioner, he had nothing to transfer, pursuant to the principle of nemo dat quod non habet. Even assuming Article 1544 applied, respondents and their predecessors-in-interest registered first and possessed the land at the earliest time, entitling them to ownership under the doctrine of "priority in time, priority in rights" (prius tempore, potior jure).
• Indefeasibility vs. Reconveyance: The issuance of a Torrens title did not vest ownership upon the petitioner, as registration under the Torrens System is not a mode of acquiring ownership; a certificate of title is merely evidence thereof. A certificate of title cannot be used to protect a usurper, shield fraud, or permit unjust enrichment. An action for reconveyance remains available to the true owner, respecting the decree of registration as incontrovertible but seeking the transfer of title wrongfully registered in another's name. Moreover, an action for reconveyance based on fraud is imprescriptible when the plaintiff is in actual possession of the property, as their undisturbed possession gives them a continuing right to seek the aid of a court of equity to quiet title.

• Nemo dat quod non habet — No one can give what one does not have; 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. Applied to hold that because Ildefonso had already sold the land to Galarosa, he no longer owned it and could transfer no right to the petitioner in the 1972 sale.
• Constructive notice under Act No. 3344 — The registration of an instrument involving unregistered land in the Registry of Deeds creates constructive notice and binds third persons who may subsequently deal with the same property. Applied to defeat the petitioner's claim of good faith, as the 1969 sale to Galarosa was registered under Act No. 3344 prior to the petitioner's 1972 purchase.
• Imprescriptibility of action for reconveyance by a possessor — An action for reconveyance based on fraud does not prescribe when the plaintiff is in actual possession of the property, because the possessor's undisturbed possession gives them a continuing right to seek the aid of a court of equity to quiet title. Applied to hold that the respondents' right to seek reconveyance had not prescribed, notwithstanding the issuance of the petitioner's OCT.
• Prius tempore, potior jure (Priority in time, priority in rights) — Applied to reinforce that respondents are entitled to ownership and possession, having registered the source of their ownership first and possessed the land at the earliest time.

• "The law applicable therefore is Act No. 3344, which provides for the registration of all instruments on land neither covered by the Spanish Mortgage Law nor the Torrens System. Under this law, registration by the first buyer is constructive notice to the second buyer that can defeat his right as such buyer in good faith."
• "It is an established principle that no one can give what one does not have, nemo 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."
• "Registration of a piece of land under the Torrens System does not create or vest title, because it is not a mode of acquiring ownership. A certificate of title is merely an evidence of ownership or title over the particular property described therein. It cannot be used to protect a usurper from the true owner; nor can it be used as a shield for the commission of fraud; neither does it permit one to enrich himself at the expense of others."

• Carumba v. Court of Appeals, G.R. No. L-27587, February 18, 1970 — Followed. Held that Article 1544 of the Civil Code has no application to land not registered under the Torrens System.
• Bautista v. Fule, 85 Phil. 391 (1950) — Followed. Held that the registration of an instrument involving unregistered land in the Registry of Deeds creates constructive notice and binds third persons who subsequently deal with the same property.
• Rayos v. Reyes, 446 Phil. 32 (2003) — Followed. Held that the issue of good faith or bad faith of the buyer is relevant only where the subject of the sale is registered land and the purchaser is buying from the registered owner whose title is clean; buyers of unregistered land do so at their peril.
• Leyson v. Bontuyan, G.R. No. 156357, February 18, 2005 — Followed. Declared that an action for reconveyance based on fraud is imprescriptible where the plaintiff is in possession of the property subject of the act.

• Article 1544, Civil Code — Governs double sales by determining ownership based on good faith, possession, and registration. Held inapplicable to the case at bar because the subject land was unregistered at the time of the first sale; the registration contemplated refers to the Torrens System.
• Act No. 3344 — Provides for the registration of all instruments on land neither covered by the Spanish Mortgage Law nor the Torrens System. Applied as the governing law, where registration by the first buyer operates as constructive notice to subsequent buyers.
• Section 32, Presidential Decree No. 1529 (Property Registration Decree) — Provides that upon the expiration of one year, the decree of registration and the certificate of title shall become incontrovertible. Interpreted to mean that while the certificate of title cannot be collaterally attacked, it does not deprive an aggrieved party of a remedy in law, such as an action for reconveyance, because ownership is distinct from the certificate of title.

Artemio V. Panganiban (C.J., Chairperson), Ma. Alicia Austria-Martinez, Romeo J. Callejo, Sr., Minita V. Chico-Nazario