Spouses Sabitsana vs. Muertegui

A lawyer may not, for his own personal interest and benefit, gamble on his client's word, believing it at one time and disbelieving it the next, and he owes his client undivided loyalty. In cases involving the sale of unregistered land, the first buyer in good faith has a better right over the property, and a subsequent sale to another buyer is null and void because the seller no longer had ownership to transfer, notwithstanding the later buyer's prior registration under Act No. 3344.

Petitioner Atty. Clemencio C. Sabitsana, Jr. was the lawyer of the Muertegui family at the time Alberto Garcia sold the lot to respondent Juanito Muertegui. The lot was unregistered land covered only by a Tax Declaration. The Muertegui family consulted Atty. Sabitsana before the sale was executed, establishing a professional and confidential relationship that continued after the sale. The case implicates the lawyer's duty of loyalty to clients and the rules governing the recording of transactions over unregistered real estate under Act No. 3344, as amended.

On September 2, 1981, Alberto Garcia executed an unnotarized Deed of Sale in favor of respondent Juanito Muertegui over a 7,500-square meter parcel of unregistered land located in Dalutan Island, Talahid, Almeira, Biliran, Leyte del Norte, covered by Tax Declaration (TD) No. 1996 issued in 1985 in Garcia's name. Juanito's father Domingo Muertegui, Sr. and brother Domingo Jr. took actual possession of the lot, planted coconut and ipil-ipil trees thereon, and paid the real property taxes from 1980 up to 1998.

On October 17, 1991, Garcia sold the same lot to petitioner Atty. Clemencio C. Sabitsana, Jr., the Muertegui family's lawyer, through a notarized deed of absolute sale. The sale was registered with the Register of Deeds on February 6, 1992. TD No. 1996 was cancelled and a new one, TD No. 5327, was issued in Atty. Sabitsana's name. Atty. Sabitsana paid real property taxes in 1992, 1993, and 1999, and in 1996 introduced concrete improvements on the property, which were shortly thereafter destroyed by a typhoon.

When Domingo Sr. passed away, his heirs applied for registration and coverage of the lot under the Public Land Act (Commonwealth Act No. 141). Atty. Sabitsana, in a letter dated August 24, 1998 addressed to the CENRO/PENRO office in Naval, Biliran, opposed the application, claiming he was the true owner and asking that the application be held in abeyance until the conflicting ownership issue was resolved.

On April 11, 2000, Juanito, through his attorney-in-fact Domingo Jr., filed Civil Case No. B-1097 for quieting of title and preliminary injunction against petitioners, claiming they bought the lot in bad faith and that their acts constituted a cloud over his title. The complaint prayed that the Sabitsana Deed of Sale, the August 24, 1998 letter, and TD No. 5327 be declared null and void; that petitioners respect and recognize Juanito's title; and that moral and exemplary damages, attorney's fees, and litigation expenses be awarded.

The evidence and testimonies of respondent's witnesses revealed that Atty. Sabitsana was the Muertegui family's lawyer at the time Garcia sold the lot to Juanito, and that he was consulted by the family before the sale was executed. After the sale to Juanito, Domingo Sr. entered into actual, public, adverse, and continuous possession of the lot. Atty. Sabitsana, for his part, testified that before purchasing the lot, he was told by Carmen Muertegui Davies that the Muertegui family had bought the lot, but she could not show the document of sale. He conducted an investigation with the municipal and provincial assessors' offices, failed to find any proof of the sale to Juanito, and concluded that the Muerteguis were merely bluffing. He then proceeded to purchase the lot from Garcia, wrote Caseldita in October 1991 to inform her of the sale, took possession, and constructed a rip-rap on the property in 1996 and 1997.

• Jurisdiction: Petitioners asserted that the RTC of Naval, Biliran did not have jurisdiction over the case because the assessed value of the lot was only ₱1,230.00, and pursuant to Republic Act No. 7691, jurisdiction over civil actions involving title to real property where the assessed value does not exceed ₱20,000.00 lies with the first level courts.
• Applicable Law: Petitioners insisted that the lot, being unregistered land, is beyond the coverage of Article 1544 of the Civil Code, and instead the provisions of Presidential Decree No. 1529 should apply; under Section 113 of PD 1529, the Deed of Sale in favor of Juanito is valid only as between him and Garcia and cannot affect petitioners who are not parties thereto.
• Laches and Estoppel: Petitioners argued that from October 1991, when they informed the Muerteguis in writing about their purchase, the latter did not notify them of their prior purchase nor interpose any objection until 1998; this seven-year period of silence and inaction should be construed as neglect, barring the action to quiet title by laches and estoppel.
• Attorney's Fees: Petitioners claimed that since there was no bad faith on their part, the award of attorney's fees and litigation expenses was not just and equitable, and that an express finding of facts and law justifying such award was absent.

• Jurisdiction: Respondent countered that a suit for quieting of title is one whose subject matter is incapable of pecuniary estimation, and thus falls within the jurisdiction of the RTC.
• Applicable Law: Respondent insisted that Article 1544 applies because there is a clear case of double sale of the same property to different buyers, and the bottom line lies in petitioners' lack of good faith in entering into the subsequent sale.
• Laches/Estoppel: Respondent echoed the CA's view that he was persistent in exercising his rights over the lot, having previously filed a complaint for recovery of the lot, which was dismissed based on technicality.
• Attorney's Fees: Respondent cited Article 2208 of the Civil Code, arguing that petitioners' acts compelled him to litigate and incur expenses to protect his interests, that they acted in gross and evident bad faith in refusing to recognize his ownership, and that the justness and equitableness of his case justified the award.

• Jurisdiction: Whether the Regional Trial Court had jurisdiction over the suit for quieting of title despite the assessed value of the subject land being only ₱1,230.00.
• Applicable Law: Whether Article 1544 of the Civil Code applies to sales involving unregistered land, or whether the Property Registration Decree (P.D. No. 1529) should instead apply.
• Laches and Prescription: Whether the complaint was barred by laches and the statute of limitations.
• Attorney's Fees and Litigation Expenses: Whether the award of attorney's fees and litigation expenses to respondent was proper.

• Jurisdiction: Yes. An action for quieting of title may be instituted in the RTCs regardless of the assessed value of the real property in dispute, pursuant to Rule 63 of the Rules of Court, which provides that an action to quiet title to real property or remove clouds therefrom may be brought in the appropriate RTC.
• Applicable Law: No. Article 1544 of the Civil Code does not apply to sales involving unregistered land; the issue of the buyer's good or bad faith is relevant only where the subject of the sale is registered land. Act No. 3344, as amended, applies to the sale of unregistered lands, and any registration made thereunder is "without prejudice to a third party with a better right."
• Laches and Prescription: No. Petitioners' defense of prescription, laches, and estoppel is unavailing because their claim is based on a null and void deed of sale; the Muerteguis' failure to interpose any objection does not give rise to a right in petitioners' favor.
• Attorney's Fees and Litigation Expenses: Yes. The award is proper because of petitioners' bad faith, and Atty. Sabitsana's breach of his duty of loyalty to his clients provides further justification for the award.

• Jurisdiction: Under Rule 63 of the Rules of Court, an action to quiet title to real property or remove clouds therefrom may be brought in the appropriate RTC. The suit for quieting of title was prompted by petitioners' August 24, 1998 letter-opposition to respondent's application for registration. In order to prevent a cloud from being cast upon his application for a title, respondent filed Civil Case No. B-1097 to obtain a declaration of his rights. In this sense, the action is one for declaratory relief, which properly falls within the jurisdiction of the RTC pursuant to Rule 63 of the Rules.

• Applicable Law: Both the trial court and the CA erred in applying Article 1544 of the Civil Code, which does not apply to sales involving unregistered land. The issue of the buyer's good or bad faith is relevant only where the subject of the sale is registered land, and the purchaser is buying the same from the registered owner whose title to the land is clean. What applies in this case is Act No. 3344, as amended, which provides for the system of recording transactions over unregistered real estate and expressly declares that any registration made shall be without prejudice to a third party with a better right. The question to be resolved therefore is who between petitioners and respondent has a better right to the disputed lot. The sale to respondent Juanito was executed on September 2, 1981, while the sale to petitioners was made on October 17, 1991, or ten years thereafter. Thus, Juanito, who was the first buyer, has a better right to the lot, while the subsequent sale to petitioners is null and void because when it was made, the seller Garcia was no longer the owner of the lot — nemo dat quod non habet. The fact that the sale to Juanito was not notarized does not alter anything, since the sale between him and Garcia remains valid nonetheless; notarization is only for convenience, and not for validity or enforceability. Nor can petitioners' registration of their purchase have any effect on Juanito's rights, as the mere registration of a sale in one's favor does not give him any right over the land if the vendor was no longer the owner, having previously sold the same to another even if the earlier sale was unrecorded. Registration does not vest title; it is merely the evidence of such title.

• Laches and Prescription: Petitioners' defense of prescription, laches, and estoppel is unavailing since their claim is based on a null and void deed of sale. The fact that the Muerteguis failed to interpose any objection to the sale in petitioners' favor does not change anything, nor could it give rise to a right in their favor; their purchase remains void and ineffective as far as the Muerteguis are concerned.

• Attorney's Fees and Litigation Expenses: Petitioners' actual and prior knowledge of the first sale to Juanito makes them purchasers in bad faith. Atty. Sabitsana was remiss in his duties as counsel to the Muertegui family; instead of advising them to register their purchase as soon as possible, he took advantage of the situation and the information he gathered from his inquiries and investigation, bought the very same lot, and immediately caused the registration thereof ahead of his clients. He took advantage of confidential information disclosed to him by his client, using the same to defeat him. As the Muertegui family lawyer, he had no right to take a position, using information disclosed to him in confidence by his client, that would place him in possible conflict with his duty. He owed the Muerteguis his undivided loyalty and had the duty to protect the client at all hazards and costs even to himself. Even granting that Atty. Sabitsana ceased to act as the Muertegui family's lawyer, he still owed them his loyalty; the termination of attorney-client relation provides no justification for a lawyer to represent an interest adverse to or in conflict with that of the former client on a matter involving confidential information which the lawyer acquired when he was counsel. The client's confidence once reposed should not be divested by mere expiration of professional employment.

• Nemo dat quod non habet — No one can give what he does not have. The Court applied this principle to hold that because Garcia had already sold the lot to Juanito in 1981, he no longer had ownership thereof when he sold the same lot to petitioners in 1991; the subsequent sale was therefore null and void.
• Registration under Act No. 3344 is without prejudice to a third party with a better right — Under Act No. 3344, registration of instruments affecting unregistered lands is "without prejudice to a third party with a better right." The Court held that the mere registration of a sale in one's favor does not give him any right over the land if the vendor was not anymore the owner of the land, having previously sold the same to somebody else even if the earlier sale was unrecorded.
• Registration does not vest title — Registration is merely the evidence of title; land registration laws do not give the holder any better title than what he actually has. The Court applied this to reject petitioners' claim that their prior registration of the sale gave them a superior right over the lot.
• Lawyer's duty of undivided loyalty to client — A lawyer owes his client undivided loyalty and may not, for his own personal interest and benefit, gamble on his client's word, believing it at one time and disbelieving it the next. The Court held that Atty. Sabitsana breached this duty by using confidential information disclosed to him by his client to purchase the lot and register it ahead of his clients.
• Continuing duty of loyalty to former client — The termination of attorney-client relation provides no justification for a lawyer to represent an interest adverse to or in conflict with that of the former client on a matter involving confidential information which the lawyer acquired when he was counsel. The client's confidence once reposed should not be divested by mere expiration of professional employment.

• "Under Act No. 3344, registration of instruments affecting unregistered lands is 'without prejudice to a third party with a better right.' The aforequoted phrase has been held by this Court to mean that the mere registration of a sale in one's favor does not give him any right over the land if the vendor was not anymore the owner of the land having previously sold the same to somebody else even if the earlier sale was unrecorded." — This passage, quoting Radiowealth Finance Co. vs. Palileo, states the controlling doctrine on the effect of registration under Act No. 3344 and is the ratio decidendi for the Court's resolution of the double-sale issue.
• "A lawyer may not, for his own personal interest and benefit, gamble on his client's word, believing it at one time and disbelieving it the next. He owes his client his undivided loyalty." — This opening statement articulates the ethical principle underlying the Court's finding of bad faith against Atty. Sabitsana and its justification for the award of attorney's fees and litigation expenses.
• "The termination of attorney-client relation provides no justification for a lawyer to represent an interest adverse to or in conflict with that of the former client on a matter involving confidential information which the lawyer acquired when he was counsel. The client's confidence once reposed should not be divested by mere expiration of professional employment." — This passage defines the continuing duty of loyalty a lawyer owes to a former client, which the Court applied to reject Atty. Sabitsana's defense.

• Radiowealth Finance Co. vs. Palileo, 274 Phil. 516 (1991) — Controlling precedent cited for the proposition that under Act No. 3344, the mere registration of a sale in one's favor does not give him any right over the land if the vendor was no longer the owner, having previously sold the same to somebody else even if the earlier sale was unrecorded.
• Spouses Ong vs. Spouses Olasiman, 520 Phil. 338 (2006) — Cited for the principle that the issue of the buyer's good or bad faith 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.
• Estreller vs. Ysmael, G.R. No. 170264, March 13, 2009, 581 SCRA 247 — Cited for the rule that notarization, or the requirement of a public document under the Civil Code, is only for convenience, and not for validity or enforceability.
• Gochan and Sons Realty Corporation vs. Heirs of Raymundo Baba, 456 Phil. 569 (2003) — Cited for the principle that registration does not vest title; it is merely the evidence of such title.
• Heirs of Lydio Falame vs. Atty. Baguio, 571 Phil. 428 (2008) — Cited for the lawyer's duty to protect the client at all hazards and costs even to himself, and for the continuing duty of loyalty to a former client.
• Presidential Commission on Good Government vs. Sandiganbayan, 495 Phil. 485 (2005) — Cited for the proposition that a lawyer, as the client's general agent, is under obligation to safeguard the client's property.

• Article 1544, Civil Code — The provision on double sales, which the trial court and CA erroneously applied. The Court held that this provision does not apply to sales involving unregistered land.
• Act No. 3344, as amended — The statute governing the recording of instruments relating to unregistered lands. The Court applied it to determine who between petitioners and respondent has a better right to the disputed lot, noting that registration thereunder is "without prejudice to a third party with a better right."
• Section 113, Presidential Decree No. 1529 — The provision on recording of instruments relating to unregistered lands under the Torrens system, which petitioners invoked but the Court did not apply, as the lot was unregistered land.
• Rule 63, Rules of Court — The rule on declaratory relief and similar remedies, which provides that an action to quiet title to real property or remove clouds therefrom may be brought in the appropriate RTC. The Court relied on this to uphold RTC jurisdiction.
• Article 173, Civil Code — The provision on the wife's right to annul contracts of the husband entered into without her consent. The CA applied this to hold that the sale to Juanito was merely voidable, not void, for lack of marital consent.
• Article 2208, Civil Code — The provision enumerating instances when attorney's fees and expenses of litigation may be recovered. The Court cited this in affirming the award of attorney's fees and litigation expenses to respondent.
• Republic Act No. 7691 — The statute expanding the jurisdiction of first level courts. Petitioners invoked this to challenge RTC jurisdiction, but the Court held that an action for quieting of title falls within RTC jurisdiction regardless of the assessed value of the property.
• Article 1358, Civil Code — The provision requiring certain contracts to appear in a public document. The Court cited this to explain that notarization is only for convenience and not for validity or enforceability.

• Associate Justice Antonio T. Carpio (Chairperson)
• Associate Justice Arturo D. Brion
• Associate Justice Jose Portugal Perez
• Associate Justice Estela M. Perlas-Bernabe