Valdez vs. Court of Appeals

In a double sale of immovable property, ownership is transferred to the person acquiring it who in good faith first recorded it in the Registry of Property. The prior registration of the sale by the first vendee, coupled with good faith, establishes a superior right over a subsequent vendee who registers later but in bad faith. A vendee who registers a subsequent deed with knowledge of a prior sale cannot invoke the protection of Article 1544 of the Civil Code.

Spouses Francisco Ante and Manuela Ante were the registered owners of a parcel of land in Quezon City covered by Transfer Certificate of Title (TCT) No. 141582. They executed a special power of attorney in favor of their son, Antonio Ante, a lawyer, authorizing him to execute documents conveying the property by way of mortgage or sale, to receive payment, and to dispose of the same as he deemed fit. The property was occupied by Eliseo Viernes with the permission of Antonio Ante. This case involves a double sale of the same immovable property to two different vendees, raising the application of Article 1544 of the Civil Code.

Spouses Francisco Ante and Manuela Ante were the registered owners of a parcel of land located at 20th Avenue, Murphy, Quezon City, with an area of approximately 625.70 square meters, as evidenced by Transfer Certificate of Title (TCT) No. 141582. They executed a special power of attorney in favor of their son, Antonio Ante, a lawyer, authorizing him to execute any document conveying by way of mortgage or sale a portion or the whole of the property, to receive payment, and to dispose of the same as he may deem fit. Antonio Ante offered to sell the lot to Eliseo Viernes, who was occupying the same with Ante's permission, but Viernes turned down the offer as he did not have money. Antonio Ante then told Viernes that he would instead sell the property to Pastor Valdez and Virginia Valdez.

Antonio Ante had the lot subdivided into Lot A with an area of 280 square meters and Lot B with an area of 345.70 square meters. On June 15, 1980, Antonio Ante, as attorney-in-fact, executed a deed of sale of Lot A in favor of the Valdez spouses for P112,000.00. On February 12, 1981, in the same capacity, he sold Lot B to the Valdez spouses for P138,000.00. The Valdez spouses demanded the delivery of the owner's duplicate copy of TCT No. 141582, and Ante promised to deliver it in a few days. Meanwhile, the petitioners started fencing the whole lot with cement hollow blocks in the presence of the Viernes spouses, who were informed that the Valdezes had purchased the land from Antonio Ante.

As Ante failed to deliver the owner's duplicate certificate of title, the Valdez spouses filed an affidavit of adverse claim over the subject lot with the Register of Deeds of Quezon City on September 6, 1982. They later learned that Antonio Ante had delivered the owner's duplicate certificate of title as collateral to Dr. Camilo Garma to secure his rentals in arrears. On September 13, 1983, upon the prodding of the Valdez spouses, Antonio Ante wrote to the Garma spouses to entrust the title to the Valdezes, who paid Ante's obligation and received the owner's duplicate certificate of title. When the Valdezes attempted to register their deeds of sale, they were informed that the owner's duplicate certificate of title had been declared null and void per order of Judge Tutaan dated November 10, 1982, and that the Antes had earlier filed a petition for the issuance of a new owner's duplicate certificate of title. The Valdezes also discovered that the Register of Deeds had cancelled TCT No. 141582 and issued TCT No. 293889 in the name of Felicidad Viernes on the basis of a deed of assignment dated February 17, 1982 executed by Antonio Ante in her favor. When Virginia Valdez inquired why Ante executed the deed of assignment, he replied that they could sue him in court.

The Valdezes filed an adverse claim over the lot covered by TCT No. 293889 and a complaint in the Regional Trial Court of Quezon City seeking, among others, to declare null and void the order dated November 10, 1982 authorizing the issuance of a new owner's duplicate certificate of title, to cancel the deed of assignment in favor of Felicidad Viernes, to cancel TCT No. 293889, and to declare the petitioners the true and lawful owners of the property. After trial, the trial court dismissed the complaint as against the Viernes spouses and ordered the Antes to pay damages. The trial court concluded that there was no sufficient proof of knowledge or bad faith on the part of the Viernes spouses, and that a third person who in good faith purchases and registers a property cannot be deprived of title as against a plaintiff who previously purchased the same property but failed to register the same.

• Fraudulent Issuance of New Title: Petitioners argued that the order dated November 10, 1983 declaring as null and void the owner's copy of TCT No. 141582 and ordering the issuance of a new owner's copy should be set aside, having been secured fraudulently and in bad faith by Francisco Ante and Antonio Ante, who had already sold the property to the petitioners and who knew fully well that the owner's copy of the title had never been lost.
• Superior Right to the Property: Petitioners argued that as between them and respondent Felicidad Viernes, they are entitled to the subject lot, having purchased the property earlier and having annotated their adverse claim as vendees on September 6, 1982, before the registration of the deed of assignment in favor of Viernes on November 11, 1982.
• Entitlement to Damages: Petitioners argued that they are entitled to damages, given the bad faith of the respondents in the double sale of the property.

• Good Faith Registration: Respondent Viernes argued that she was a third person who in good faith purchased and registered the property, and thus cannot be deprived of her title as against the petitioners who had previously purchased the same property but failed to register the same.
• Lack of Knowledge or Bad Faith: Respondent Viernes maintained that there was no sufficient proof of knowledge or bad faith on her part in the purchase and registration of the property.

• Validity of the Order Declaring Title Null and Void: Whether the order dated November 10, 1983 declaring as null and void the owner's copy of TCT No. 141582 and ordering the issuance of a new owner's copy should be set aside for having been secured fraudulently and in bad faith.
• Entitlement to the Subject Lot: Whether the petitioners or respondent Felicidad Viernes is entitled to the subject lot in a double sale of immovable property.
• Entitlement to Damages: Whether the petitioners are entitled to damages.

• Validity of the Order Declaring Title Null and Void: Yes. The order was set aside, having been secured through fraud and gross misrepresentation, because the respondents knew that the owner's duplicate copy of TCT No. 141582 was never lost.
• Entitlement to the Subject Lot: The petitioners. Under Article 1544 of the Civil Code, ownership of immovable property in a double sale belongs to the person acquiring it who in good faith first recorded it in the Registry of Property. The petitioners first recorded their right through their adverse claim on September 6, 1982, and in good faith, while respondent Viernes registered later and in bad faith.
• Entitlement to Damages: Yes. The petitioners are entitled to moral damages, exemplary damages, and attorney's fees, awarded jointly and severally against the private respondents.

• Validity of the Order Declaring Title Null and Void: The Court found that the petition for the issuance of a new owner's duplicate certificate of title was attended with fraud. The fraud was unmasked as early as July 14, 1981, when respondent Francisco Ante, in Civil Case No. 29617, filed an urgent motion for the issuance of a subpoena and subpoena duces tecum to require Paz Garma to produce the owner's duplicate copy of TCT No. 141582, which had been entrusted to her. Respondent Viernes admitted in her answer that she knew of the filing of the urgent motion and the issuance of the subpoena. Thus, both respondent Ante and respondent Viernes knew that the owner's duplicate copy was never lost, and the filing of the petition for a new one was attended with fraud and gross misrepresentation. The bad faith of respondents Viernes and Ante was obvious.
• Entitlement to the Subject Lot: The Court applied Article 1544 of the Civil Code, which provides that if the same immovable property is sold to different vendees, ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. The sale to the petitioners was made long before the execution of the deed of assignment to respondent Viernes. The petitioners annotated their adverse claim as vendees on September 6, 1982, while the deed of assignment in favor of Viernes was registered only on November 11, 1982. The rule is clear that a prior right is accorded to the vendee who first recorded his right in good faith over an immovable property. The petitioners acquired the subject lot in good faith and for valuable consideration, and they fenced the property, taking possession thereof. Respondent Viernes could not claim good faith because her husband was first given the option to purchase but declined, she knew of the petitioners' purchase and fencing of the property, and the annotation of the adverse claim was notice to the whole world. The Court also noted that the Register of Deeds cancelled TCT No. 141582 and issued a new title in favor of Viernes even while the petitioners' adverse claim was still existing and had not been cancelled, and the annotation was not carried over to the new title.
• Entitlement to Damages: The Court found that the trial court's decision failed to state clearly and distinctly the facts and the law on which it was based, as required by Section 14, Article VIII of the Constitution and Section 1, Rule 36 of the Rules of Court. The trial court's conclusion that the petitioners had not registered the sale was traversed by the records, which showed that the petitioners had earlier registered the sale. The appellate court overlooked this fatal defect and merely adopted the alleged findings of fact of the trial court. Because the challenged decision failed to state clearly and distinctly the facts on which it was predicated, the Court had to wade through the records and make its own findings of fact rather than remand the case. The Court awarded moral damages of P15,000.00, exemplary damages of P5,000.00, and attorney's fees of P20,000.00, jointly and severally against the private respondents.

• Double Sale of Immovable Property (Article 1544, Civil Code) — In a double sale of immovable property, ownership belongs to the person acquiring it who in good faith first recorded it in the Registry of Property. Should there be no inscription, ownership pertains to the person who in good faith was first in possession; and in the absence thereof, to the person who presents the oldest title, provided there is good faith. The Court applied this rule to hold that the petitioners, who first recorded their right through an adverse claim and in good faith, have a superior right over respondent Viernes, who registered later and in bad faith.
• Good Faith in Double Sales — A vendee who registers a subsequent deed with knowledge of a prior sale cannot claim good faith. The Court found that respondent Viernes could not claim good faith because her husband was first given the option to purchase but declined, she knew of the petitioners' purchase and fencing of the property, and the annotation of the adverse claim was notice to the whole world.
• Requirement of Findings of Fact (Section 14, Article VIII, Constitution; Section 1, Rule 36, Rules of Court) — No decision shall be rendered by any court without expressing therein clearly and distinctly the facts and the law on which it is based. The Court struck down the trial court's decision for failing to comply with this mandate, as the trial court's one-paragraph conclusion constituted a mere conclusion of facts and of law without stating the facts serving as the basis thereof.

• "If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property. Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property." — This is the canonical formulation of Article 1544 of the Civil Code, which the Court applied to resolve the double sale in favor of the petitioners.
• "The rule is clear that a prior right is accorded to the vendee who first recorded his right in good faith over an immovable property." — This states the controlling rule in double sales of immovable property, which the Court applied to the facts of the case.
• "Respondent Viernes cannot claim good faith in the purchase of the subject lot and the subsequent registration of the Deed of Assignment in her favor." — This is the Court's finding of bad faith on the part of respondent Viernes, which was decisive in denying her claim of ownership.
• "No decision shall be rendered by any court without expressing therein clearly and distinctly the facts and the law on which it is based." — This is the constitutional mandate under Section 14, Article VIII, which the trial court violated, leading the Court to strike down the appealed decision.

• Carbonnel vs. Court of Appeals, 69 SCRA 99 (1976) — Cited as controlling precedent for the rule that a prior right is accorded to the vendee who first recorded his right in good faith over an immovable property.

• Article 1544, Civil Code — The provision on double sales of immovable property, which the Court applied to determine that the petitioners, who first recorded their right in good faith, have a superior right over respondent Viernes.
• Section 14, Article VIII, 1987 Constitution — The constitutional mandate requiring decisions to state clearly and distinctly the facts and the law on which they are based, which the trial court violated.
• Section 1, Rule 36, Rules of Court — The procedural rule requiring judgments to be in writing, personally and directly prepared by the judge, stating clearly and distinctly the facts and the law on which they are based.

Narvasa, Cruz, Griño-Aquino, and Medialdea, JJ., concurred.