G.R. No. 106042 February 28, 1994
RUFINA BAUTISTA, ALFREDO JR., LUZVIMINDA, MARIZA, JOSEPHINE, ALEJANDRO and AMELITA, all surnamed VALDEZ, petitioners, vs. HON. COURT OF APPEALS, HON. MARINA L. BUZON, SPOUSES DONALD SALVADOR and CRESENCIA SALVADOR, respondents.

FACTS

Petitioners, spouses Alfredo Valdez and Rufina Bautista, purchased a parcel of land on August 10, 1983 from Maria de la Cruz vda. de Santiago and Jose Santiago, who claimed to be the widow and son, respectively, of the registered owner, Dionisio Santiago. The sale was effected through a deed of extrajudicial settlement with absolute sale. Consequently, Transfer Certificate of Title (TCT) No. 343919 in the name of Dionisio Santiago was cancelled, and TCT No. 105231 was issued in the petitioners’ name. The petitioners later demanded that private respondents, spouses Donald and Cresencia Salvador, vacate the premises. The private respondents refused, claiming ownership over the property by virtue of two prior unregistered sales: the first half was sold to them by Dionisio Santiago on December 20, 1974, with payment completed by October 15, 1981; the second half was sold to them by Benjamina Magalong (Dionisio Santiago’s common-law wife) on October 20, 1979. The private respondents had been in possession of the land since 1970, first as lessees and later as owners. The petitioners filed a complaint for recovery of possession. The trial court dismissed the complaint, applying Article 1544 of the Civil Code, and adjudicated one-half of the property to the private respondents as first purchasers in good faith, and the other half to the petitioners. The Court of Appeals affirmed the decision. The petitioners now challenge the ruling, arguing they are purchasers in good faith who relied on the Torrens title.

ISSUE

Whether the petitioners are purchasers in good faith entitled to ownership of the entire property under Article 1544 of the Civil Code, despite the prior unregistered sale and actual possession by the private respondents.

RULING

No. The Supreme Court denied the petition and affirmed the decision of the Court of Appeals. The Court held that where a double sale of immovable property occurs, Article 1544 of the Civil Code requires that to be deemed the owner, the second purchaser must not only register the property first but must also act in good faith. Good faith requires the exercise of ordinary prudence. Here, the petitioners were not purchasers in good faith. They knew the property was in the actual, visible, and public possession of persons other than their vendors (the private respondents) since 1970. Despite this, they merely relied on the vendor’s explanation that the occupants were relatives allowed to stay and failed to inquire directly from the occupants or from Benjamina Magalong about the nature of their possession. This failure to take ordinary precautions constitutes gross negligence amounting to bad faith. Consequently, as to the one-half first sold by Dionisio Santiago to the private respondents in 1974, the private respondents, being first in possession in good faith, have a better right under Article 1544. Regarding the other half purportedly sold by Benjamina Magalong in 1979, the sale was invalid as she was not the registered owner or authorized to sell. Thus, upon Dionisio Santiago’s death, his rights to that half passed to his legal heir, Maria de la Cruz, who validly sold it to the petitioners. The doctrine of in pari delicto was not applicable as the private respondents’ failure to register their deed did not bar them from claiming ownership against a subsequent purchaser in bad faith.