G.R. No. 120154 June 29, 1998
HEIRS OF SPOUSES BENITO GAVINO and JUANA EUSTE represented by AMPARO G. PESEBRE and BELEN G. VERCELUZ, petitioners, vs. COURT OF APPEALS and JUANA VDA. DE AREJOLA represented by FLAVIA REYES, respondents.

FACTS

In 1953, a parcel of land covered by TCT No. 896 was sold on installment by the Rehabilitation Finance Corporation (RFC, later DBP) to Luis P. Arejola, who died in 1958 without completing payment. His widow, Juana Vda. de Arejola, was appointed administratrix of his intestate estate. The land was not initially included in the estate inventory. In April 1960, to prevent foreclosure, Juana, both in her personal capacity and as administratrix, executed a “Revival and Re-amortization of Deed of Conditional Sale” with DBP, with court approval. On 14 February 1963, after being granted judicial authority to sell estate properties (which authority became functus oficio upon her removal as administratrix on 3 October 1962, a fact she did not disclose), Juana sold the property to spouses Benito Gavino and Juana Euste via a pacto de retro for P6,650.00. On 15 February 1963, after full payment to DBP, a final deed of sale was executed, resulting in TCT No. 4873 being issued in Juana’s name alone. On 6 March 1963, Juana fictitiously sold the same property to the estate lawyer, Atty. Jacobo Briones, to secure a mortgage; TCT No. 4874 was issued to Briones. On 22 April 1963, Juana received an additional P1,000.00 from the Gavino spouses, and a new pacto de retro deed was executed reflecting the total price of P7,650.00, but still referencing the cancelled TCT No. 896. On 15 October 1963, Atty. Briones sold the property to the Gavino spouses, who then obtained TCT No. 5244. In 1968, Juana and other estate administrators filed a case for annulment of the sales, alleging they were done without judicial authority through Briones’s manipulations. During the case, the Gavino spouses sold the land to Sulpicio Lovendino, who later sold it to Gerardo Pesebre; the property ultimately ended up with Amparo G. Pesebre and Belen G. Verceluz, daughters of the Gavino spouses. The trial court declared the sales to the Gavino spouses valid. The Court of Appeals upheld the sale but only insofar as Juana’s individual share was concerned, ordering the conveyance of the remaining undivided portion to the estate.

ISSUE

Whether the rights of the innocent purchasers for value in good faith (the Gavino spouses/heirs) should prevail over the rights of the heirs of the estate regarding the registered land sold without express court authority.

RULING

The Supreme Court GRANTED the petition, REVERSED the Court of Appeals, and REINSTATED the trial court’s decision awarding the entire property to the petitioners (heirs of the Gavino spouses). The Court ruled that the subject land, acquired during the marriage of Luis and Juana Arejola, was conjugal property. Thus, upon Luis’s death, only one-half belonged to his estate, and the other half belonged to Juana as the surviving spouse. Juana, in her personal capacity, had the right to dispose of her one-half share. The Gavino spouses were found to be innocent purchasers for value and in good faith, having relied on the clean certificates of title presented to them (first in Juana’s name, then in Briones’s name) and having paid valuable consideration. The sales to them were declared valid and binding. The entire property was adjudicated to the petitioners, to be excluded from the final distribution of Luis’s estate but chargeable against Juana’s share therein.