G.R. No. 132161 ; January 17, 2005
CONSOLIDATED RURAL BANK (CAGAYAN VALLEY), INC., petitioner, vs. THE HONORABLE COURT OF APPEALS and HEIRS OF TEODORO DELA CRUZ, respondents.

FACTS

The registered owners, the Madrid brothers, sold a portion of their land (Lot 7036-A-7) to Aleja Gamiao and Felisa Dayag in 1957. This deed was unregistered. Gamiao and Dayag later sold the southern half to Teodoro dela Cruz in 1964, whose heirs thereafter possessed it. In 1976, the Madrid brothers sold the same entire Lot 7036-A-7 to Pacifico Marquez, who registered the deed. Marquez obtained titles, subdivided the lot, and mortgaged portions to petitioner Consolidated Rural Bank (CRB). Upon Marquez’s default, CRB foreclosed on the mortgages.
The Heirs of Teodoro dela Cruz filed an action for reconveyance against Marquez and CRB, claiming ownership of the southern half. The Regional Trial Court dismissed the complaint, upholding Marquez as the first registrant in good faith and validating CRB’s mortgage. The Court of Appeals reversed, ordering reconveyance of the southern half to the Heirs and declaring the mortgages void as to that portion.

ISSUE

Whether the Court of Appeals erred in ruling that the Heirs have a better right to the property than Marquez and the mortgagee bank, despite Marquez being the first registrant.

RULING

The Supreme Court denied the petition and affirmed the Court of Appeals. The legal logic rests on the principle of prior tempore, potior jure (first in time, stronger in right) as applied to double sales under Article 1544 of the Civil Code. This article governs only when the two sales are made by the same vendor. Here, the first sale in 1957 was executed by only one of the co-owners, Rizal Madrid, with the consent of his brothers. The second sale in 1976 was made by all the Madrid brothers. Since the vendors in the two transactions were not identical—the first sale involved a single co-owner with consent, while the second involved all co-owners—Article 1544 does not apply.
Consequently, the rule of prior registration cannot be invoked by Marquez. Ownership of the southern half had already passed to the Heirs’ predecessor-in-interest, Teodoro dela Cruz, upon the 1964 sale from Gamiao and Dayag, who derived their rights from the valid 1957 sale. Marquez acquired no right to that portion, making his titles and the subsequent mortgages over it void. CRB, as mortgagee, was not a mortgagee in good faith because its reliance on Marquez’s certificate of title was not justified, as the property was in the adverse possession of the Heirs, which should have prompted a more diligent investigation.