GR 147072; (May, 2002) (Digest)
G.R. No. 147072 May 7, 2002
FRANCISCO H. LU, petitioner, vs. Spouses ORLANDO and ROSITA MANIPON, respondents.
FACTS
On May 9, 1981, Juan Peralta executed a Deed of Sale by installment in favor of spouses Orlando and Rosita Manipon for a 350-square-meter portion of his lot. This deed was not registered. On June 10, 1981, Peralta mortgaged the entire lot to Thrift Savings and Loan Association, Inc. (TSLAI). Due to non-payment, the lot was judicially foreclosed and sold to TSLAI, which subsequently sold it to Francisco Lu on July 15, 1988. Lu later caused the subdivision of the lot. Meanwhile, on July 30, 1983, after completing payment, the Manipons obtained a final Deed of Sale from Peralta for the same portion, but this deed was also unregistered. The Manipons had been in possession since 1981 and built a house on the property.
ISSUE
The primary issue is who has a better right of ownership over the disputed lot, considering the rules on double sale and the requirement of good faith.
RULING
The Supreme Court ruled in favor of the respondents, the Manipon spouses. The Court applied Article 1544 of the Civil Code, which governs double sales of immovable property. Under this provision, ownership shall belong to the person who in good faith first recorded the sale in the Registry of Property. While petitioner Lu was the first to register his title, the Court emphasized that the preferential right of a first registrant is qualified by good faith. Good faith requires an honest belief in the validity of one’s title and absence of notice of any defect or claim by another.
The Court found that Lu was a purchaser in bad faith. He was aware of the Manipons’ prior possession and claim over the specific portion of the lot before he purchased the entire property from TSLAI. His knowledge was evidenced by the fact that he shared a similar situation, having also purchased another lot from Peralta’s property that was affected by the foreclosure. Registration cannot protect a buyer in bad faith; it cannot be used as a shield for fraud. Consequently, the Manipons, as prior buyers in good faith who first took possession, have a superior right. The Court affirmed the appellate decision ordering Lu to convey the lot to Rosita Manipon without payment, as Lu’s bad faith precluded him from demanding reimbursement. The claim for a higher purchase price was therefore denied.