G.R. No. 170073; October 18, 2010
SPOUSES RAMY and ZENAIDA PUDADERA, Petitioners, vs. IRENEO MAGALLANES and the late DAISY TERESA CORTEL MAGALLANES substituted by her children, NELLY M. MARQUEZ, ELISEO MAGALLANES and ANGEL MAGALLANES, Respondents.

FACTS

Belen Consing Lazaro owned Lot 11-E. On March 13, 1979, she sold a 400 sq.m. portion to Daisy Teresa Cortel Magallanes under a Contract to Sell, which was fully paid, leading to a Deed of Definite Sale on July 21, 1980. Magallanes immediately took possession, fencing the lot and building a nipa hut. Lazaro also sold other portions to various buyers and executed a Partition Agreement on July 14, 1980, assigning Lot 11-E-8 to Magallanes and Mario Gonzales. Due to Lazaro’s refusal to surrender the mother title, Magallanes and others filed an adverse claim and a notice of lis pendens on the title. Despite this, Lazaro sold the same Lot 11-E-8 to her niece and husband, the Spouses Natividad, on November 23, 1981, who obtained a new title. Magallanes sued them and caused a notice of lis pendens to be annotated on this new title. The Spouses Natividad later subdivided the lot and, on July 3, 1986, sold Lot 11-E-8-A to Ramy Pudadera, who obtained TCT No. T-72734. Magallanes remained in possession, constructing houses on the lot.

ISSUE

Whether petitioners Spouses Pudadera are buyers in good faith entitled to ownership of the disputed lot, and whether respondents have a superior right to the property.

RULING

The Supreme Court ruled in favor of the respondents, affirming the decisions of the lower courts. Petitioners are not buyers in good faith. The legal principle is that one is considered a buyer in bad faith not only with actual knowledge of a defect in the seller’s title but also with knowledge of facts that should prompt a reasonably prudent person to investigate further. Here, when Ramy Pudadera purchased the lot from the Spouses Natividad in 1986, the title (TCT No. T-58606) carried an annotation of a notice of lis pendens from the civil case filed by Magallanes. Although this notice was subsequently cancelled days after the sale, its existence at the time of purchase was a red flag requiring inquiry. Furthermore, Magallanes was in open, continuous, and notorious possession of the property since 1979, which was a fact readily observable. A buyer is charged with seeing the property and investigating the rights of one in possession. Pudadera’s failure to investigate the visible possession and the annotated lis pendens constituted gross negligence, making him a buyer in bad faith. Consequently, he acquired no better title than his sellers, the Spouses Natividad, who themselves derived title from a fraudulent double sale by Lazaro. Magallanes, having purchased first in good faith and taken immediate possession, holds a superior equitable and legal right to the property. The Court ordered the cancellation of the Pudaderas’ title and the issuance of a new one in the names of Magallanes’ heirs, but deleted the award of attorney’s fees for lack of proof of bad faith in filing the suit.