G.R. No. 200173; April 15, 2013
SPS. ESMERALDO D. VALLIDO and ARSENIA M. VALLIDO, rep. by ATTY. SERGIO C. SUMAYOD, Petitioners, vs. SPS. ELMER PONO and JULIET PONO, and PURIFICACION CERNA-PONG and SPS. MARIANITO PONO and ESPERANZA MERO-PONO, Respondents.

FACTS

Martino Dandan was the registered owner of a parcel of land in Kananga, Leyte, covered by OCT No. P-429. On January 4, 1960, Martino sold a portion (18,214 sq.m.) to respondent Purificacion Cerna and delivered the owner’s duplicate copy of OCT No. P-429 to her, but the sale was not registered. On May 4, 1973, Purificacion sold the same portion to respondent Marianito Pono, who took possession, paid taxes, and allowed his son Elmer to build a house on it; this sale was also not registered, and Marianito kept the OCT.
Martino later moved to Cavite. On June 14, 1990, he sold the entire property to his grandson, petitioner Esmeraldo Vallido. Martino no longer had the owner’s duplicate copy of the title to deliver. On May 7, 1997, Martino filed a petition claiming the duplicate title was lost, which the RTC granted. On September 17, 1999, Esmeraldo registered the deed of sale, and TCT No. TP-13294 was issued in the petitioners’ name.
The petitioners filed a complaint for quieting of title and recovery of possession against the respondents. The RTC ruled in favor of the petitioners, applying Article 1544 on double sale and finding them buyers and registrants in good faith because the title was clean at the time of sale and registration. The CA reversed the RTC, holding that the petitioners were not buyers or registrants in good faith, as the respondents were in actual possession and the petitioners failed to investigate, and that the prior 1960 sale gave the respondents a better right.

ISSUE

Whether the petitioners are buyers and registrants in good faith entitled to priority under Article 1544 of the Civil Code, despite the prior unregistered sale and the respondents’ actual possession.

RULING

The Supreme Court DENIED the petition and upheld the CA decision. The petitioners are NOT buyers or registrants in good faith.
1. Burden of Proof: In a double sale, the burden of proving good faith lies with the second buyer (petitioners), which is not discharged by merely invoking the ordinary presumption of good faith.
2. Privity and Constructive Knowledge: Petitioner Esmeraldo, as Martino’s grandson and heir, is a privy to Martino. Against privies, the non-registration of the prior deed of sale between Martino and Purificacion is immaterial and binding. As a second buyer with such privity, Esmeraldo is charged with constructive knowledge of prior dispositions affecting the property. A second buyer with actual or constructive knowledge cannot be a registrant in good faith.
3. Duty to Investigate Possession: While a person dealing with registered land generally need not look beyond the certificate of title, this rule does not apply when circumstances exist that would prompt a purchaser to investigate. Such circumstances include: (a) the vendor (Martino) not being in possession of the property; (b) the vendor not having the owner’s duplicate copy of the title at the time of sale; (c) the existence of permanent improvements on the land; and (d) the respondents being in actual possession. These glaring circumstances placed the petitioners on guard and required them to inspect the property and inquire into the occupants’ rights. Their failure to do so constitutes negligence and precludes them from claiming status as purchasers in good faith.
4. Priority of Rights: Registration of a later sale must be done in good faith to entitle the registrant to priority over a vendee in an earlier sale. Since the petitioners failed to prove good faith, they cannot claim a better right. The respondents, as first buyers who took possession in good faith, have a superior right to the property. The sale to Purificacion in 1960, thirty years prior to Esmeraldo’s acquisition, prevails.
The Court also noted that the procedural issue regarding the timeliness of the respondents’ Appellant’s Brief was a mere technicality already resolved by the CA.