G.R. No. 222737 , November 12, 2018
HEIRS OF JOSEFINA GABRIEL, PETITIONERS, VS. SECUNDINA CEBRERO, CELSO LAVIÑA, AND MANUEL C. CHUA, RESPONDENTS.

FACTS

The case originated from a real estate mortgage executed by respondent Secundina Cebrero over a property in Manila to secure a P8,000,000.00 obligation to Josefina Gabriel pursuant to an amicable settlement. Upon Cebrero’s failure to pay, Gabriel successfully foreclosed the mortgage. In a 1993 decision, the RTC ordered the payment of the debt or the public auction of Cebrero’s specific undivided share in the property. Gabriel emerged as the sole bidder at the sheriff’s sale in 1994, and a Final Deed of Sale was issued in 1995 after the redemption period lapsed.
Subsequently, Gabriel discovered that during the redemption period in September 1994, Cebrero, through her attorney-in-fact Celso Laviña, had executed a Deed of Absolute Sale conveying the entire property to Progressive Trade & Services Enterprises, represented by respondent Manuel C. Chua, for P27,000,000.00. A new title was issued in Progressive’s name. Gabriel (later substituted by her heirs) filed a complaint to annul this sale and the resulting title, arguing it prejudiced her rights as the foreclosure sale purchaser.

ISSUE

Whether the subsequent sale of the entire property by Cebrero to Chua/Progressive is valid, considering the prior foreclosure and sheriff’s sale of a portion of the same property to Gabriel.

RULING

The Supreme Court ruled in favor of the petitioners, the Heirs of Gabriel, and declared the Deed of Absolute Sale to Chua/Progressive null and void. The Court’s legal logic centered on the nature of the rights acquired by Gabriel from the foreclosure proceedings and the principle that one cannot sell what one does not own (nemo dat quod non habet).
Upon the finality of the foreclosure judgment and the expiration of the redemption period without Cebrero redeeming the property, Gabriel’s right to the purchased portion became consolidated. The sheriff’s Final Deed of Sale effectively transferred Cebrero’s ownership rights over the specific undivided share to Gabriel. Consequently, at the time Cebrero sold the property to Chua in September 1994, she no longer had full ownership of it; she had already lost her rights to the portion sold at auction. Therefore, her sale of the entire property included a portion she could no longer legally dispose of.
Furthermore, Chua could not be considered a purchaser in good faith. The mortgage in favor of Gabriel was annotated on the title at the time of his purchase. This annotation constituted constructive notice of Gabriel’s existing interest, which imposed a duty upon Chua to investigate the status of that encumbrance. His failure to do so negates any claim of good faith. Since the sale was void as to the portion already owned by Gabriel, the entire contract of sale was rendered void for lack of a valid object in its entirety. The Court thus reinstated the RTC decision annulling the sale and the derivative title.