G.R. No. L-9940; March 30, 1960
AVELINO REVILLA and ELENA FAJARDO, plaintiffs-appellants, vs. GODOFREDO GALINDEZ, defendant-appellee.

FACTS

A parcel of land, originally part of Lot No. 659 registered in the name of Alipio Gasmeña, was donated to Florencio Gasmeña in 1938. On May 21, 1938, Florencio mortgaged this unsegregated portion to Godofredo Galindez (defendant-appellee), and the mortgage was registered and annotated on the title. On October 5, 1938, Florencio sold the same portion outright to Galindez, but this sale was never registered. Galindez took possession from the time of the mortgage. After Florencio’s death in 1941, the portion was segregated as Lot No. 659-A, and a new title (T.C.T. No. NT-7782) was issued in 1950 in Florencio’s name, without the annotation of the mortgage. On September 20, 1950, Florencio’s widow and heirs executed an extrajudicial partition with sale, adjudicating the lot to themselves and then selling it to Avelino Revilla and Elena Fajardo (plaintiffs-appellants) for P2,000. Before purchasing, the appellants examined Florencio’s title and found no encumbrance. The sale was registered, and a new title (T.C.T. No. NT-7938) was issued to them. When appellants attempted to take possession, Galindez’s overseer refused, claiming Galindez had previously purchased the lot from Florencio. Appellants filed an action to recover possession. The lower court declared the extrajudicial partition with sale null and void and ordered the cancellation of appellants’ title.

ISSUE

Whether the plaintiffs-appellants, who purchased the registered land from the heirs of the registered owner and obtained a clean certificate of title, are purchasers in good faith entitled to ownership over the defendant-appellee, who purchased the same land earlier from the registered owner but failed to register the sale.

RULING

No. The Supreme Court affirmed the lower court’s judgment. The Court ruled that under the Torrens system, an unregistered sale of registered land only binds the parties to the contract and does not affect innocent third persons. Since Galindez failed to register his sale, it did not bind the land. However, appellants were not purchasers in good faith. The law requires a higher degree of prudence from a purchaser who buys from someone who is not the registered owner at the time of the transaction. Appellants bought from Florencio’s heirs, not from Florencio himself as the registered owner. They were expected to examine not only the certificate of title but all factual circumstances to determine any flaws in the transferor’s title or capacity to transfer. Their failure to investigate the circumstances, such as Galindez’s long-standing possession, constituted lack of good faith. As neither vendee registered their sale in good faith, ownership is determined by priority of possession in good faith under Article 1544 of the New Civil Code. Galindez, who was first in possession in good faith, is the rightful owner. The Court declared the deed of extrajudicial partition with sale null and void and ordered the cancellation of appellants’ certificate of title.