Gabriel v. Mabanta
REITERATIONFacts
The Antecedents: Spouses Pablo and Escolastica Mabanta were registered owners of two lots. They mortgaged these lots to the Development Bank of the Philippines (DBP) for a loan. Subsequently, they sold the lots to Susana Soriano with a right to repurchase within two years. Spouses Mabanta failed to repurchase. In 1984, Alejandro Gabriel purchased the lots from Susana Soriano, giving a residential lot and P5,000.00 to spouses Mabanta. Spouses Mabanta executed a Deed of Sale with Assumption of Mortgage in favor of Alejandro, and Susana Soriano transferred her rights to Alejandro. Alejandro and his son Alfredo cultivated the lots and restructured the loan with DBP. When they were ready to pay the loan, they discovered that spouses Benito and Pura Tan had paid the loan and cancelled the mortgage. On August 18, 1985, spouses Tan offered to refund Alejandro's P5,000.00, but Alejandro refused as they would not return the residential lot he gave. Spouses Tan then attempted to eject Alejandro from one of the lots. Procedural History: On September 17, 1985, Alejandro and Alfredo Gabriel filed a complaint for specific performance, reconveyance, and damages against spouses Mabanta, spouses Tan, DBP, and barangay officials. During the proceedings, it was revealed that Zenaida Tan-Reyes, daughter of spouses Tan, bought one of the lots (covered by TCT No. 72707) from spouses Mabanta on August 21, 1985. She intervened, claiming to be the registered owner, having purchased the lot in good faith and for value, paid the DBP loan, and obtained a new title (TCT No. T-160391). The Regional Trial Court (RTC) ruled in favor of the Gabriels, declaring the sale to Zenaida Tan-Reyes null and void, finding her not a purchaser in good faith. The Court of Appeals (CA) modified the RTC decision, declaring the sale to Zenaida Tan-Reyes valid, holding that a buyer of registered land may rely on the certificate of title. The Petition: The Gabriels filed a petition for review on certiorari, assailing the CA's decision and raising the issue of whether the CA erred in declaring the second sale to Zenaida Tan-Reyes valid under Article 1544 of the Civil Code.
Issue(s)
Whether the Court of Appeals erred in declaring the second sale of the disputed lot executed by spouses Mabanta in favor of Zenaida Tan-Reyes valid under Article 1544 of the Civil Code, considering the good faith of the parties involved. What constitutes good faith in the context of Article 1544 of the Civil Code, specifically regarding knowledge of prior sales and the timing of registration.
Ruling
The petition is impressed with merit. The assailed Decision of the Court of Appeals is REVERSED and SET ASIDE. The Decision of the trial court is hereby reinstated.
Ratio Decidendi
On the issue of the validity of the second sale and Zenaida Tan-Reyes' good faith: The Supreme Court held that Zenaida Tan-Reyes did not act in good faith when she purchased the lot and had the sale registered, and therefore the Court of Appeals erred in declaring the second sale valid. The Court found that the evidence indicated she had knowledge of the prior sale to petitioner Alejandro Gabriel. This knowledge was evidenced by her father, Benito Tan, approaching Alejandro to refund the P5,000.00 paid to spouses Mabanta, which Alejandro refused because the residential lot was not returned. The Court reasoned that this offer to refund was an attempt to facilitate Zenaida's acquisition by preventing Alejandro from contesting it. Furthermore, Zenaida registered the deed of absolute sale on October 17, 1985, after the Gabriels filed their complaint on September 16, 1985, which the Court considered another indicium of bad faith, as she sought to register the sale to the prejudice of the Gabriels who were in possession but had not yet registered their purchase. On the application of Article 1544 of the Civil Code and the definition of good faith: The Court reiterated that for immovable property sold twice, ownership transfers to the one who in good faith first recorded it in the Registry of Property. If no inscription exists, it goes to the one who in good faith was first in possession. The law requires both acquisition and registration in good faith. The Court emphasized that mere registration is insufficient; it must be coupled with good faith. Knowledge gained by the second buyer of a prior sale defeats their right, even if they register first, because such knowledge taints the registration with bad faith. The Court cited Uraca vs. Court of Appeals and Leung Yee vs. F. L. Strong Machinery, Co. and Williamson to support the principle that a purchaser cannot close their eyes to facts that should put them on guard and still claim good faith.
Main Doctrine
In cases of double sale of immovable property, ownership shall belong to the person who in good faith first recorded the sale in the Registry of Property. If there is no inscription, ownership pertains to the person who in good faith was first in possession. The requirement is two-fold: acquisition in good faith and registration in good faith. Knowledge of a prior sale by the second buyer taints the registration with bad faith, even if it is registered first.