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CARMELITA FUDOT v. CATTLEYA LAND

FACTS:

In this case, respondent Cattleya Land, Inc. purchased nine lots, including the subject property, from the spouses Troadio and Asuncion Tecson. The purchase was made through a Deed of Conditional Sale in November 1992, and a Deed of Absolute Sale in August 1993. However, the registration of the Deed of Absolute Sale was not annotated on the titles due to an existing notice of attachment.

On another hand, petitioner presented for registration the owner's copy of the title for the subject property, along with a deed of sale purportedly executed by the Tecsons in her favor. The registration of the deed of sale was accepted and a new title was issued in her name.

As a result, respondent filed a complaint against petitioner seeking to cancel the title registered in her name and to assert their ownership over the subject property. The trial court ruled in favor of respondent, declaring the deed of sale between petitioner and the Tecsons as invalid and ordered the registration of the subject land in favor of respondent.

Petitioner appealed to the Court of Appeals, which upheld the decision of the trial court. The Court of Appeals held that there was no double sale since the alleged sale to petitioner was null and void due to forgery. Furthermore, even if there was a double sale, the Court of Appeals noted that respondent's claim would still prevail because they registered their sale in good faith.

Petitioner sought reconsideration from the Court of Appeals, but her motion was denied. Subsequently, petitioner filed a petition before the Supreme Court, raising issues related to the better right between two buyers of registered land, whether a buyer who did not demand delivery of the owner's duplicate title can be considered a buyer in good faith, and which law governs the subsequent registration of registered lands.

In response, respondent argued that petitioner cannot be considered a buyer in good faith since her claim is based on a null and void deed of sale. They further asserted that their status as a buyer in good faith had already been established in the lower courts. Additionally, respondent argued that the applicable law in this case is not P.D. No. 1529 but Article 1544 of the Civil Code.

With these arguments presented, the Supreme Court took the case for resolution.

ISSUES:

  1. Whether there was a double sale in this case.

  2. Whether the registration of petitioner's void deed of sale affects its validity.

  3. Whether petitioner, as the first to register the sale, has a better right over the property.

  4. Whether the respondent was a buyer in good faith, despite not having notice of a previous sale.

  5. Whether the act of registration is necessary to convey or affect the land for purposes of Art. 1544 of the Civil Code.

RULING:

  1. There was no double sale in this case. The Court held that Art. 1544 of the Civil Code, which provides the rule on double sale, applies only when the same property is validly sold to different buyers. In this case, there was only one valid sale between the spouses Tecson and respondent.

  2. The registration of petitioner's void deed of sale does not affect its validity. The act of registration is a mere ministerial act that does not add to the validity of an otherwise void contract. While registration operates as a notice to others, it does not convert an invalid instrument into a valid one as between the parties.

  3. Petitioner, as the first to register the sale, does not have a better right over the property. The Court applied the principle of "primus tempore, potior jure" (first in time, stronger in right) in interpreting Art. 1544. Knowledge gained by the first buyer of the second sale does not defeat the first buyer's rights, except when the second buyer registers in good faith ahead of the first buyer. However, knowledge gained by the second buyer of the first sale defeats his rights even if he is the first to register, as it taints his prior registration with bad faith.

  4. The respondent was a buyer in good faith. It was able to purchase the property without any notice of a previous sale, but only a notice of attachment relative to a pending civil case. The respondent actively sought to settle the case and cancel the notice of attachment to finally have the title to the properties transferred in its name.

  5. The act of registration is necessary to convey or affect the land for purposes of Art. 1544 of the Civil Code. The registration of the deed of sale operates to convey and affect the land, giving a bona fide purchaser who registers their purchase ahead of another transferee a better title to the property. The registration contemplated under Art. 1544 refers to registration under P.D. No. 1529, which considers the act of registration as the operative act that binds the land.

PRINCIPLES:

  • Art. 1544 of the Civil Code applies only when the same property is validly sold to different buyers.

  • The act of registration does not validate an otherwise void contract and does not convert an invalid instrument into a valid one as between the parties.

  • The principle of "primus tempore, potior jure" applies in interpreting Art. 1544, which gives priority to the buyer who registers first, unless the second buyer registers in good faith ahead of the first buyer.

  • The act of registration is the operative act to convey or affect the land, and it operates as constructive notice to all persons from the time of registration. (P.D. No. 1529, Sec. 51 and 52)

  • Between two transactions concerning the same parcel of land, the registered transaction prevails over the earlier unregistered right. (P.D. No. 1529)

  • In the Torrens System, the purchaser acquires rights and interests as they appear in the certificate of title, unaffected by any prior lien or encumbrance not noted therein. The purchaser is not required to explore farther than what the Torrens title indicates, except when the purchaser has actual knowledge of a flaw or defect in the title or such liens or encumbrances. (Former Justice Jose Vitug)