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Property Rules

First in time, stronger in right

04:22 AM November 23, 2019

Spouses Luis and Rata have a big family. They have nine children namely: Pic, Art, Rita, Luz, Ed, Nuel Cleo, Ton and Lica. The sudden demise of Rata left a void in the hearts of the children, and most especially, Luis.

Luis found his heart beating again. He then walked the aisle the second time to marry Ludy.

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Years later, Luis, with the full knowledge and consent of his second wife, Ludy, executed a Deed of Absolute Sale (First Sale) covering several titled properties in favor of Luis’ children, Pic, Ton, Lica and Cleo (“Pic, et al.”).

Despite the above sale, Luz, Luis’ other daughter, and her daughter, Lai, obtained a Special Power of Attorney (SPA) from Luis, who was then sick, infirm, blind and of unsound mind. The mother-daughter tandem accomplished this by affixing Luis’ thumb mark on the SPA which purportedly authorized Lai to sell and convey, among others, two of the lots which were previously sold by Luis to his Pic, Ton, Lica and Cleo. Another SPA was obtained by Luz and Lai from Luis which allowed Lai and her husband, Ham to mortgage another lot, which was previously sold, VL Lending Investors Inc. with the concurrence of Ludy.

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A second sale took place when the mother and daughter team made Luis sign the Deed of Absolute Sale conveying to Mer Corporation three parcels of residential land, all of which were previously sold to Pic, et al.

Upon discovery of the above transactions, Luis and Pic, et al. sued Luz, Lai and Mer Corporation. While the case was pending, Luis died. Pic, et al. amended their complaint to include in the suit as additional defendants, their stepmother, Ludy, and Lai’s husband, Ham.

Luz and Lai defended their actions by saying: (a) Luis and his other children are estopped from questioning the second sale in favor of Mer Corporation because they failed not only in effecting the necessary transfer of the title, but also in annotating their interests on the titles of the questioned properties; and (b) that with respect to the assailed SPAs and the deed of absolute sale executed by Luis, they claimed that the documents were valid because he was conscious and of sound mind and body when he executed them. In fact, it was Luis together with his wife who received the check payment issued by Mer Corporation where a big part of it was used to foot his hospital and medical expenses.

Mer Corp., on the other hand, claimed that it was a buyer in good faith. It alleged that it checked the titles of the said lots with the Register of Deeds and discovered therein that the First Sale was not registered with the said Register of Deeds prior to the actual purchase.

Ludy, in her defense, averred that her signature as well as that of Luis appearing on the deed of sale in favor of Pic, Ton, Lica and Cleo, was obtained through fraud, deceit and trickery. She explained that they signed the prepared deed out of pity because Pic, et al. told them that it was necessary for a loan application. In fact, there was no consideration involved in the First Sale. With respect to the Second Sale, she never encouraged the same and neither did she participate in it. It was purely her husband’s own volition that the Second Sale materialized. She, however, affirmed that she received Mer Corp.’s payment on behalf of her husband who was then bedridden.

Q: Is the Deed of Sale executed by Luis in favor of Pic, Ton, Lica and Cleo valid?

A: Yes. The fact that the first deed of sale was executed, conveying the subject properties in favor of Pic and his siblings was never contested by Luz, Lai and Ludy. What the latter vehemently insist, though, is that the said sale was simulated because the purported sale was made without a valid consideration.

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In this case, Luz, Lai, Ludy and Mer Corp. failed to trounce these disputable presumptions: (1) private transactions have been fair and regular; (2) the ordinary course of business has been followed; and (3) there was sufficient consideration for a contract. Aside from their bare allegation that the sale was made without a consideration, they failed to supply clear and convincing evidence to back up this claim. It is elementary in procedural law that bare allegations, unsubstantiated by evidence, are not equivalent to proof under the Rules of Court.

Ludy’s representation that the children of Luis approached him and convinced him to sign the deed of sale, explaining that it was necessary for a loan application, but they did not pay the purchase price for the subject properties does not help their defense. It is self-serving and would not amount to a clear and convincing evidence required by law to dispute the said presumption.

Q: Granting that there was no payment made in the Luis-Pic et al. transaction, can the properties subject of the first sale still be sold?

A: No. The seller would have no right to sell again what he no longer owned. His remedy would be to rescind the sale for failure on the part of the buyer to perform his part of their obligation pursuant to Article 1191 of the New Civil Code.

The failure of the buyer to make good the price does not, in law, cause the ownership to revest to the seller unless the bilateral contract of sale is first rescinded or resolved pursuant to Article 1191 of the New Civil Code. Non-payment only creates a right to demand the fulfillment of the obligation or to rescind the contract.

Q: Is Mer Corporation a buyer in good faith considering that it had the properties first recorded in the Registry of Property, as they were unaware of the First Sale?

A: No. The fact that Mer Corporation had them first registered will not help its cause. A reading of the provisions of Article 1544 of the Civil Code shows that ownership of an immovable property which is the subject of a double sale shall be transferred: (1) to the person acquiring it who in good faith first recorded it in the Registry of Property; (2) in default thereof, to the person who in good faith was first in possession; and (3) in default thereof, to the person who presents the oldest title, provided there is good faith.

The requirement of the law then is two-fold: acquisition in good faith and registration in good faith. Good faith must concur with the registration. If it would be shown that a buyer was in bad faith, the alleged registration they have made amounted to no registration at all.

The principle of primus tempore, potior jure (first in time, stronger in right) gains greater significance in case of a double sale of immovable property. When the thing sold twice is an immovable, the one who acquires it and first records it in the Registry of Property, both made in good faith, shall be deemed the owner. Verily, the act of registration must be coupled with good faith.

The fact that the subject properties were already in the possession of persons other than Luis was never disputed. Mer Corporation, through its agent, knew that the subject properties were in possession of persons other than the seller. Instead of investigating the rights and interests of the persons occupying the said lots, however, it chose to just believe that Luis still owned them.

Simply, Mer Corp. failed to exercise the due diligence required by law of purchasers in acquiring a piece of land in the possession of person or persons other than the seller.

(Source: Rosaroso vs. Soria, G.R. No. 194846, June 19, 2013)

Ma. Soledad Deriquito-Mawis

Dean, Lyceum of the Philippines University

Mawis Law Office

Outgoing Chairman, Philippine Association of Law Schools

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