Cruz vs. Cabaña
129 SCRA 656
June 1984
FACTS:
In June 1965, respondent Leodegaria Cabaña sold the subject property to respondent spouses Teofilo Legaspi and Iluminada Cabaña (spouses Legaspi) under their contract entitled “Bilihang Muling Mabibili” which stipulated that Cabaña can repurchase the land within one year from December 31, 1966. The said land was not repurchased, however, so the spouses Legaspi took possession of the said property. Later, Cabaña requested that the land title be lent to her in order to mortgage the property to the Philippine National Bank (PNB), to which the spouses Legaspi yielded. On October 21, 1968, Cabaña formally sold the land to spouses Legaspi by way of an absolute sale. The spouses Legaspi then attempted to register the deed of sale, but failed because they could not present the owner's duplicate of title which was still in the possession of the PNB as mortgage. Subsequently, they were able to register the document of sale on May 13, 1969 under Primary Entry No. 210113 of the Register of Deeds of Quezon Province.
On November 29, 1968, Cabaña sold the same property to herein petitioner Abelardo Cruz (now deceased), who, in turn, tried to register the deed of sale on September 3, 1970. However, he was informed that Cabaña had already sold the property to the spouses Legaspi, so he was only able to register the land in his name on February 9, 1971. The CFI of Quezon Province declared the spouses Legaspi as the true and rightful owners of the subject property and the land title that Cruz had acquired as null and void. The Court of Appeals affirmed said decision, but ordered Cabaña reimburse to Cruz's heirs the amounts of P2,352.50, which the late petitioner Abelardo Cruz paid to PNB to discharge the mortgage obligation of Cabaña in favor of said bank, and the amount of P3,397.50, representing the amount paid by said Abelardo Cruz to her as consideration of the sale with pacto de retro of the subject property.
ISSUE:
Who is the rightful owner of the subject property?
COURT RULING:
The Supreme Court affirmed the decision of the appellate court with modification ordering and sentencing respondent Leodegaria Cabaña to reimburse and pay to petitioner's heirs the total sum of P5,750.00.
There is no question that spouses Legaspi were the first buyers, first on June 1, 1965 under a sale with right of repurchase and later on October 21, 1968 under a deed of absolute sale and that they had taken possession of the land sold to them; that Abelardo Cruz was the second buyer under a deed of sale dated November 29, 1968, which to ail indications, contrary to the text, was a sale with right of repurchase for ninety (90) days. There is no question, either, that spouses Legaspi were the first and the only ones to be in possession of the subject property.
The knowledge of the first sale Abelardo Cruz had gained defeats his rights even if he is first to register the second sale, since such knowledge taints his prior registration with bad faith. This is the price exacted by Article 1544 of the Civil Code. Before the second buyer can obtain priority over the first, he must show that he acted in good faith throughout (i.e. in ignorance of the first sale and of the first buyer's rights) - from the time of acquisition until the title is transferred to him by registration or failing registration, by delivery of possession. The second buyer must show continuing good faith and innocence or lack of knowledge of the first sale until his contract ripens into full ownership through prior registration as provided by law."
