G.R.

No. L-8452 August 2, 1916

DEAN C. WORCESTER, plaintiff-appellee,
vs.
MARTIN OCAMPO and GERVASIO OCAMPO y REYES, defendants-appellants.

JOHNSON, J.:

This is an appeal from an order made by the Honorables Charles H. Smith and Norberto Romualdez, then judges of the
Court of Land Registration, directing the cancellation of certain duplicates of certificates of title issued under the Torrens
system and directing the registration of a certain deed executed by the sheriff of the city of Manila to the plaintiff
herein. Said order was made upon the 2d day of September, 1912.

Said order was based upon the facts contained in a certain communication from Joaquin Jaramillo, then register of
deeds, asking the judges of the Court of Land Registration for instructions concerning the registration of a deed issued
by the sheriff of the city of Manila to Dean C. Worcester.

The facts upon which the present appeal is based are not disputed and are best stated by the said communication itself.
Said communication is as follows:

By virtue of an execution issued out of the Court of First Instance of Manila under date of January 26, 1910, in case No.
6930, entitled Dean C. Worcester vs. Martin Ocampo, all the right, title and interest of the latter in two parcels of land
registered in his name under certificates of title Nos. 924 and 965, book 4 of the registry, were levied upon for the
purpose of satisfying a judgment of P60,000, a notice of the levy in said case having been entered upon the back of said
certificates of title on the same date, to wit: January 26, 1910. By a document of prior date to said attachment, to wit,
January 11, 1909, the two parcels mentioned were sold con pacto de retracto by Martin Ocampo to Gervasio Ocampo y
Reyes, for the period of four years from said date, the vendor being allowed the right to continue occupying the said
properties by paying an annual rental of P150. This document was endorsed on the back of said certificates of title on
February 1, 1910. By another writ of execution, issued on March 26, 1910, in the same case no. 6930, all the right, title
and interest of the defendant, Martin Ocampo, in the two properties which had been levied upon ,were sold at public
auction and Dean C. Worcester, as the highest bidder, purchased the same, subject to the right of redemption which the
law allows to judgment debtors; this sale was also noted on the back of said certificates of title on April 11, 1910.

The period of redemption having expired without the judgment debtor having exercised his right, the sheriff of Manila
executed in favor of the purchaser, Worcester, an absolute deed of sale of all the right, title and interest of Martin
Ocampo in the two parcels above mentioned, which had been sold at public auction. By virtue of this document Kincaid
and Hartigan, as attorneys for Worcester, now seek the inscription of his right in and to the said properties, so acquired
by him at public auction, which inscription, if made, will necessarily require the cancellation of those certificates and the
issuance of new ones in favor of Dean C. Worcester.

Moreover, the said parcels having been sold con pacto de retracto to Gervasio Ocampo y Reyes, as above set forth, the
undersigned is at a loss how to proceed to register the absolute deed of sale executed by the Sheriff of Manila in favor of
Dean C. Worcester.

Wherefore, he asks the assistance of this court in deciding the same. It is also desired to call the attention of the court to
the fact that the duplicates of the certificates of title of said parcels have not been presented in this office and that the
civil status of Worcester does not appear in the deed.

Very respectfully,

(Sgd.) JOAQUIN JARAMILLO,
Register of Deeds, Manila, P. I.

The decision of the judges of the Court of Land Registration was based solely upon the facts stated in said
communication. The only other proof submitted to said judges was some proof relating to the civil status of Dean C.
Worcester.

After a full hearing accorded to all of the interested parties and a consideration of the facts and the law relating thereto,
the Honorable Charles H. Smith and the Honorable Norberto Romualdez, judges of the Court of Land Registration,
rendered a decision, the important parts of which are as follows:

The question presented here is whether or not an absolute deed of sale executed by the sheriff of Manila to Dean C.
Worcester should be registered in his name. The deed was made pursuant to a sale at public auction by virtue of a writ
of execution issued on two parcels of real estate registered in the name of Martin Ocampo under certificates of title
Nos. 924 and 965, book 4 of the registry, and issued under the provisions of Act No. 496.

The writ of execution was issued by the Court of First Instance of Manila, on January 26, 1910, in case No. 6930, entitled
Dean C. Worcester vs. Martin Ocampo, the notice of the levy made by virtue of said order of execution having been
endorsed on the said certificates of title on the same date, to wit, January 26, 1910.


The doubt which is the cause of the present consulta arises from the fact that the parcels of land above mentioned were
sold on January 11, 1909, by Martin Ocampo to Gervasio Ocampo y Reyes, con pacto de retracto, the said document of
sale not having been registered until the 1st of February, 1910.

The question seem clear to us. Treating of property registered under the Torrens system, as in the present case, and
under Act No. 496, the deed of sale con pacto de retracto executed by Martin Ocampo in favor of Gervasio Ocampo
produced no effect whatsoever as a deed of such transfer (nor was it an encumbrance on the property, but only
constituted a contract between the parties and as authority for the register of deeds to make the corresponding
inscription), except from the moment of its filing or registration, that is to say, from the first day of February, 1910. As
on a date prior to the first day of February, 1910, to wit, January 26 of said year, the final levy on said properties in favor
of Dean C. Worcester, had already been noted which notice produced all the effects prescribed in section 51 of Act No.
496, it been the final levy, by virtue of which the public auction was conducted and the sheriff having executed the deed
of sale in favor of Worcester, it is evident that the said levy and sale made by the sheriff takes precedence over the deed
of sale con pacto de retracto executed by Martin Ocampo in favor of Gervasio Ocampo y Reyes.

Sections 50 and 51 of Act No. 496, provide:

SEC. 50. An owner of registered land may convey, mortgage, lease, charge, or otherwise deal with the same as fully as if
it had not been registered. He may use forms of deeds, mortgages, leases, or other voluntary instruments like those now
in use and sufficient in law for the purpose intended. But no deed, mortgage, lease, or other voluntary instrument,
except a will, purporting to convey or affect registered land, shall take effect as a conveyance or bind the land, but shall
operate only as a contract between the parties and as evidence of authority to the clerk or register of deeds to make
registration. The act of registration shall be the operative act to convey and affect the land, and in all cases under this
Act the registration shall be made in the office of register of deeds for the province or provinces or city where the land
lies.

SEC. 51. Every conveyance, mortgage, lease, lien, attachment, order, decree, instrument, or entry affecting registered
land which would under existing laws, if recorded, filed, or entered in the office of the register of deeds, affect the real
estate to which it relates shall, if registered, filed, or entered in the office of the register of deeds in the province or city
where the real estate to which such instrument relates lies, be notice to all persons from the time of such registering,
filing, or entering.'

Our Supreme Court has decided cases analogous to the present to the same effect, as can be seen in the cases of Liong
Wong Shih vs. Sunico (8 Phil. Rep., 91); Tabigue vs. Green (11 Phil. Rep., 102); and Buzon vs. Licauco (13 Phil. Rep., 354).

As to the statement of the register of deeds touching on the fact that the duplicates of the certificates of title referred to
had not been presented in his office and that the civil status of Worcester did not appear in the deed, it was shown on
the hearing of this case that the said duplicate certificates are in the possession of Martin Ocampo and that Dean C.
Worcester is married to Nanon L. Worcester, as shown by the testimony of Kincaid, who was a witness in the case.

Wherefore, in view of the foregoing it is decreed:

1.
That Martin Ocampo deliver up to the office of the register of deeds of Manila the duplicates of the certificates
of title Nos. 924 and 965, book 4 of the registry referring to certain other properties inscribed in his name, and he is
hereby ordered so to do.

2.
That the register of deeds of Manila cancel the certificates of title mentioned in the preceding paragraph and
register the absolute deed of sale executed by the sheriff of Manila in favor of Dean C. Worcester, entering the
corresponding certificates and duplicate certificate thereof.

3.
That notice of this decision, by the mailing of a certified copy of same, be given to the Attorney-General of the
Philippine Islands, the register of deeds of the city of Manila, Kincaid, Hartigan & Lahesa, Dean C. Worcester, Vicente
Ilustre, Martin Ocampo, and Gervasio Ocampo y Reyes. So ordered.

From the decision of the said judges the attorney for the said Gervasio Ocampo y Reyes appealed to this court and made
the following assignment of error:

In ordering the cancellation of the certificates of title issued to Martin Ocampo, bearing the corresponding indorsement
of the sale with pacto de retro to the appellant Gervasio Ocampo y Reyes and ordering the registration of the absolute
deed of sale executed by the sheriff of Manila in favor of Dean C. Worcester and the entry of the corresponding
certificates and duplicate certificates in the name of the latter.

Under said assignment of error the appellant contends, that the only right which the plaintiff purchased was the right of
repurchase of the said Martin Ocampo; in other words, the contention of the appellant is that, in view of the fact that
Martin Ocampo had sold the parcels of land in question to Gervasio Ocampo y Reyes, under a pacto de retracto, the only
interest which he had remaining in the land was the right to repurchase the same within the period mentioned in said
contract and that therefore the only interest which was sold by the sheriff was the right to repurchase, that being the
only right which Martin Ocampo had in the parcels of land in question at the time of the sheriff's sale. In that contention

the appellant has overlooked the provisions of sections 50 and 51 of Act No. 496. He has overlooked the fact that the
said contract of conditional sale by Martin Ocampo to him was not registered or noted in the registry until several days
after the attachment upon the judgment in favor of Worcester had been made and had been noted in the registry of
property.

Said section 50 (Act No. 496) provides that:

An owner of registered land may convey, mortgage . . . . or otherwise deal with the same as fully as if it had not been
registered. . . . But no deed, mortgage, . . . . or other voluntary instrument, except a will, purporting the convey or affect
registered land shall take effect as a conveyance or bind the land, but shall operate only as a contract between the
parties and as evidence of authority to the clerk of register of deeds to make registration. The act of registration shall be
the operative act to convey and affect the land, etc.

Section 51 of said Act (496) provides that:

Every conveyance, mortgage . . . . attachment, order, . . . . or entry affecting registered land which would under existing
laws, if recorded, filed, or entered in the office of the register of deeds, affect the real estate to which it relates shall, if
registered, filed, or entered in the office of the register of deeds, . . . be notice to all persons from the time of such
registering, filing, or entering.

If, then, ever conveyance or attachment when recorded, filed, or entered in the office of the register of deeds, shall be
notice to all persons from the time of such registering, filing or entering, then Gervasio Ocampo y Reyes cannot plead
ignorance of the existence of the rights acquired by Worcester under his attachment which was duly recorded in the
office of the register of deeds several days before there was any attempt to record or file or register the pacto de
retracto.

Said section 50 clearly provides that when registered land is conveyed, mortgaged, leased, or otherwise dealth with,
such conveyance, mortgage, etc., shall not affect or convey the land until such conveyance, mortgage, etc., is recorded
or filed or entered in the office of the register of deeds. From said provision it is clear then, that by reason of the fact
that the said pacto de retracto was not recorded, filed, or entered in the office of the register of deeds until after the
plaintiff had secured his lien by attachment, that Gervasio Ocampo y Reyes acquired his right subject to the rights of the
plaintiff herein. His right being subject to the rights of the plaintiff, it cannot be enforced against the land until after the
rights of the plaintiff have been fully satisfied. No claim is made by the appellant that there were any rights left in said
parcel of land over and above the rights of the plaintiff.

And, moreover, this is not the first time the question which we are discussing has been presented to this court.
Analogous questions were presented in the cases of Liong-Wong-Shih vs. Sunico and Peterson (8 Phil. Rep., 91); Tabigue
vs. Green (11 Phil. Rep., 102); Buzon vs. Licauco (13 Phil. Rep., 354).

After a careful examination of the facts and of the law applicable thereto, we are of the opinion that no error was
committed by the lower court in its judgment and order. Therefore the same is hereby affirmed with costs. So ordered.
G.R. No. 200173 April 15, 2013

SPS. ESMERALDO D. VALLIDO and ARSENIA M. V ALLIDO, rep. by ATTY. SERGIO C. SUMAYOD, Petitioners,
vs.
SPS. ELMER PONO and JULIET PONO, and PURIFICACION CERNA-PONG and SPS. MARIANITO PONO and ESPERANZA
MERO-PONO, Respondents.

MENDOZA, J.:

This is a petition for review on certiorari assailing the December 8, 2011 Decision of the Court of Appeals (CA) which
reversed and set aside the July 20, 2004 Decision of the Regional Trial Court, Branch 12, Ormoc City (RTC). a case
involving a double sale of a parcel of land.

It appears that Martino Dandan (Martino) was the registered owner of a parcel of land in Kananga, Leyte, with an area
of 28,214 square meters, granted under Homestead Patent No. V-21513 on November 11, 1953 and covered by Original
Certificate of Title (OCT) No. P-429.

On January 4, 1960, Martino, who was at that time living in Kananga, Leyte, sold a portion of the subject property
equivalent to 18,214 square meters to respondent Purificacion Cerna (Purificacion). Upon execution of the Deed of
Absolute Sale, Martino gave Purificacion the owners copy of OCT No. P-429. The transfer, however, was not recorded in
the Registry of Deeds.

On May 4, 1973, Purificacion sold her18,214 square meter portion of the subject property to respondent Marianito Pono
(Marianito) and also delivered OCT No. P-429 to him. Marianito registered the portion he bought for taxation purposes,
paid its taxes, took possession, and allowed his son respondent Elmer Pono (Elmer) and daughter-in-law, Juliet Pono
(Juliet), to construct a house thereon. Marianito kept OCT No. P-429. The transfer, however, was also not recorded in
the Registry of Deeds.

Meanwhile, Martino left Kananga, Leyte, and went to San Rafael III, Noveleta, Cavite, and re-settled there. On June 14,
1990, he sold the whole subject property to his grandson, petitioner Esmeraldo Vallido (Esmeraldo), also a resident of
Noveleta, Cavite. Considering that Martino had delivered OCT No. P-429 to Purificacion in 1960, he no longer had any
certificate of title to hand over to Esmeraldo.

On May 7, 1997, Martino filed a petition seeking for the issuance of a new owners duplicate copy of OCT No. P-429,
which he claimed was lost. He stated that he could not recall having delivered the said owners duplicate copy to
anybody to secure payment or performance of any legal obligation. On June 8, 1998, the petition was granted by the
RTC, Branch 12 of Ormoc City. On September 17, 1999, Esmeraldo registered the deed of sale in the Registry of Deeds
and Transfer Certificate of Title (TCT) No. TP-13294 was thereafter issued in the name of the petitioners.

Subsequently, the petitioners filed before the RTC a complaint for quieting of title, recovery of possession of real
property and damages against the respondents. In their Answer, respondents Elmer and Juliet averred that their
occupation of the property was upon permission of Marianito. They included a historical chronology of the transactions
from that between Martino and Purificacion to that between Purificacion and Marianito.

On July 20, 2004, the RTC promulgated a decision1 favoring the petitioners. The RTC held that there was a double sale
under Article 1544 of the Civil Code. The respondents were the first buyers while the petitioners were the second
buyers. The RTC deemed the petitioners as buyers in good faith because during the sale on June 4, 1990, OCT No. P-429
was clean and free from all liens. The petitioners were also deemed registrants in good faith because at the time of the
registration of the deed of sale, both OCT No. P-429 and TCT No. TP-13294 did not bear any annotation or mark of any
lien or encumbrance. The RTC concluded that because the petitioners registered the sale in the Register of Deeds, they
had a better right over the respondents.

Aggrieved, the respondents filed their Notice of Appeal on August 27, 2004.

In the assailed Decision,2 dated December 8, 2011, the CA ruled in favor of the respondents. The CA agreed that there
was a double sale. It, however, held that the petitioners were neither buyers nor registrants in good faith. The
respondents indisputably were occupying the subject land. It wrote that where the land sold was in the possession of a
person other than the vendor, the purchaser must go beyond the certificate of title and make inquiries concerning the
rights of the actual possessors. It further stated that mere registration of the sale was not enough as good faith must
concur with the registration. Thus, it ruled that the petitioners failed to discharge the burden of proving that they were
buyers and registrants in good faith. Accordingly, the CA concluded that because the sale to Purificacion took place in
1960, thirty (30) years prior to Esmeraldos acquisition in 1990, the respondents had a better right to the property.

Hence, this petition.

The petitioners argue that the CA erred in ruling in favor of the respondents. Primarily, they contend that the Appellants
Brief was filed beyond the 30-day extension period granted by the CA and that the findings of fact of the RTC were no
longer subject to review and should not have been disturbed on appeal.

They invoke that they are buyers and registrants in good faith. They claim that the title of the land was clean and free
from any and all liens and encumbrances from the time of the sale up to the time of its registration. They also aver that
they had no knowledge of the sale between Martino and Purificacion on July 4, 1960 as they have been residents of
Noveleta, Cavite, which is very far from Brgy. Masarayao, Kananga, Leyte. When Esmeraldo confronted his grandfather,
Martino, about the July 4, 1960 sale to Purificacion, he took as gospel truth the vehement denial of his grandfather on
the existence of the sale. The latter explained that the transaction was only a mortgage. These facts show that indeed
they were buyers and registrants in good faith. Thus, their right of ownership is preferred against the unregistered claim
of the respondents.

The petition is without merit.

On the procedural aspect, it was the ruling of the CA that the respondents were deemed to have filed their Appellants
Brief within the reglementary period.3 The Court accepts that as it was merely a technical issue.

The core issue in this case is whether the petitioners are buyers and registrants in good faith.

It is undisputed that there is a double sale and that the respondents are the first buyers while the petitioners are the
second buyers. The burden of proving good faith lies with the second buyer (petitioners herein) which is not discharged
by simply invoking the ordinary presumption of good faith.4

After an assiduous assessment of the evidentiary records, this Court holds that the petitioners are NOT buyers in good
faith as they failed to discharge their burden of proof.

Notably, it is admitted that Martino is the grandfather of Esmeraldo. As an heir, petitioner Esmeraldo cannot be
considered as a third party to the prior transaction between Martino and Purificacion. In Pilapil v. Court of Appeals,5 it
was written:

The purpose of the registration is to give notice to third persons. And, privies are not third persons. The vendor's heirs
are his privies. Against them, failure to register will not vitiate or annul the vendee's right of ownership conferred by
such unregistered deed of sale.

The non-registration of the deed of sale between Martino and Purificacion is immaterial as it is binding on the
petitioners who are privies.6 Based on the privity between petitioner Esmeraldo and Martino, the petitioner as a second
buyer is charged with constructive knowledge of prior dispositions or encumbrances affecting the subject property. The
second buyer who has actual or constructive knowledge of the prior sale cannot be a registrant in good faith.7

Moreover, although it is a recognized principle that a person dealing on a registered land need not go beyond its
certificate of title, it is also a firmly settled rule that where there are circumstances which would put a party on guard
and prompt him to investigate or inspect the property being sold to him, such as the presence of occupants/tenants
thereon, it is expected from the purchaser of a valued piece of land to inquire first into the status or nature of
possession of the occupants. As in the common practice in the real estate industry, an ocular inspection of the premises
involved is a safeguard that a cautious and prudent purchaser usually takes. Should he find out that the land he intends
to buy is occupied by anybody else other than the seller who, as in this case, is not in actual possession, it would then be
incumbent upon the purchaser to verify the extent of the occupants possessory rights.

The failure of a prospective buyer to take such precautionary steps would mean negligence on his part and would
preclude him from claiming or invoking the rights of a "purchaser in good faith."8 It has been held that "the registration
of a later sale must be done in good faith to entitle the registrant to priority in ownership over the vendee in an earlier
sale."9

There are several indicia that should have placed the petitioners on guard and prompted them to investigate or inspect
the property being sold to them. First, Martino, as seller, did not have possession of the subject property. Second, during
the sale on July 4, 1990, Martino did not have the owners duplicate copy of the title. Third, there were existing
permanent improvements on the land. Fourth, the respondents were in actual possession of the land. These
circumstances are too glaring to be overlooked and should have prompted the petitioners, as prospective buyers, to
investigate or inspect the land. Where the vendor is not in possession of the property, the prospective vendees are
obligated to investigate the rights of one in possession.10

When confronted by Esmeraldo on the alleged previous sale, Martino declared that there was no sale but only a
mortgage.The petitioners took the declaration of Martino as gospel truth or ex cathedra.11 The petitioners are not
convincing. Glaringly, Martino gave conflicting statements. He stated in his Petition for Issuance of New Owner's
Duplicate Copy of OTC12 that he could not recall having delivered the owner's duplicate copy to anybody to secure
payment or performance of any obligation. Yet, when confronted by Esmeraldo, Martino stated that he mortgaged the
land with Purificacion. The claims of Martino, as relayed by the petitioners, cannot be relied upon.

As the petitioners cannot be considered buyers in good faith, they cannot lean on the indefeasibility of their TCT in view
of the doctrine that the defense of indefeasibility of a torrens title does not extend to transferees who take the
certificate of title in bad faith.13

The Court cannot ascribe good faith to those who have not shown any diligence in protecting their rights.14

Lastly, it is uncontroverted that the respondents were occupying the land since January 4, 1960 based on the deed of
sale between Martino and Puriticacion. They have also made improvements on the land by erecting a house of mixed
permanent materials thereon, which was also admitted by the petitioners.15 The respondents, without a doubt, are
possessors in good faith. Ownership should therefore vest in the respondents because they were first in possession of
the property in good faith.16


G.R. No. 170405 February 2, 2010

RAYMUNDO S. DE LEON, Petitioner,
vs.
BENITA T. ONG. Respondent.

CORONA, J.:

On March 10, 1993, petitioner Raymundo S. de Leon sold three parcels of land2 with improvements situated in Antipolo,
Rizal to respondent Benita T. Ong. As these properties were mortgaged to Real Savings and Loan Association,
Incorporated (RSLAI), petitioner and respondent executed a notarized deed of absolute sale with assumption of
mortgage3 stating:

x x x x x x x x x

That for and in consideration of the sum of ONE MILLION ONE HUNDRED THOUSAND PESOS (P1.1 million), Philippine
currency, the receipt whereof is hereby acknowledged from [RESPONDENT] to the entire satisfaction of [PETITIONER],
said [PETITIONER] does hereby sell, transfer and convey in a manner absolute and irrevocable, unto said [RESPONDENT],

his heirs and assigns that certain real estate together with the buildings and other improvements existing thereon,
situated in [Barrio] Mayamot, Antipolo, Rizal under the following terms and conditions:

1. That upon full payment of [respondent] of the amount of FOUR HUNDRED FIFTEEN THOUSAND FIVE HUNDRED
(P415,000), [petitioner] shall execute and sign a deed of assumption of mortgage in favor of [respondent] without any
further cost whatsoever;

2. That [respondent] shall assume payment of the outstanding loan of SIX HUNDRED EIGHTY FOUR THOUSAND FIVE
HUNDRED PESOS (P684,500) with REAL SAVINGS AND LOAN,4 Cainta, Rizal (emphasis supplied)

x x x x x x x x x

Pursuant to this deed, respondent gave petitioner P415,500 as partial payment. Petitioner, on the other hand, handed
the keys to the properties and wrote a letter informing RSLAI of the sale and authorizing it to accept payment from
respondent and release the certificates of title.

Thereafter, respondent undertook repairs and made improvements on the properties.5 Respondent likewise informed
RSLAI of her agreement with petitioner for her to assume petitioners outstanding loan. RSLAI required her to undergo
credit investigation.

Subsequently, respondent learned that petitioner again sold the same properties to one Leona Viloria after March 10,
1993 and changed the locks, rendering the keys he gave her useless. Respondent thus proceeded to RSLAI to inquire
about the credit investigation. However, she was informed that petitioner had already paid the amount due and had
taken back the certificates of title.

Respondent persistently contacted petitioner but her efforts proved futile.

On June 18, 1993, respondent filed a complaint for specific performance, declaration of nullity of the second sale and
damages6 against petitioner and Viloria in the Regional Trial Court (RTC) of Antipolo, Rizal, Branch 74. She claimed that
since petitioner had previously sold the properties to her on March 10, 1993, he no longer had the right to sell the same
to Viloria. Thus, petitioner fraudulently deprived her of the properties.

Petitioner, on the other hand, insisted that respondent did not have a cause of action against him and consequently
prayed for the dismissal of the complaint. He claimed that since the transaction was subject to a condition (i.e., that
RSLAI approve the assumption of mortgage), they only entered into a contract to sell. Inasmuch as respondent did apply
for a loan from RSLAI, the condition did not arise. Consequently, the sale was not perfected and he could freely dispose
of the properties. Furthermore, he made a counter-claim for damages as respondent filed the complaint allegedly with
gross and evident bad faith.

Because respondent was a licensed real estate broker, the RTC concluded that she knew that the validity of the sale was
subject to a condition. The perfection of a contract of sale depended on RSLAIs approval of the assumption of
mortgage. Since RSLAI did not allow respondent to assume petitioners obligation, the RTC held that the sale was never
perfected.

In a decision dated August 27, 1999,7 the RTC dismissed the complaint for lack of cause of action and ordered
respondent to pay petitioner P100,000 moral damages, P20,000 attorneys fees and the cost of suit.

Aggrieved, respondent appealed to the Court of Appeals (CA),8 asserting that the court a quo erred in dismissing the
complaint.

The CA found that the March 10, 2003 contract executed by the parties did not impose any condition on the sale and
held that the parties entered into a contract of sale. Consequently, because petitioner no longer owned the properties
when he sold them to Viloria, it declared the second sale void. Moreover, it found petitioner liable for moral and
exemplary damages for fraudulently depriving respondent of the properties.

In a decision dated July 22, 2005,9 the CA upheld the sale to respondent and nullified the sale to Viloria. It likewise
ordered respondent to reimburse petitioner P715,250 (or the amount he paid to RSLAI). Petitioner, on the other hand,
was ordered to deliver the certificates of titles to respondent and pay her P50,000 moral damages and P15,000
exemplary damages.

Petitioner moved for reconsideration but it was denied in a resolution dated November 11, 2005.10 Hence, this
petition,11 with the sole issue being whether the parties entered into a contract of sale or a contract to sell.

Petitioner insists that he entered into a contract to sell since the validity of the transaction was subject to a suspensive
condition, that is, the approval by RSLAI of respondents assumption of mortgage. Because RSLAI did not allow
respondent to assume his (petitioners) obligation, the condition never materialized. Consequently, there was no sale.

Respondent, on the other hand, asserts that they entered into a contract of sale as petitioner already conveyed full
ownership of the subject properties upon the execution of the deed.


We modify the decision of the CA.

Contract of Sale or Contract to Sell?

The RTC and the CA had conflicting interpretations of the March 10, 1993 deed. The RTC ruled that it was a contract to
sell while the CA held that it was a contract of sale.

In a contract of sale, the seller conveys ownership of the property to the buyer upon the perfection of the contract.
Should the buyer default in the payment of the purchase price, the seller may either sue for the collection thereof or
have the contract judicially resolved and set aside. The non-payment of the price is therefore a negative resolutory
condition.12

On the other hand, a contract to sell is subject to a positive suspensive condition. The buyer does not acquire ownership
of the property until he fully pays the purchase price. For this reason, if the buyer defaults in the payment thereof, the
seller can only sue for damages.13

The deed executed by the parties (as previously quoted) stated that petitioner sold the properties to respondent "in a
manner absolute and irrevocable" for a sum of P1.1 million.14 With regard to the manner of payment, it required
respondent to pay P415,500 in cash to petitioner upon the execution of the deed, with the balance15 payable directly to
RSLAI (on behalf of petitioner) within a reasonable time.16 Nothing in said instrument implied that petitioner reserved
ownership of the properties until the full payment of the purchase price.17 On the contrary, the terms and conditions of
the deed only affected the manner of payment, not the immediate transfer of ownership (upon the execution of the
notarized contract) from petitioner as seller to respondent as buyer. Otherwise stated, the said terms and conditions
pertained to the performance of the contract, not the perfection thereof nor the transfer of ownership.

Settled is the rule that the seller is obliged to transfer title over the properties and deliver the same to the buyer.18 In
this regard, Article 1498 of the Civil Code19 provides that, as a rule, the execution of a notarized deed of sale is
equivalent to the delivery of a thing sold.

In this instance, petitioner executed a notarized deed of absolute sale in favor of respondent. Moreover, not only did
petitioner turn over the keys to the properties to respondent, he also authorized RSLAI to receive payment from
respondent and release his certificates of title to her. The totality of petitioners acts clearly indicates that he had
unqualifiedly delivered and transferred ownership of the properties to respondent. Clearly, it was a contract of sale the
parties entered into.

Furthermore, even assuming arguendo that the agreement of the parties was subject to the condition that RSLAI had to
approve the assumption of mortgage, the said condition was considered fulfilled as petitioner prevented its fulfillment
by paying his outstanding obligation and taking back the certificates of title without even notifying respondent. In this
connection, Article 1186 of the Civil Code provides:

Article 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment.

Void Sale Or Double Sale?

Petitioner sold the same properties to two buyers, first to respondent and then to Viloria on two separate occasions.20
However, the second sale was not void for the sole reason that petitioner had previously sold the same properties to
respondent. On this account, the CA erred.

This case involves a double sale as the disputed properties were sold validly on two separate occasions by the same
seller to the two different buyers in good faith.

Article 1544 of the Civil Code provides:

Article 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the
person who may have first taken possession thereof in good faith, if it should be movable property.

Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded
it in the Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession;
and, in the absence thereof, to the person who presents the oldest title, provided there is good faith. (emphasis
supplied)

This provision clearly states that the rules on double or multiple sales apply only to purchasers in good faith. Needless to
say, it disqualifies any purchaser in bad faith.

A purchaser in good faith is one who buys the property of another without notice that some other person has a right to,
or an interest in, such property and pays a full and fair price for the same at the time of such purchase, or before he has

notice of some other persons claim or interest in the property.21 The law requires, on the part of the buyer, lack of
notice of a defect in the title of the seller and payment in full of the fair price at the time of the sale or prior to having
notice of any defect in the sellers title.

Was respondent a purchaser in good faith? Yes.

Respondent purchased the properties, knowing they were encumbered only by the mortgage to RSLAI. According to her
agreement with petitioner, respondent had the obligation to assume the balance of petitioners outstanding obligation
to RSLAI. Consequently, respondent informed RSLAI of the sale and of her assumption of petitioners obligation.
However, because petitioner surreptitiously paid his outstanding obligation and took back her certificates of title,
petitioner himself rendered respondents obligation to assume petitioners indebtedness to RSLAI impossible to
perform.

Article 1266 of the Civil Code provides:

Article 1266. The debtor in obligations to do shall be released when the prestation become legally or physically
impossible without the fault of the obligor.

Since respondents obligation to assume petitioners outstanding balance with RSLAI became impossible without her
fault, she was released from the said obligation. Moreover, because petitioner himself willfully prevented the condition
vis--vis the payment of the remainder of the purchase price, the said condition is considered fulfilled pursuant to Article
1186 of the Civil Code. For purposes, therefore, of determining whether respondent was a purchaser in good faith, she is
deemed to have fully complied with the condition of the payment of the remainder of the purchase price.

Respondent was not aware of any interest in or a claim on the properties other than the mortgage to RSLAI which she
undertook to assume. Moreover, Viloria bought the properties from petitioner after the latter sold them to respondent.
Respondent was therefore a purchaser in good faith. Hence, the rules on double sale are applicable.

Article 1544 of the Civil Code provides that when neither buyer registered the sale of the properties with the registrar of
deeds, the one who took prior possession of the properties shall be the lawful owner thereof.

In this instance, petitioner delivered the properties to respondent when he executed the notarized deed22 and handed
over to respondent the keys to the properties. For this reason, respondent took actual possession and exercised control
thereof by making repairs and improvements thereon. Clearly, the sale was perfected and consummated on March 10,
1993. Thus, respondent became the lawful owner of the properties.

Nonetheless, while the condition as to the payment of the balance of the purchase price was deemed fulfilled,
respondents obligation to pay it subsisted. Otherwise, she would be unjustly enriched at the expense of petitioner.

Therefore, respondent must pay petitioner P684,500, the amount stated in the deed. This is because the provisions,
terms and conditions of the contract constitute the law between the parties. Moreover, the deed itself provided that the
assumption of mortgage "was without any further cost whatsoever." Petitioner, on the other hand, must deliver the
certificates of title to respondent. We likewise affirm the award of damages.

WHEREFORE, the July 22, 2005 decision and November 11, 2005 resolution of the Court of Appeals in CA-G.R. CV No.
59748 are hereby AFFIRMED with MODIFICATION insofar as respondent Benita T. Ong is ordered to pay petitioner
Raymundo de Leon P684,500 representing the balance of the purchase price as provided in their March 10, 1993
agreement.

G.R. No. L-46701 June 17, 1940

MAURICIO CRUZ, solicitante-apelado,
vs.
JOSEFINA SANDOVAL, opositora y apelante.

G.R. No. L-23386 December 12, 1925

MERCEDES GUSTILO, ET AL., plaintiffs.
MERCEDES GUSTILO and her husband LEOPOLDO JEREZA, appellants,
vs.
HERMINIO MARAVILLA, defendant-appellant.


OSTRAND, J.:

It appears from the record that one Antonia Gustilo was originally the owner of the Malago or Mercedes plantation in
the municipality of Sarabia, Occidental Negros, under Torrens transfer certificates of title Nos. 719 and 720. These
certificates bear a memorandum of a mortgage executed on April 30, 1918, in favor of the Philippine National Bank for
the sum of P8,000, with interest at 8 per cent per annum, and for the term of ten years. On August 3, 1918, Antonia

Gustilo leased the property for the term of seven years to the plaintiff Vicente Ardosa at an annual rent of P1,000. The
lease is evidenced by a notarial document Exhibit G, and it is recited therein that Ardosa paid the rent in advance for the
whole term of the lease, or a total sum of P7,000. By Notarial document Exhibit D, executed on the 10th of the same
month, Ardosa subleased the plantation to the plaintiff Felix Montinola Celis for three agricultural years, or until June
30, 1921. The term of the sublease was subsequently, on August 15, 1921, by a private document or "receipt" extended
so as to embrace the full term of the original lease.

On August 8, 1920, Antonia Gustilo executed a deed of sale for the property in favor of the plaintiff Mercedes Gustilo,
the consideration named in the deed being P30,000, the purchaser assuming the mortgage debt to the Philippine
National Bank (Exhibit 1). As Antonia's certificates appear to have been issued in favor of Mercedes.

On November 24, 1920, Antonia and Mercedes Gustilo executed a second mortgage on the same property in favor of
the defendant Herminio Maravilla for the sum of P25,000, and for the term of one year from the date of the document.
Upon the expiration of the term, the debt secured by the mortgage was paid with money alleged to have been furnished
by Jose Maravilla, a cousin of the defendant, and another mortgage was on January 4, 1922, executed in Jose's favor for
P28,000, representing the original debt of P25,000 with interest.

When the debt secured by the last mortgage fell due, Herminio Maravilla, in the name of Jose Maravilla, demanded
payment which Mercedes Gustilo was unable to make and it was finally agreed between the parties that the title to the
plantation was to be transferred to the defendant in full satisfaction of the debt, the defendant assuming the debt to the
National Bank. A deed to that effect was thereupon executed by Mercedes Gustilo and her husband, the plaintiff
Leopoldo Jereza, in favor of the defendant on August 9, 1922 (Exhibit A).

In the meantime Felix Montinola remained in possession of the plantation by virtue of his sublease and in a letter dated
September 21, 1922, the defendant notified him that he would be required to pay 12 per cent of the total sugar
production of the plantation as rent. Relying on the lease from Antonia Gustilo to Ardosa and his own sublease from the
latter, Montinola refused to pay rent to the defendant, and in December, 1922, jointly with Mercedes Gustilo and
Vicente Ardosa, brought the present action.

In the complaint the plaintiffs is substance allege the facts hereinbefore set forth and, in addition thereto, aver that
though in the deed from Mercedes Gustilo and Leopoldo Jereza to the defendant no mention was made of the lease to
Ardosa and Montinola, the defendant by false statements led Mercedes Gustilo to believe that he would nevertheless
respect the lease, and that in this belief she and her husband executed the deed. Upon the facts so stated, the plaintiffs
pray that judgment be rendered declaring that the defendant has no right to the crop growing on the hacienda and to
collect rents during the duration of the term of the lease to Ardosa; that it be further declared that said lease is an
incumbrance upon the property which the defendant has bound himself to respect, and that it be ordered that said
lease be noted on the transfer certificate of title issued in favor of the defendant.

The defendant in his answer denied the allegations of the complaint and, by way of cross-complaint and counterclaim,
alleges that at the time of his purchase of the plantation, he had no knowledge of the existence of a lease on the
property; that if he had such knowledge, he would not have made the purchase; that the plaintiffs fraudulently
concealed from him the existence of the lease; that subsequently to the purchase he has paid to the Philippine National
Bank the sum of P1,253.19 on the mortgage assumed by him through his purchase of the land; and that he has paid the
sum of P573.74 in back taxes on the land which should have been paid by the vendors. He therefore asks that the
contract of sale of the plantation to him be declare rescinded and that judgment be rendered against the plaintiffs for
the sum of P1,253.19 for payments made to the Philippine National Bank, and for the further sum of P573.74 for back
taxes paid.

In answer to the defendants cross-complaint and counterclaim, the plaintiffs allege that at the time of his purchase, the
defendant was fully informed of all incumbrances on the Mercedes plantation, and that he assumed the payment and
fulfillment of said incumbrances and obligations; that he has not complied with the terms and conditions under which
the sale of the property to him was made; and that through his failure to comply with such terms and conditions, the
plaintiffs have suffered damages in the sum of P20,000. They therefore ask that the sale be declared rescinded through
the fault of the defendant and that judgment be rendered against the defendant and in favor of the plaintiffs for the
sum of P20,000 and for the costs.

Upon trial, the court below found that when the defendant purchased the property in question from the plaintiff
Mercedes Gustilo, he had full knowledge of the fact that the property had been leased to Vicente Ardosa, as well as of
the terms of said lease, and held that it therefore become a part of the contract of sale. The court also declared that the
lease, being for a terms of more than six years, was registerable and ordered that it be entered upon the certificates of
title and upon the records of the register of deeds. The court further found that the defendant had failed to fulfill his
obligations under the contract of sale and declared said contract rescinded, holding that inasmuch as the rescission was
due to his fault, the defendant had failed to fulfill his obligations under the contract of sale and declared said contract
rescinded, holding inasmuch as the rescission was due to his fault, the defendant was not entitled to recover any sum
which he might have expended in consideration of the sale. It also held that under the exceptions established in article
1571 of the Civil Code, the defendant had no right to terminate the lease in question and was not entitled to receive any
sum for the occupation of the land by the lessee. The plaintiffs' claim for damages was disallowed. The plaintiffs'
Mercedes Gustilo and Leopoldo Jereza appeal and so does the defendant.

The appeal of Mercedes Gustilo and Leopoldo Jereza relates to their claim for damages and is so entirely without merit
as to require no discussion. It may be noted that the defendant has never had possession of the property and has
received no benefit therefrom.

The defendants presents the following assignments of error:

1.
The trial court erred in holding that the defendant and appellant had notice at the time of making the purchase
that the land was leased for seven years to Vicente Ardosa and sublet by the latter to the plaintiff Felix Montinola Celis,
and that the defendant having made the purchase with knowledge of said lease, the same in effect became a part of the
contract of sale to him of the plantation.

2.
The trial court erred in holding that the defendant has no right to terminate the lease in question, and therefore
is not entitled to receive any amount whatsoever in consideration of said lease, the latter coming within the two
exceptions or provisos of article 1571 of the Civil Code.

3.
The trial court erred in holding that the contract of lease at bar is registerable, and in ordering its registration in
the register of property and its notation on the proper transfer certificate of title as an incumbrance upon the land.

4.
The trial court erred in holding that by reason of the defendant's failure to perform the obligations contracted
by him in the contract of sale in question, said contract was rescinded as prayed for by the defendant, but without any
right on the part of the latter to be repaid for any such amount as he may have spent or paid by reason of said contract.

5.
The trial court erred in ordering that the amount of the price of the sale of 12 per cent of the crop placed by
order of the court in possession of Felix Montinola as depositary be delivered to the latter.lawphi1.net

The first, second and fifth assignments of error have reference principally to questions of fact upon which the findings of
the court below are fully sustained by the evidence. That the defendant at the time of purchasing the plantation had full
knowledge of the fact that it had been leased to Vicente Ardosa, is shown not only by the testimony of Mercedes Gustilo
and Leopoldo Jereza but is also corroborated by the notary before whom the deed was acknowledged. This testimony, in
connection with the circumstances surrounding the case, leaves no doubt whatever upon that point. Neither have we
any doubt that the defendant was informed as the terms of the lease and of the fact that the rent had been paid in
advance. This being established, the defendant was bound to respect the lease and the court below did not err in
holding that said lease in effect became a part of the contract of sale.

This conclusion is in harmony with our decision in the case of T. de Winkleman and Winkleman vs. Veluz (43 Phil., 604).
The fact that the land in question in this case is registered land while the land in the Winkleman case was unregistered,
does not affect the legal principles involved. The Land Registration Act only protects the holder in good faith, and cannot
be used as a shield for frauds. Strong and convincing evidence is, of course, required to establish the existence of
encumbrances not appearing on the certificate of title, but such evidence is not lacking in the present case.lawphi1.net

The defendant's failure to respect the Ardosa lease is in itself a sufficient breach of the terms of the contract of sale to
justify its rescission, but in addition thereto it is also to be observed that while the present action was pending in the
Court of First Instance, one Aquiles M. Sajo, a near relative of the defendant, brought an action against Mercedes and
Antonia Gustilo and Leopoldo Jereza upon a promissory note for P28,000 executed in favor of Jose Maravilla, and
secured by the mortgage of January 4, 1922, the plaintiff alleging that the note and the corresponding mortgage had
been assigned to him by Jose Maravilla on August 16, 1922, one week after the sale of the plantation to the defendant.
In view of the fact that it clearly appears that sale was made with the understanding and for the purpose of canceling
the debt evidenced by the note and mortgage upon which Sajo's action was brought, the plaintiffs are also for this
reason clearly entitled to a rescission.

Under the third assignment of error, the defendant-appellant argues that the assignment of the lease by Ardosa to
Montinola did not appear in a notarial instrument and that therefore the trial court erred in ordering that the lease be
entered upon the certificate of title. There is not much force in this argument; if the court had jurisdiction, the judgment
itself would be sufficient warrant for the entry of the corresponding memorandum, but inasmuch as the term of the
lease has already expired, the entry in question is unnecessary and the judgment must be modified accordingly. In this
connection it may be well to call attention to the fact that under the last paragraph of section 112 of the Land
Registration Act, petition for amendments or alterations of certificates of title which includes the entry of a
memorandum must be "filed and entitled in the original case in which the degree of registration was entered," and
upon that ground it may have been error to order such an entry in the present proceedings.

The defendant's fourth assignment of error is well taken. The trial court may possibly have been misled by paragraph 2
of article 1306 of the Civil Code, but the paragraph applies only to cases where "the nullity arises from illegality of the
consideration or the purpose of the contract" (Civil Code, art. 1305). The provision applicable to the present case is
found in article 1303 which read as follows:

When an obligation has been adjudged void, the contracting parties shall restore to each other the things which have
been the subject-matter of the contract, together with their fruits, and the price paid therefore, together with interest,
without prejudice to the provisions of the following articles.

The court below therefore erred in holding that the defendant was not entitled to reimbursement for his payment to the
National Bank and for taxes.

For the reasons stated, the judgment appealed from is affirmed in so far as it holds that the defendant was bound to
respect the lease from Antonia Gustilo to Vicente Ardosa and the sublease to Felix Montinola, declares the sale of the
plantation by the plaintiffs Mercedes Gustilo and Leopoldo Jereza to the defendant rescinded, and awards to Felix
Montinola the sugar produced on the plantation during his receivership or the money received from the sale of such
sugar. In all other respects, the judgment is reversed.

It is hereby ordered that the defendant have and recover judgment against the plaintiffs Mercedes Gustilo and Leopoldo
Jereza, jointly and severally, for the sum of P1,253.19 for payments made on their behalf to the National Bank and for
the further sum of P573.74 for taxes paid, all with interest at the rate of 6 per cent per annum from February 23, 1923,
the date of the filing of the defendant's cross-complaint and counterclaim. The defendant-appellant shall pay the costs
of both instances. So ordered.



G.R. No. L-46840 June 17, 1940

VICTORIANO HERNANDEZ, plaintiff-appellee,
vs.
MACARIA KATIGBAK VIUDA DE SALAS, defendant-appellant.

MORAN, J.:

Appeal from a judgment rendered by the Court of First Instance of Rizal.

The facts as agreed upon by parties and material to the disposition of the case, are as follows:

Vicente Singson Encarnacion was, at first alone, and later with others, the registered owner of lots Nos. 27, 28 and 29 of
the "Hacienda Maysilo", located at Tuliahan, municipality of Caloocan, Rizal, with an aggregate area of 234 hectares, and
covered by Torrens certificates of title Nos. 8540 and 8548 of the register of deeds of Rizal. Nicolas Rivera repurchased,
in pursuance of his registered right to that effect, 40 hectares of these three lots, and later sold to Mariano P. Leuterio
an unsegregrated portion of about 18 hectares thereof. The latter, in turn, sold a total area of 16,900 square meters to
Rafael Villanueva by deeds which had never been registered. These deeds are dated September 21, 1920, September 24,
1920, August 31, 1922 and September 1, 1922, respectively. Later Rafael Villanueva sold to the herein plaintiff,
Victoriano Hernandez, all rights in the said total area of 16,900 square meters.

In civil case No. 2861 of the Court of First Instance of Rizal, instituted by Perfecto J. Salas Rodriguez, against Mariano P.
Leuterio, a writ of execution was issued against the defendant, and, in pursuance thereof, the provincial sheriff of Rizal
levied upon the properties of said defendant, among them, a parcel of land containing an area of 177,557.4 square
meters. This is the same property that the defendant bought from Nicolas Rivera. The levy was duly recorded in the
office of the Register of Deeds and noted on transfer certificate of title No. 8540 covering lot No. 28. Rafael Villanueva
filed with the sheriff a third party claim, but as the judgment creditor gave an indemnity bond, the sheriff proceeded
with the execution and sold the property at a public auction at which the judgment creditor himself was the highest
bidder. On March 30, 1926, said officer executed the corresponding deed in favor of the purchaser.

Prior to the execution of the officer's deed, or on March 1, 1926, the 40 hectares bought by Nicolas Rivera from Singson
Encarnacion were segregated, and on March 5, 1926, two transfer certificates of title were issued in favor of Nicolas
Rivera, one with lot No. 10533, for 79,014 square meters, designated as lot No. 28-A, and the other with No. 10535, for
62,661 square meters and 174,130 square meters, designated as lots Nos. 27-A and 29-A, respectively. The execution
lien of Perfecto J. Salas Rodriguez as well as the auction sale held on March 30, 1926, which were annotated on transfer
certificate of title No. 8540, were transferred to and annotated on the new certificate of title No. 10533 covering lot No.
28-A. And there having been no redemption, a final deed of sale was executed on March 30, 1927 by the sheriff in favor
of the purchaser, Perfecto J. Salas Rodriguez, and transfer certificate of title No. 12242 was issued the following day in
the latter's name. Perfecto J. Salas died, and by virtue of a partition approved by the probate court, lot No. 29-A was
adjudicated to his widow, Macaria Katigbak Vda. de Salas, now defendant, in whose favor transfer certificate of title No.
22157 was issued by the Register of Deeds of Rizal on August 9, 1932.

On the basis of the foregoing facts, the Court of First Instance of Rizal rendered judgment, ordering the defendant to
segregate from lot No. 28-A, covered by her transfer certificate of title No. 22157, a portion equivalent to 16,900 square
meters, and to execute, in due form, the corresponding deed in favor of the herein plaintiff. The judgment is predicated
on the decisions rendered by this Court in cases (G.R. Nos. 33950 and 33969 which in turn are founded on the ruling laid
down in Lanci vs. Yangco, 52 Phil., 563).

The question is: who has a better right the purchaser at the execution sale, Perfecto J. Salas Rodriguez, predecessor in
interest of the defendant, or the purchaser in the private sale, Rafael Villanueva, predecessor in interest of the plaintiff?

The two purchasers derived their title from Mariano P. Leuterio, who in turn acquired his from Nicolas Rivera. The
purchase made by Villanueva took place prior to the execution sale, but was never registered. The property is registered
under the Torrens system, there being a certificate of title issued in favor of Nicolas Rivera bearing No. 10533 on lot No.
28-A. No certificate of title was ever issued in favor of Mariano P. Leuterio, but the levy and the execution sale of the
property were noted on the transfer certificate of title of Nicolas Rivera without the latter's objection, and in the
notation it appeared that the property had been sold by Nicolas Rivera to Mariano P. Leuterio. It was, therefore,
Mariano P. Leuterio alone who, in Rivera's certificate of title, appeared as the sole owner of the property at the time of
the levy and execution sale.

It is a well-settled rule that, when the property sold on execution is registered under the Torrens systems, registration is
the operative act that gives validity to the transfer, or creates a lien on the land, and a purchaser, on execution sale, is
not required to go behind the registry to determine the conditions of the property. Such purchaser acquires such right,
title and interest as appear on the certificate of title issued on the property, subject to no aliens encumbrances or
burdens that are noted thereon. (Anderson and Co. vs. Garcia, 36 Of. Gaz., 2847; Reynes vs. Barrera, G.R. No. 46724.) It
follows that, on the property in question, defendant has a better right than the plaintiff.

Judgment is reversed, with costs against plaintiff-appellee.

Avancea, C.J., Imperial, Diaz, Laurel and Concepcion, JJ., concur.

MORAN, J.:

The doctrine in Lanci vs. Yangco (52 Phil., 563), which purports to give effect to all liens and encumbrances existing prior
to the execution sale of a property registered under the Torrens system, even if such liens and encumbrances are not
noted in the certificate of title, has been abandoned by this court. (see Philippine National Bank vs. Camus, G. R. No.
46870, June 27, 1940.) The new doctrine, from which we have no reason to depart, is that, in an execution sale of and
registered under the Torrens system, the purchaser acquires such right interest as appear on the certificate of title,
unaffected by any prior lien or encumbrance not noted therein. (Anderson and Co. vs. Garcia, 35 Of. Gaz., 2847, sec. 39,
Act No. 496, as amended by Act 2011.) The purchaser is thus "not required to explore farther than what the Torrens
title, upon its face, indicates in quest for any hidden defect or inchoate right that may subsequently defeat his right
thereto. If the rule were otherwise, the efficacy and conclusiveness of the certificate of title which the Torrens system
seek to insure, would entirely be futile and nugatory." (Reynes vs. Barrera, G.R. No. 46724, September 30, 1939.).

The only reception to this rule is where the purchaser had acknowledge, prior to or at the time of the levy, of such
previous lien or encumbrance. In such case, his knowledge is equivalent to registration and taints his purchase with bad
faith. (Gustilo vs. Maravilla, 48 Phil., 442; la Urbana vs. Bernardo, 62 Phil., 790; 23 C.J., sec. 812; Parsons Hardware Co.
vs. Court of Appeals, G. R. No. 46141.) But if knowledge of any lien or encumbrance upon the property is acquired after
the levy, the purchaser cannot be said to have acted in bad faith in making the purchase and, therefore, such lien or
encumbrance cannot affect his title.

In the present case, the third-party claim was filed about one month after the levy was recorded. The validity of the levy
is thus unaffected by any subsequent knowledge which the judgment creditor might have derived from the third-party
claim. The fact that this third-party claim was presented one day before the execution sale, is immaterial. If the levy is
valid, as it was, the execution sale made in pursuance thereof is also validly be foreclosed regardless of any equities that
may have arisen after its Constitution. In Vargas vs. Tancioco, supra:

. . . el terrebo en cuestion estaba cubierto por el Certificado de Titulo que llevada el No. 17088 de la Oficina del
Registrador de titulos de Negros Occidental y que fue expedido a nombre de Sua Tico el dia 26 de julio de 1923. En dicho
certifiacdo no constaba ningun gravamen excepto el embargo que se habia trabado sobre el terreno a que alude, como
un acto o paso preliminar para vender el referido terreno, n publica subasta en cumplimiento de un mandamiento
judicial expedido con las malidades de la ley. . . .

De paso debe decirse que el Tribunal de Apelaciuones hallo tambien probado el hecho de que un dia antes de ponerse
en publica subasta el terreno de que se viene habaldo, el recurrente presento al Sheriff Provincial de Negros Occidental
un escrito de terceria para reclamarlo como de su exclusiva propiedad; pero, habiendo prestado la recurrida Nieves
Tancioco la fianza correspondiente, el Sheriff hubo de estar adelante con la venta resultado que ya se sabe.

Upon these facts, this court held:

La contencion del recurrente de que la recurrida no era compradora de buena fe, porque al comprar en publica subasta
el terreno cuestionado ya sabia que el mismo no era de Sua Tico, por haberselo vendido a el mismo no era de Sua Tico,
por haberselo vendido a el, como asi lo habia expresando en su escrito de terceria presentado un dia antes de la venta,
no tiene importancia, y porque esta implicitamente aclarada y resuelte en los parrafos anteriores. Cuando dicha
recurrida obtuvo el embargo y este se fecto y se anoto en el mismo terreno embargado habia sido vendido meses antes
por Sua Tico. La razon es obvia, porque la pretendida venta no fue anotada jamas en Registro como lo fue el referido
embargo.

Expressions of dissatisfaction made by the appellee's attorney in his motion for reconsideration are uncalled for, and
except for this observation, they deserve no attention from this court. Motion for reconsideration is denied.