BPI v. Sanchez et al.

G.R. No. 179518/179835, Nov. 19, 2014

Facts:
 
 The case stemmed from the transaction entered into by private respondents Vicente Victor,
Kenneth Nereo, and Imelda Sanchez (Sanchezes) with Jesus Garcia (Garcia) doing business
under the name TransAmerican Sales and Exposition, Inc. (TSEI) over property No. 10 located
at Panay Avenue, Quezon City for the amount of Php 1.8 million on October 10,1988.
 The initial terms was subsequently amended with modification of the amount from Php 1.8
million to Php 1.850 million and an agreement that Garcia shall take care of all the registration
and transfer of the name of the property.
 Felisa Yap (Yap), the widow of Kenneth Sanchez turned over TCT 156254 to Garcia.
 Afterwards, Yap required the occupants of the subject property to vacate the premises.
 However, without the knowledge and consent of the Sanchezes and Yap, after the property
was vacated, Garcia installed his own caretaker with an instruction not to let anyone enter the
premises. It was also during this time that Garcia started advertising in the Manila Bulletin
about TSEI's selling of townhouses.
 On December 1988, Garcia informed Yap that the checks were ready, however, it must be
Vicente who needs to pick it up from the office.
o 6 checks were given
i. The first 4 amounted to Php 250,000.00 each (cleared)
ii. The latter 2 amounted to Php 400,000.00 each (bounced due to insufficient
funds)
 Garcia was informed to replace the checks, which he failed to do so.
 Yap then wrote to Garcia informing him that she and Vicente decided to rescind the contract,
to which Garcia replied offering 2 manager's checks with an aggregate amount of Php 300,000
as replacement of the checks, the Sanchezes refused the offer.
 Later on, it came to the knowledge of the Sanchezes of the advertisement of Garcia/TSEI of
the Townhouse in the subject property, they went to HLURB contesting the license of TSEI in
selling and informing HLURB that the selling is illegal and that they are still the registered
owner of the subject property.
 HLURB issued a Cease and Desist Order (CDO) to TSEI, however, despite the CDO TSEI still
continued to construct the townhouses.
 Yap and Sanchezes inquired with the City Hall regarding the Building Permit of Garcia, and
found out that the construction was indeed illegal.
 On February 1990, Yap and Sanchezes filed a formal complaint before the RTC Quezon City
for the rescission of the contract, restitution, and damages with prayer for TRO/preliminary
injunction against TSEI and Garcia.
 Meanwhile, Garcia was able to cancel TCT 156254 and replaced it with TCT 383697 in the
name of TSEI.
 However, the date of issuance of the "replacement" bore June 9, 1988, way before the
parties agreed on the sale. This was apparently used by Garcia to entice some buyers.
 Claiming to have bought the townhouses sometime in 1989, the following intervened in the
instant case: Sps. Caminas, Generoso Tulagan (Tulagan), Varied Traders Concept, Inc.
(VTCI), and Arturo Marquez (Marquez).
 The subject property was also used as a security for a loan by Garcia/TSEI with FEBTC (later
on acquired by BPI).
 Due to failure to pay the said loan, BPI foreclosed the mortgage.
  Intervenors and BPI all claimed to have acted in good faith and thus should benefit from the
application of Article 448 of the Civil Code.

Issue(s):
 
1. Can the Sanchezes be considered to be in bad faith for failing to file an action for injunction
against the construction of the townhouses on the subject property? (Main issue)
2. Are the intervenors purchasers in good faith?
3. Can BPI be considered a mortgagee in good faith?

Ruling(s):
 
1. No. The second paragraph of the Art. 453 clearly reads that a landowner is considered in bad
faith if he does not oppose the unauthorized construction thereon despite knowledge of the
same. However, it doesn't state what form such opposition should take. The Sanchezes were
able to take action to oppose the construction on their property by writing the HLURB and the
City Building Official of Quezon City. As a result, the HLURB issued 2 Cease and Desist
Orders and several directives against Garcia/TSEI which, although these were left unheeded.

As the intervenors asserted having bought the townhouse units in early 1989, it can be seen
that the preselling was done almost immediately after the Sanchezes and Garcia/TSEI agreed
on the terms of the sale of the subject lot, or shortly after Garcia and TSEI had taken over the
property and demolished the old house built thereon. The Court agrees with both the RTC
and the CA that Garcia and/or TSEI are builders in bad faith. They knew for a fact that
the property still belonged to the Sanchezes and yet proceeded to build the townhouses
not just without the authority of the landowners, but also against their will.
 
2. No.
a. They admitted that they executed either contracts of sale or contracts to sell indicating
that the lot is covered by TCT No. 156254 registered under the name of the respondent
Sanchezes. The fact that the lot being sold to them belonged to persons other than
TSEI or Garcia should have driven the intervenors, as prudence would dictate, to
investigate the true status of the property.
b. The intervenors know, based on the contract of sale or contract to sell, that the property
is registered under TCT No. 156254 in the name of the Sanchezes. As such, they
should have insisted that they talk to the Sanchezes before executing said
conveyances. Had they done so, they would have known that the Sanchezes have not
executed a written deed of absolute sale in favor of TSEI for the latter's failure to pay
the consideration in full.
c. The intervenors should have been suspicious of the explanation of Garcia that TCT No.
383697, reflecting TSEI as the owner of the property, has been burned and that he is in
the process of reconstituting the title.
d. The intervenors knew that they were buying a townhouse over a subdivision lot from
TSEI and Garcia. Such being the case, they should have verified with the HLURB
whether said project is registered with said housing agency and if a license to sell has
been issued to TSEI or Garcia.
 
3. No. Even as the intervenors have been found to be in bad faith, BPI, the successor of FEBTC,
cannot be considered a mortgagee in good faith, considering the glaring anomalies in the loan
transaction between TSEI and FEBTC.