Case Digest: Rosaroso et al vs. Meridian Realty

CASE TITLE:  Rosaroso et al vs Meridian Realty
GR No/ Date: G.R. No. 194846               June 19, 2013
PONENTE: Mendoza J.
CASE WITH THE SC: Petition for Review on Certiorari under Rule 45
PROCEDURAL ANTECEDENTS: RTC - Action for declaration of nullity of documents CA - Appeal
FACTS: Luis Rosaroso and Honorata Duazo acquired properties in Daan Bantayan, Cebu City. They had nine children: Hospicio, Arturo, Florita, Lucila, Eduardo, Manuel, Cleofe, Antonio, and Angelica. In 1952, Honorata died. Luis later married Lourdes Pastor Rosaroso. Luis and others filed a complaint against Lucila R. Soria, her daughter Laila S. Solutan, and Meridian Realty Corporation. After Luis' death, an amended complaint was filed including Ham Solutan and Lourdes as defendants. Allegations: On November 4, 1991, Luis, with Lourdes' consent, executed a Deed of Absolute Sale (First Sale) for several properties in Daanbantayan, Cebu to petitioners. Despite the sale, Laila and Lucila conspired to obtain a Special Power of Attorney (SPA) from Luis on April 3, 1993, when he was sick, infirm, blind, and of unsound mind, authorizing Laila to sell properties already sold to petitioners. A second SPA, dated July 21, 1993, allowed Laila and Ham to mortgage Lot No. 19 for ₱150,000.00 with Lourdes' concurrence. On August 23, 1994, respondents made Luis sign a Deed of Absolute Sale (Second Sale) conveying three parcels of land to Meridian for ₱960,500.00. RTC: Ruled in favor of petitioners, declaring the second sale void as Luis had already sold the properties to his children. CA: Reversed the RTC decision, declaring the First Sale void due to lack of consideration. CA ruled the first SPA was valid until revoked, but the second SPA was never revoked.
ISSUES: Whether the CA gravely erred when it declared as void the first sale executed by the late Luis Rosaroso in favor of his children from his first marriage. YES Whether the CA gravely erred in not sustaining and affirming the ruling of the trial court, which declared Meridian Realty Corporation a buyer in bad faith, despite the trial court’s findings that the deed of sale (First Sale) was genuine and had fully complied with all the legal formalities. YES
ARGUMENTS/LEGAL BASES
PETITIONER	RESPONDENTS
Petitioners argue the second deed of sale is null and void because Luis had already sold the properties to his children. Petitioners assert that Meridian was a buyer in bad faith. When Meridian’s representative visited the site, she failed to make necessary inquiries despite the presence of houses, which should have prompted questions about ownership and rights.	Lucila and Laila contested the First Sale, claiming it was not recorded, and argued the Second Sale was valid. Meridian averred that Luis was fully aware of the conveyances he made, personally witnessing Luis affix his thumb mark on the deed of sale. Before purchasing the properties, it checked the titles of the said lots with the Register of Deeds of Cebu.
PREVAILING PARTY:  Rosaroso
DECISION/DOCTRINE: Petitioners argue that the second deed of sale was null and void because Luis could not have validly transferred the ownership of the subject properties to Meridian, he being no longer the owner after selling them to his children. No less than Atty. William Boco, the lawyer who notarized the first deed of sale, appeared and testified in court that the said deed was the one he notarized and that Luis and his second wife, Lourdes, signed the same before him. He also identified the signatures of the subscribing witnesses. Thus, they invoke the finding of the RTC which wrote: In the case of Heirs of Joaquin Teves, Ricardo Teves versus Court of Appeals, et al., G.R. No. 109963, October 13, 1999, the Supreme Court held that a public document executed [with] all the legal formalities is entitled to a presumption of truth as to the recitals contained therein. In order to overthrow a certificate of a notary public to the effect that a grantor executed a certain document and acknowledged the fact of its execution before him, mere preponderance of evidence will not suffice. Rather, the evidence must (be) so clear, strong and convincing as to exclude all reasonable dispute as to the falsity of the certificate. When the evidence is conflicting, the certificate will be upheld x x x . A notarial document is by law entitled to full faith and credit upon its face. (Ramirez vs. Ner, 21 SCRA 207). As such it … must be sustained in full force and effect so long as he who impugns it shall not have presented strong, complete and conclusive proof of its falsity or nullity on account of some flaw or defect provided against by law (Robinson vs. Villafuerte, 18 Phil. 171, 189-190).  Furthermore, petitioners aver that it was erroneous for the CA to say that the records of the case were bereft of evidence that they paid the price of the lots sold to them. In fact, a perusal of the records would reveal that during the cross-examination of Antonio Rosaroso, when asked if there was a monetary consideration, he testified that they indeed paid their father and their payment helped him sustain his daily needs.  Petitioners also assert that Meridian was a buyer in bad faith because when its representative visited the site, she did not make the necessary inquiries. The fact that there were already houses on the said lots should have put Meridian on its guard and, for said reason, should have made inquiries as to who owned those houses and what their rights were over the same.  Meridian’s assertion that the Second Sale was registered in the Register of Deeds was a falsity. The subject titles, namely: TCT No. 11155 for Lot 19, TCT No. 10885 for Lot 22, and TCT No. 10886 for Lot 23 were free from any annotation of the alleged sale.28 After an assiduous assessment of the records, the Court finds for the petitioners. The First Deed Of Sale Was Valid The fact that the first deed of sale was executed, conveying the subject properties in favor of petitioners, was never contested by the respondents. What they vehemently insist, though, is that the said sale was simulated because the purported sale was made without a valid consideration. Under Section 3, Rule 131 of the Rules of Court, the following are disputable presumptions:  private transactions have been fair and regular; the ordinary course of business has been followed; and  there was sufficient consideration for a contract. These presumptions operate against an adversary who has not introduced proof to rebut them. They create the necessity of presenting evidence to rebut the prima facie case they created, and which, if no proof to the contrary is presented and offered, will prevail. The burden of proof remains where it is but, by the presumption, the one who has that burden is relieved for the time being from introducing evidence in support of the averment, because the presumption stands in the place of evidence unless rebutted.  In this case, the respondents failed to trounce the said presumption. 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.  The CA decision ran counter to this established rule regarding disputable presumption. It relied heavily on the account of Lourdes who testified 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.32 This testimony, however, is self-serving and would not amount to a clear and convincing evidence required by law to dispute the said presumption. As such, the presumption that there was sufficient consideration will not be disturbed. Granting that there was no delivery of the consideration, 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. In the case of Clara M. Balatbat v. Court Of Appeals and Spouses Jose Repuyan and Aurora Repuyan, it was written: 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.  Meridian is Not a Buyer in Good Faith Respondents Meridian and Lucila argue that, granting that the First Sale was valid, the properties belong to them as they acquired these in good faith and had them first recorded in the Registry of Property, as they were unaware of the First Sale.  Again, the Court is not persuaded. The fact that Meridian had them first registered will not help its cause. In case of double sale, Article 1544 of the Civil Code provides: ART. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first 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 possession; and, in the absence thereof; to the person who presents the oldest title, provided there is good faith. Otherwise stated, ownership of an immovable property which is the subject of a double sale shall be transferred: to the person acquiring it who in good faith first recorded it in the Registry of Property;  in default thereof, to the person who in good faith was first in possession; and in default thereof, to the person who presents the oldest title, provided there is good faith. T 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— that is, the registrant must have no knowledge of the defect or lack of title of his vendor or must not have been aware of facts which should have put him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the title of his vendor.  When a piece of land is in the actual possession of persons other than the seller, the buyer must be wary and should investigate the rights of those in possession. Without making such inquiry, one cannot claim that he is a buyer in good faith. When a man proposes to buy or deal with realty, his duty is to read the public manuscript, that is, to look and see who is there upon it and what his rights are. A want of caution and diligence, which an honest man of ordinary prudence is accustomed to exercise in making purchases, is in contemplation of law, a want of good faith. The buyer who has failed to know or discover that the land sold to him is in adverse possession of another is a buyer in bad faith. In the case of Spouses Sarmiento v. Court of Appeals, it was written: Verily, every person dealing with registered land may safely rely on the correctness of the certificate of title issued therefor and the law will in no way oblige him to go behind the certificate to determine the condition of the property. Thus, the general rule is that a purchaser may be considered a purchaser in good faith when he has examined the latest certificate of title. An exception to this rule is when there exist important facts that would create suspicion in an otherwise reasonable man to go beyond the present title and to investigate those that preceded it. Thus, it has been said that a person who deliberately ignores a significant fact which would create suspicion in an otherwise reasonable man is not an innocent purchaser for value. A purchaser cannot close his eyes to facts which should put a reasonable man upon his guard, and then claim that he acted in good faith under the belief that there was no defect in the title of the vendor. As we have held: The failure of appellees to take the ordinary precautions which a prudent man would have taken under the circumstances, specially in buying a piece of land in the actual, visible and public possession of another person, other than the vendor, constitutes gross negligence amounting to bad faith. In this connection, it has been held that where, as in this case, the land sold is in the possession of a person other than the vendor, the purchaser is required to go beyond the certificate of title to make inquiries concerning the rights of the actual possessor. Failure to do so would make him a purchaser in bad faith.   One who purchases real property which is in the actual possession of another should, at least make some inquiry concerning the right of those in possession. The actual possession by other than the vendor should, at least put the purchaser upon inquiry. He can scarely, in the absence of such inquiry, be regarded as a bona fide purchaser as against such possessors.   Prescinding from the foregoing, the fact that private respondent RRC did not investigate the Sarmiento spouses' claim over the subject land despite its knowledge that Pedro Ogsiner, as their overseer, was in actual possession thereof means that it was not an innocent purchaser for value upon said land. Article 524 of the Civil Code directs that possession may be exercised in one's name or in that of another. In herein case, Pedro Ogsiner had informed RRC that he was occupying the subject land on behalf of the Sarmiento spouses. Being a corporation engaged in the business of buying and selling real estate, it was gross negligence on its part to merely rely on Mr. Puzon's assurance that the occupants of the property were mere squatters considering the invaluable information it acquired from Pedro Ogsiner and considering further that it had the means and the opportunity to investigate for itself the accuracy of such information.   In another case, it was held that if a vendee in a double sale registers the sale after he has acquired knowledge of a previous sale, the registration constitutes a registration in bad faith and does not confer upon him any right. If the registration is done in bad faith, it is as if there is no registration at all, and the buyer who has first taken possession of the property in good faith shall be preferred.  In the case at bench, the fact that the subject properties were already in the possession of persons other than Luis was never disputed. Sanchez, representative and witness for Meridian, even testified as follows: x x x; that she together with the two agents, defendant Laila Solutan and Corazon Lua, the president of Meridian Realty Corporation, went immediately to site of the lots; that the agents brought with them the three titles of the lots and Laila Solutan brought with her a special power of attorney executed by Luis B. Rosaroso in her favor but she went instead directly to Luis Rosaroso to be sure; that the lots were pointed to them and she saw that there were houses on it but she did not have any interest of the houses because her interest was on the lots; that Luis Rosaroso said that the houses belonged to him; that he owns the property and that he will sell the same because he is very sickly and he wanted to buy medicines; that she requested someone to check the records of the lots in the Register of Deeds; that one of the titles was mortgaged and she told them to redeem the mortgage because the corporation will buy the property; that the registered owner of the lots was Luis Rosaroso; that in more or less three months, the encumbrance was cancelled and she told the prospective sellers to prepare the deed of sale; that there were no encumbrances or liens in the title; that when the deed of absolute sale was prepared it was signed by the vendor Luis Rosaroso in their house in Opra x x x.  From the above testimony, it is clear that Meridian, 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, Meridian Realty 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. In this regard, great weight is accorded to the findings of fact of the RTC. Basic is the rule that the trial court is in a better position to examine real evidence as well as to observe the demeanor of witnesses who testify in the case.  WHEREFORE, the petition is GRANTED. The December 4, 2009 Decision and the November 18, 201 0 Resolution of the Court of Appeals, in CA-G.R. CV No. 00351, are REVERSED and SET ASIDE. The July 30, 2004 Decision of the Regional Trial Court, Branch 8, 7th Judicial Region, Cebu City, in Civil Case No. CEB-16957, is hereby REINSTATED. SO ORDERED.