DOUBLE SALE OF UNREGISTERED IMMOVABLE PROPERTY

RADIOWEALTH V. PALILEO PROPERTY

G.R. NO. 83432 197 SCRA 245
MAY 20, 1991
GANCAYCO, J.:
FACTS:
Spouses Enrique Castro and Herminia R. Castro sold to Manuelito Palileo (private
respondent herein), a parcel of unregistered coconut land situated in Surigao del Norte. The
sale is evidenced by a notarized Deed of Absolute Sale The deed was not registered in the
Registry of Property for unregistered lands in the province of Surigao del Norte. Palileo
exercised acts of ownership over the land through his mother Rafaela Palileo, as
administratrix or overseer.
Subsequently, a judgment was rendered against Enrique T. Castro, in Civil Case No. 0103145
by the then Court of First Instance of Manila Radiowealth Finance Company. Upon the
finality of the judgment, a writ of execution was issued. Pursuant to said writ, defendant
provincial Sheriff Marietta E. Eviota, through defendant Deputy Provincial Sheriff Risma,
levied upon and finally sold at public auction the subject land that defendant Enrique Castro
had sold to Manuelito Palileo. A certificate of sale was executed by the Provincial Sheriff in
favor of Radiowealth Finance Company, being the only bidder. After the period of
redemption has expired, a deed of final sale was also executed by the same Provincial Sheriff.
Both the certificate of sale and the deed of final sale were registered with the Registry of
Deeds. 3
Learning of what happened to the land, private respondent Manuelito Palileo filed an action
for quieting of title over the same. After a trial on the merits, the court a quo rendered a
decision in his favor. On appeal, the decision of the trial court was affirmed. Hence, this
petition for review on certiorari.
ISSUE:
WON the sale in public auction is valid and covered by Article 1544 of the Civil Code.
HELD:
No. Under Act.3344 mere registration of a sale in one's favor does not give him any right
over the land if the vendor was not anymore the owner of the land having previously sold the
same to somebody else even if the earlier sale was unrecorded.
Article 1544 of the Civil Code has no application to land not registered under the torrens
system. It was explained that this is because the purchaser of unregistered land at a sheriffs
execution sale only steps into the shoes of the judgment debtor, and merely acquires the
latter's interest in the property sold as of the time the property was levied upon. As such, the
execution sale of the unregistered land in favor of petitioner is of no effect because the land
no longer belonged to the judgment debtor as of the time of the said execution sale.

DOUBLE SALE OF IMMOVABLE PROPERTY

OCCENA VS. ESPONILLA
G.R. NO. 156973 129 SCRA 656
JUNE 4, 2004
PUNO, J.:
FACTS:
Case involves a parcel of land originally owned by Tordesillas spouses. When they died, the
land was inherited by their children Harod and Angela, and grandchildren Arnold and Lilia.
Subsequently, the heirs executed a Deed of Pacto de Retro Sale in favor of Alberta Morales.
Alberta possessed the lot as owner, constructed a house on it and appointed a caretaker to
oversee her property. Thereafter, vendor Arnold de la Flor borrowed the OCT from Alberta
covering the subject lot. Later, Arnold and Angela, nephew and daughter respectively of the
Tordesillas spouses, without the knowledge of Alberta, executed a Deed of Extrajudicial
Settlement declaring the two of them as the only co-owners of the undivided 1,198 sq. m. lot
no. 265, without acknowledging their previous sale of 748 sq. m. thereof to Alberta. A
number of times, thereafter, Alberta and her nieces asked Arnold for the OCT of the land but
Arnold just kept on promising to return it.
When Alberta Morales died. Her nieces-heirs, Lydia, Elsa and Dafrosa, succeeded in the
ownership of the lot.
Arnold used the OCT he borrowed from the deceased vendee Alberta Morales, subdivided the
entire lot no. 265 into three sublots, and registered them all under his name, viz: lot no. 265A (with TCT No. 16895), lot no. 265-B (with TCT No. 16896) and lot no. 265-C (with TCT
No. 16897).
Arnold sold lot nos. 265-B & C to spouses Tomas and Sylvina Occea, which included the
748 sq. m. portion previously sold to Alberta Morales. A Deed of Absolute Sale over said lots
was executed to the Occea spouses and titles were transferred to their names.
After the death of Arnold, the three (3) nieces-heirs of Alberta Morales learned about the
second sale of their lot to the Occea spouses when they were notified by caretaker Abas that
they were being ejected from the land. In 1994, the heirs filed a case for annulment of sale
and cancellation of titles, with damages, against the second vendees Occea spouses.
The Occea spouses alleged that they were buyers in good faith as the titles to the subject lots
were free from liens or encumbrances when they purchased them. The Occeas likewise set
up the defenses of laches and prescription. They argue that Alberta and plaintiffs-heirs were
barred from prosecuting their action as they failed to assert their right for forty (40) years.
ISSUE:
WON the Occenia spouses are buyers in good faith?
HELD:
NO.

The petition at bar presents a case of double sale of an immovable property. Article 1544 of
the New Civil Code provides that in case an immovable property is sold to different vendees,
the ownership shall belong: (1) to the person acquiring it who in good faith first recorded it in
the Registry of Property; (2) should there be no inscription, the ownership shall pertain to the
person who in good faith was first in possession; and, (3) in the absence thereof, to the person
who presents the oldest title, provided there is good faith.
The defense of indefeasibility of a Torrens title does not extend to a transferee who takes the
certificate of title in bad faith, with notice of a flaw
In the case at bar, we find that petitioner-spouses failed to prove good faith in their purchase
and registration of the land. A purchaser in good faith and for value is one who buys property
without notice that some other person has a right to or interest in such property and pays its
fair price before he has notice of the adverse claims and interest of another person in the same
property. At the trial, Tomas Occea admitted that he found houses built on the land during
its ocular inspection prior to his purchase. He relied on the representation of vendor Arnold
that these houses were owned by squatters and that he was merely tolerating their presence on
the land. Tomas should have verified from the occupants of the land the nature and authority
of their possession instead of merely relying on the representation of the vendor that they
were squatters, having seen for himself that the land was occupied by persons other than the
vendor who was not in possession of the land at that time. The settled rule is that a buyer of
real property in the possession of persons other than the seller must be wary and should
investigate the rights of those in possession. Without such inquiry, the buyer can hardly be
regarded as a buyer in good faith and cannot have any right over the property even if he is
first to register, since such knowledge taints his registration with bad faith.
CONTRACT OF PIECE OF WORK
ENGINEERING & MACHINERY CORP VS. CA
G.R. NO. 52267 308 SCRA 731
JANUARY 24, 1996
PANGANIBAN, J.:
FACTS:
Pursuant to the contract between petitioner and private respondent, the former undertook to
fabricate, furnish and install the air-conditioning system in the latters building .Petitioner
was to furnish the materials, labor, tools and all services required in order to so fabricate and
install said system. The system was completed and accepted by private respondent, who paid
in full the contract price.
Thereafter, private respondent sold the building to the National Investment and Development
Corporation (NIDC). The latter took possession of the building but on account of NIDCs
noncompliance with the terms and conditions of the deed of sale, private respondent was able
to secure judicial rescission thereof. It was then that he learned from some NIDC employees
of the defects of the air-conditioning system of the building.
Private respondent filed on May 8, 1971 an action for damages against petitioner on the
ground that the air-conditioning system installed by petitioner did not comply with the agreed

plans and specifications base from the report of commissioned engineer.

Petitioner moved to dismiss the complaint, alleging that the prescriptive period of six months
had set in pursuant to Articles 1566 and 1567, in relation to Article 1571 of the Civil Code,
regarding the responsibility of a vendor for any hidden faults or defects in the thing sold.
Private respondent countered that the contract dated September 10, 1962 was not a contract
of sale but a contract for a piece of work under Article 1713 of the Civil Code. Thus, in
accordance with Article 1144 (1) of the same Code, the complaint was timely brought within
the ten-year prescriptive period.
ISSUE:
WON the case at bar contemplates a contract of piece of work or a contract of sale?
HELD:
Yes.
It is a contract of piece of work. Mr. Justice Vitug explains that
A contract for the delivery at a certain price of an article which the vendor in the ordinary
course of his business manufactures or procures for the general market, whether the same is
on hand at the time or not is a contract of sale, but if the goods are to be manufactured
specially for the customer and upon his special order, and not for the general market, it is a
contract for a piece of work (Art. 1467, Civil Code).
Clearly, the contract in question is one for a piece of work. It is not petitioners line of
business to manufacture air-conditioning systems to be sold off-the-shelf. Its business and
particular field of expertise is the fabrication and installation of such systems as ordered by
customers and in accordance with the particular plans and specifications provided by the
customers. Naturally, the price or compensation for the system manufactured and installed
will depend greatly on the particular plans and specifications agreed upon with the customers.
The Court opines and so holds that the failure of the defendant to follow the contract
specifications and said omissions and deviations having resulted in the operational
ineffectiveness of the system installed makes the defendant liable to the plaintiff in the
amount necessary to rectify to put the air conditioning system in its proper operational
condition to make it serve the purpose for which the plaintiff entered into the contract with
the defendant.
Having concluded that the original complaint is one for damages arising from breach of a
written contract - and not a suit to enforce warranties against hidden defects - we herewith
declare that the governing law is Article 1715 However, inasmuch as this provision does not
contain a specific prescriptive period, the general law on prescription, which is Article 1144
of the Civil Code, will apply. Said provision states, inter alia, that actions upon a written
contract prescribe in ten (10) years. Since the governing contract was executed on
September 10, 1962 and the complaint was filed on May 8, 1971, it is clear that the action has
not prescribed.

DEED OF ASSIGNMENT OF CREDIT

LO V. KJS ECO-FRAMEWORK SYSTEM PHIL INC

G.R. NO 149420
OCTOBER 8, 2003
YNARES-SANTIAGO, J.:
FACTS:
KJS Eco-Framework System is a corporation engaged in the sale of steel scaffoldings, while
petitioner Sonny Lo, doing business under the name of Sans Enterprises, is a building
contractor.
In February 1990, petitioner ordered scaffolding equipments from the respondent amounting
to P540, 425.80. He paid a down payment of P150,000 and the balance was to be paid in 10
monthly installments. However, Lo was only able to pay the first 2 monthly installments due
to financial difficulties despite demands from the respondent.
In October 1990, petitioner and respondent executed a deed of assignment whereby
petitioner assigned to respondent his receivables of P335,462.14 from Jomero Realty Corp.
But when respondent tried to collect the said credit from Jomero Realty Corp, the latter
refused to honor the deed of assignment because it claimed that the petitioner was also
indebted to it. As such, KJS sent Lo a demand letter but the latter refused to pay, claiming
that his obligation had been extinguished when they executed the deed of assignment.
Subsequently, respondent filed an action for recovery of sum of money against petitioner.
Petitioner argued that his obligation was extinguished with the execution of the deed of
assignment of credit. Respondent alleged that Jomero Realty Corp refused to honor the deed
of assignment because it claimed that the petitioner had outstanding indebtedness to it
The trial court dismissed the complaint on the ground that the assignment of credit
extinguished the obligation Upon appeal, CA reversed the trial court decision and held in
favor of KJS.
ISSUE:
WON the deed of assignment extinguished the petitioners obligation
HELD:
No.
The petitioners obligation was not extinguished with the execution of the deed of
assignment.
An assignment of credit is an agreement by virtue of which the owner of a credit, known as
the assignor, by a legal cause, such as sale, dacion en pago, exchange or donation, and
without the consent of the debtor, transfers his credit and accessory rights to another, known
as the assignee, who acquires the power to enforce it to the same extent as the assignor could
enforce it against the debtor.
Hence, it may well be that the assignment of credit, which is in the nature of a sale of
personal property, produced the effects of a dation in payment which may extinguish the
obligation. However, as in any other contract of sale, the vendor or assignor is bound by
certain warranties. More specifically, the first paragraph of Article 1628 of the Civil Code

provides:
The vendor in good faith shall be responsible for the existence and legality of the credit at the
time of the sale, unless it should have been sold as doubtful; but not for the solvency of the
debtor, unless it has been so expressly stipulated or unless the insolvency was prior to the sale
and of common knowledge.
From the above provision, petitioner, as vendor or assignor, is bound to warrant the existence
and legality of the credit at the time of the sale or assignment. When Jomero claimed that it
was no longer indebted to petitioner since the latter also had an unpaid obligation to it, it
essentially meant that its obligation to petitioner has been extinguished by compensation. In
other words, respondent alleged the non-existence of the credit and asserted its claim to
petitioners warranty under the assignment. Therefore, it necessary for the petitioner to make
good its warranty and pay the obligation.
Moreover, the petitioner breached his obligation under the Deed of Assignment, to execute
and do all such further acts and deeds as shall be reasonably necessary to effectually enable
said ASSIGNEE to recover whatever collectibles said ASSIGNOR has in accordance with the
true intent and meaning of these presents. Indeed, by warranting the existence of the credit,
petitioner should be deemed to have ensured the performance thereof in case the same is later
found to be inexistent. He should be held liable to pay to respondent the amount of his
indebtedness.
INADEQUACY OF PRICE IN JUDICIAL SALE WITH RIGHT OF REDEMPTION
DE LEON VS. SALVADOR
L-30871 36 SCRA 567
DECEMBER 28, 1970
TEEHANKEE, J.:
FACTS:
A judgment for P35,000.00-actual, moral and exemplary damages obtained by Enrique de
Leon against private respondent Eusebio Bernabe. Pursuant thereto, the city sheriff, levied on
execution on two parcels of land each registered in the names of Bernabe under T.C.T. Nos.
94985 and 94986 of Caloocan City. At the execution sale, the city sheriff sold the said
properties to herein petitioner, Aurora (sister of the judgment creditor) as the highest bidder
for the total sum of P30,194.00, (the property then being subject to an existing mortgage lien
in the amount of P120,000.00).
Subsequently, just about two weeks before the expiration of the one-year period to redeem
the properties sold in execution, Bernabe filed a separate civil action against his judgment
creditor Enrique de Leon, herein petitioner Aurora P. de Leon as purchaser and the sheriff as
defendants for the setting aside or annulment of the execution sale "for being anomalous and
irregular," and for the ordering of a new auction sale.
Bernabes action in Judge Salvadors court sought to set aside the execution sale and to have

a new auction sale ordered, on the grounds that the sheriff had allegedly sold the two parcels
of land jointly instead of separately, and that the total sales price of P30,194.00 was shocking
to the conscience, alleging that the two parcels, if sold separately, could easily be sold at
P235,000.00 and P150,000.00.
ISSUE:
WON the inadequacy of selling price of the subject parcels of land may invalidate the judicial
sale.
HELD:
No.
In ordinary sales for reasons of equity a transaction may be invalidated on the ground of
inadequacy of price, or when such inadequacy shocks ones conscience as to justify the courts
to interfere, such does not follow when the law gives to the owner the right to redeem, as
when a sale is made at public auction, upon the theory that the lesser the price the easier it is
for the owner to effect the redemption. And so it was aptly said: When there is the right to
redeem, inadequacy of price should not be material, because the judgment debtor may
reacquire the property or also sell his right to redeem and thus recover the loss he claims to
have suffered by reason of the price obtained at the auction sale.
Bernabes petition challenging the jurisdiction of Judge Cruz court to issue its orders of
September 5, 1969 and January 5, 1970, confirming Auroras acquisition of title to the
properties by virtue of the execution sale and ordering Bernabe to transfer possession thereof
to her, because of the separate civil action filed by him in Judge Salvadors court, must
necessarily fail since said orders were within the exclusive competence and jurisdiction of
Judge Cruz court.
REDEMPTION PERIOD BY SALE OF A CO-HEIR BEFORE PARTITION
ALONZO VS. IAC
L-72873 150 SCRA 259
MAY 28, 1987
CRUZ J.:
FACTS:
Five brothers and sisters inherited in equal pro indiviso shares a parcel of land registered in
the name of their deceased parents. Celestino Padua, transferred his undivided share of the
herein petitioners for the sum of P550.00 by way of absolute sale. One year later, Eustaquia
Padua, his sister, sold her own share to the same vendees, in an instrument denominated "Con
Pacto de Retro Sale," for the sum of P 440.00.
By virtue of such agreements, the petitioners occupied, after the said sales, an area
corresponding to two-fifths of the said lot, representing the portions sold to them. The
vendees subsequently enclosed the same with a fence. In 1975, with their consent, their son
Eduardo Alonzo and his wife built a semi-concrete house on a part of the enclosed area.

One of the five coheirs sought to redeem the area sold to petitioners but was dismissed when
it appeared that he was an American citizen. Another coheir filed her own complaint invoking
the same right of redemption of her brother. Trial court dismissed the complaint, on the
ground that the right had lapsed, not having been exercised within thirty days from notice of
the sales. Although there was no written notice, it was held that actual knowledge of the sales
by the co-heirs satisfied the requirement of the law. Respondent court reversed the decision of
the Trial Court.
ISSUE:
WON actual knowledge satisfied the requirement of Art. 1088 of the New Civil Code.
HELD:
Yes.
Art. 1088. Should any of the heirs sell his hereditary rights to a stranger before the
partition, any or all of the co-heirs may be subrogated to the rights of the purchaser by
reimbursing him for the price of the sale, provided they do so within the period of one month
from the time they were notified in writing of the sale by the vendor.
The co-heirs in this case were undeniably informed of the sales although no notice in writing
was given them. And there is no doubt either that the 30-day period began and ended during
the 14 years between the sales in question and the filing of the complaint for redemption in
1977, without the co-heirs exercising their right of redemption. These are the justifications
for this exception.
While the court does not declare that this period started from the dates of such sales in 1963
and 1964, that sometime between those years and 1976, when the first complaint for
redemption was filed, the other co-heirs were actually informed of the sale and that thereafter
the 30-day period started running and ultimately expired. This could have happened any time
during the interval of thirteen years, when none of the co-heirs made a move to redeem the
properties sold. By 1977, in other words, when Tecla Padua filed her complaint, the right of
redemption had already been extinguished because the period for its exercise had already
expired.