BENJAMIN SERRANO AND PATERNO SAMANIEGO, PLAINTIFFS-APPELLEES, VS. JOSELITO B. YOUNG, ADELAIDA B. BILANO, HEIRS OF LYDIA MERCADO, HEIRS OF REYNALDO MERCADO AND REGISTER OF DEEDS …

Serrano versus Young

The Case

This is a lecture on the case of Serrano versus Young, an action to recover ownership or to quiet title over a residential lot and its improvements on Scout Tobias Street in Quezon City. Benjamin Serrano, joined later by Paterno Samaniego, sued Joselito Young and Adelaida Bilano, the children and heirs of the late Asuncion Ballecer who had been the registered owner, together with the spouses Reynaldo and Lydia Mercado, who later bought the same property, and the Register of Deeds of Quezon City. The case matters because it is a clean laboratory for the double sale under the Torrens system: who owns the land when one buyer holds a prior deed but a later buyer registers first, and what happens when that later buyer registers with notice of an adverse claim. It also teaches the consequences of a void title and the reach of a final judgment in an ejectment case.

Procedural History

Serrano filed the complaint in the Regional Trial Court of Quezon City, Branch 94. He amended the complaint to implead the Mercado spouses and the Register of Deeds. The case was dismissed without prejudice as to Bilano because summons could not be served on her. Reynaldo Mercado died during the pendency of the action and was substituted by his children from a previous marriage; Lydia Mercado also died and was substituted by her own children. After trial, the Regional Trial Court rendered judgment on the thirty-first of January, 2001, in favor of Serrano. It declared Transfer Certificate of Title Number 339869 in the name of the Mercados null and void, declared Serrano the absolute owner, ordered the Register of Deeds to register the deed of absolute sale in his favor and to issue a new title, ordered Serrano to pay Young and Bilano the remaining balance of the purchase price, and ordered the defendants to pay attorney's fees and costs. The Mercado heirs appealed to the Supreme Court.

Facts

Asuncion Ballecer died intestate in August 1983, leaving the property to her children Young and Bilano. Through an administrator, the property was offered to Serrano. He inspected it, made a series of cash advances to the sellers, and paid the inheritance tax, capital gains tax, documentary stamps, and publication expenses. On the second of March, 1985, Young and Bilano executed a deed of absolute sale in his favor, although the title was still in the name of the deceased. Two deeds were prepared, one for 400,000 pesos and one for 250,000 pesos, the second to reduce the capital gains tax. Serrano paid 250,000 pesos on the third of April, 1985, moved his appliances in, and installed caretakers.

In September 1985, the Mercado spouses met Young and expressed interest in buying the property. Young told them it had already been sold to somebody, referring to Serrano. The Mercados borrowed the title from Young for verification and never returned it. In December 1985, they persuaded Young and Bilano to sign a deed of sale and an extrajudicial settlement in their favor. Young later swore that the Mercados did not actually pay the stated consideration. The Mercados then maneuvered to eject Serrano's caretakers, and there was a struggle for possession.

On the sixteenth of January, 1986, Serrano registered a notice of adverse claim on the old title. Despite this, the Register of Deeds issued Transfer Certificate of Title Number 339869 in the name of the Mercados on the thirty-first of January, 1986, and the adverse claim was carried over to the new title. The Mercados earlier filed an ejectment case, but the Metropolitan Trial Court dismissed it and confirmed Serrano's right to possession; that decision became final and executory.

Issues

• Whether or not Serrano is the absolute owner of the property and Transfer Certificate of Title Number 339869 in the name of the Mercados is null and void.
• Whether or not the case should be dismissed for the absence of Adelaida Bilano as an indispensable party and for Young's failure to hire counsel.

Applicable Provisions

Article 1544 of the Civil Code, on double sale, provides:

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.

This governs the contest between Serrano, the first buyer, and the Mercados, the later buyers who registered first.

Article 1458 of the Civil Code, on the perfection of a contract of sale, provides:

By the contract of sale one of the contracting parties obligates himself to transfer the ownership and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.

This confirms that the sale to Serrano was perfected and bound the sellers.

Ruling

On the first issue, the Court ruled for Serrano. The sale to him was valid and perfected; the sellers' ownership at the time of sale, though the title was still in the deceased's name, passed to him upon delivery. The Mercados could not invoke the rule on double sale because they were not buyers in good faith. They knew the property had already been sold, they kept the title, and the adverse claim was annotated and carried over to their new title. Good faith is the condition for preference under Article 1544, and they lacked it. Their title was therefore void.

On the second issue, the Court held that the absence of Bilano did not warrant dismissal. She was not an indispensable party because complete relief could be rendered without her, and the case had already been dismissed as to her. Young's failure to hire counsel did not invalidate the proceedings, as the trial court had warned him and he chose not to comply.

Doctrine

In a double sale of immovable property, the rule under Article 1544 of the Civil Code gives ownership to the buyer who in good faith first records the sale in the Registry of Property. Good faith is indispensable; a buyer who registers with knowledge of a prior sale or of an adverse claim is not a buyer in good faith and acquires no right. A title issued to a buyer in bad faith is void and may be cancelled. The absence of a party who is not indispensable does not warrant dismissal.

Disposition

The Supreme Court affirmed the decision of the Regional Trial Court, declaring Serrano the absolute owner, cancelling the Mercados' title, and ordering the Register of Deeds to issue a new title in his name.

Remember This

Memorize this line: in a double sale of land, the first to register in good faith wins, but bad faith destroys that preference. Examiners use this case to test the good faith requirement under Article 1544 and the effect of an annotated adverse claim.