SPOUSES GREGORIO DE GUZMAN, JR. AND CORAZON QUINTO, PETITIONERS, VS. HON. COURT OF APPEALS AND RAYMUNDA RINGOR QUIRIMIT, RESPONDENTS.

This is a petition for review of the decision*
of the Court of Appeals dated March 3, 1977 in CA-G.R. No. 52746-R entitled
“Spouses Gregorio de Guzman, Jr. and Corazon Quinto,
Plaintiffs-Appellees, versus Raymunda
Ringor Quirimit,
Defendant-Appellant”, declaring herein private respondent Raymunda Ringor Quirimit owner of the land subject of litigation.

Deogracias Queriza was the
original owner of a parcel of unregistered residential land containing an area
of 745 square meters, more or less, situated at San Fabian, Pangasinan.  On July 20, 1957, he executed a Deed of Pacto de Retro sale over said land in favor of his niece,
private respondent Quirimit for the sum of P500.00,
with the express stipulation that the “vendor a retro may exercise the
right of repurchase within 5 years from the execution of these presents and
upon failure to take advantage of the right herein granted him, then this
contract shall acquire the character of absolute, irrevocable and consummated
sale.”^[1] Private
respondent did not register the Deed of Pacto de
retro Sale, but took possession of the land by building
her house on a portion thereof.

It appears that
subsequently, Deogracias Queriza
mortgaged the same parcel of land to the Manaoag
Rural Bank, from which it was allegedly redeemed on his behalf by his nephew
Miguel Queriza on November 4, 1963. 
Supposedly for this reason, on April 26, 1967, Deogracias
Queriza, without having exercised his right to
repurchase under the Pacto de Retro Sale, executed
over said parcel of land and two others, a Deed of “Rimunitary
[sic] Inter-vivos Donation”^[2] in favor of Miguel Queriza, who thereafter declared the land in his name for
taxation purposes and registered the Deed of Donation on August 8, 1967 in the
Register of Deeds of Pangasinan.

On December 8, 1970,
Miguel Queriza sold the land to petitioners spouses
Gregorio de Guzman, Jr. and Corazon Quinto.  The Deed of Sale was registered on December 9, 1970 and the tax
declaration placed under their names.

In January, 1971, petitioners sent private respondent written
notice to vacate the land in question,
and upon refusal by the latter to do so, instituted on February 7, 1971, Civil Case No. D-2662 for
Quieting of Title and Recovery of Possession before the then Court of First
Instance of Pangasinan, Fourth Branch.

After trial, the court rendered judgment on January 19, 1973,
declaring petitioners owners of the land in question and ordering private
respondent to vacate the premises, to pay petitioners the total sum of
P1,000.00 for damages and attorney’s fees and to pay the cost of suit.  It ruled that the Pacto
de Retro Sale was only a mortgage
and that the Deed of Donation in favor of Miguel Queriza
was valid.

On appeal by private
respondent, the Court of Appeals reversed the decision of the trial court.  Applying Article 1544 of the New Civil Code,
the appellate court held that private respondent had a preferential right to
the land as against petitioners who were purchasers in bad faith.  It also found the transaction between Deogracias Queriza and private
respondent to be what it purported to be – a pacto de
retro sale and not an equitable mortgage.

Petitioners moved for a
reconsideration of the appellate court’s decision and upon denial
thereof, took the present recourse.

Petitioners contend that the appellate court erred in:  [a]
resolving the case under Article 1544 of the New Civil Code when such provision
was never cited nor invoked by private respondent in the court a quo;
[b] not holding that the pacto de retro sale was an
equitable mortgage in accordance with Article 1602 of the said Code; [c] not
applying the rule that as between two innocent parties, he who was negligent
should bear the loss; and, [d] in denying their motion for reconsideration.

Petitioners theorize that since the trial court did not cite
Article 1544 of the New Civil Code in its decision, the appellate court is
precluded from applying the same, for in so doing it, in effect, entertained an
issue not raised in the lower court and allowed private respondent to change
her theory on appeal.

This theory is both right and wrong.  Right because the appellate court erred in
applying Article 1544 of the New Civil Code relating to double sales to this
case which involves an earlier pacto de retro sale of
an unregistered land and the subsequent donation thereof by the vendor a
retro.  And wrong because although the
appellate court applied the wrong provision of law, it did not in so doing
entertain an issue not raised in the lower court nor allow private respondent
to change her theory on appeal. 
Precisely, the issue involved in an action for quieting of title and
recovery of possession is who, between the parties, has a better right to the
property in dispute, and this is the very issue resolved by the appellate court
in the decision under consideration. 
Thus, it is incorrect to say that this issue was never raised in the
trial court.

As to the alleged change of theory on appeal by private
respondent, an examination of the answer filed by private respondent in the
trial court reveals that she interposed two defenses:  [a] the supposed
invalidity of the Deed of Donation in favor of Miguel Queriza
by reason of fraud, undue influence or mental incapacity of the donor at the
time of the donation; and, [b] knowledge of petitioners of the pacto de retro sale in her favor prior to their purchase of
the land in question from Miguel Queriza.^[3] This being the case, it is equally
inaccurate to say that she shifted her theory from “senility of donor Deogracias Queriza to the bad
faith of the vendees spouses Gregorio de Guzman, Jr. and Corazon Quinto x x x
to avail of Article 1544 of the New Civil Code”.^[4]

Petitioners further attribute error to the appellate court in not
sustaining the lower court’s finding that the pacto
de retro sale was an equitable mortgage. 
After a thorough review of the records, We are as equally convinced as
the appellate court that the transaction between Deogracias
Queriza and private respondent was a pacto de retro sale. 
The consideration of P500.00 paid
by private respondent in 1957 was not unusually inadequate, considering that
the land had an assessed value of only P380.00 at the time of Miguel Queriza’s sale thereof to petitioners in 1971.^[5]
Also, the finding of the trial court,
allegedly on the admission of private respondent herself that it was the vendor
a retro who appropriated the fruits of the land after the sale is contrary to
the evidence on record because in her testimony, private respondent declared
that it was she who enjoyed the products of said land.^[6] Moreover, private respondent explained why
she did not consolidate her ownership over the land in question, thus:

“RE-DIRECT BY ATTY. BELEN:

Q   Mrs. Quirimit, will
you please tell the Court why you did not consolidate your ownership on the
land in question after Deogracias failed to redeem
the property?

A    Because Deogracias
told me not to worry because he has no child to question me.

xxx                xxx                   xxx

RE-CROSS EXAMINATION BY ATTY. ANCHETA:

Q   You testified you did not consolidate your
ownership over the land in question because your uncle told you there is
nothing to worry about because he has no children to challenge, is that
correct?

A    Yes, sir.

Q   What year did he tell you that?

A    All the time he told me that.

Q   That was after the lapse of 5 years from the
date of the execution of the pacto de retro, is that
correct?

A    All the time he told me and he said, ‘Never
mind, nobody will trouble you’.  ‘I have
no heirs to inherit.’

Q   He use to say that even after 1965, is that
correct?

A    yes, sir.

That
is all.^[7]

Ordinarily,
such explanation would sound lame and flimsy. 
Considering however the close blood relationship between Deogracias Queriza and private
respondent as well as the degree of trust and confidence traditionally accorded
by Filipinos to their relatives, particularly in this case where private
respondent had reason to rely on the words of Deogracias
Queriza, the latter being a Notary Public, We find
such explanation satisfactory.

Ironically, the rule
relied upon by petitioners that as between two innocent parties, he who was
negligent should bear the loss, cannot apply to this case for the simple reason
that it is petitioners themselves who cannot be considered innocent
purchasers.  As found by the appellate
court:

“In the instant case, it can hardly be said that plaintiffs-appellees [herein petitioners] were acting in good faith
when they caused their Deed of Sale to be registered with the Registry of
Deeds.  In the first place, when the sale
was consummated in favor of appellee, appellant was
actually residing in a house standing right on the land in question, and appellees were living not far from
appellant.  In the second place, even
before appellees bought the land, appellant had
already confronted them and informed them that the land had already been sold
to her.  [t.s.n.,
p. 8, July 7, 1972] Appellees were thus forewarned; the least they could do was
to inquire from their vendor Miguel Queriza and from
the other relatives of the original owner, Deogracias
Queriza, by what right or title appellant had her house
on the lot she was occupying.  But it
seems that appellees did not bother to do this and
merely relied upon the Deed of Donation made in favor of Miguel Queriza.  Had appellees exercised due diligence in inquiring into the
right or title of the appellant who was residing in
the property they would doubtless have found out that appellant was occupying it by virtue of the Pacto de Retro Sale of July 20, 1957, which apparently had
become an absolute sale on July 20, 1962 by express provision thereof and the
apparent failure of Deogracias Queriza
to redeem the property.

“Although it may be true, as testified by appellee
Gregorio de Guzman that he noticed that there was a house standing on the
property, and that when he went there nobody was in the house, and that he
decided to buy the property because of the advice of the Notary Public that its
title was clean, We are of the considered opinion that this was not sufficient
to make appellees purchasers in good faith.  If de Guzman went once to the house and found
nobody there, he could have gone back at least once more, and if still there
was no one he could have inquired from the neighbors if any one resided
therein.  Besides, it is not disputed
that appellees live near the property in
question and surely they could
not fail to notice whether the house was tenanted or not.  The information of the Notary Public could
hardly be relied upon, considering that the property is unregistered and
therefore, there was really no certificate of title to speak of which the notary
is alleged to have attested to the ‘cleanness’ of.

“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 and mae [sic] inquiries concerning the rights of the actual
possessor.  Failure to do so would make
him a purchaser in bad faith.  [Incala vs. Mendoza, CA-G.R. No. 13677-R November 9, 1965;
De Jesus vs. Revilla, CA-G.R. No. 13562-R October 5,
1965; Martelino vs. Manikan,
CA-G.R. No. 32792-R June 22, 1956].

x                    x                      x

‘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.  [Conspecto vs. Fruto, 31 Phil.
144]’

xxx                xxx                   xxx

“Appellant has been and continues to be in actual possession
of the property, and her deed of pacto de retro sale
dates back to 1957 while the deed of sale in favor of appellees
was executed in 1970; and there is no showing that appellant’s possession and
her pacto de retro sale were done in bad faith”.^[8]

While the appellate court misapplied Article 1544 of the Civil
Code in this case, its ultimate conclusion that private respondent should be
declared owner of the land in question is correct.  As stated earlier, the transaction between Deogracias Queriza and private
respondent was a true pacto de retro sale.  The essence of a pacto
de retro sale is that title and ownership of the property sold are immediately
vested in the vendee a retro, subject to the resolutory
condition of repurchase by the vendor a retro within the stipulated
period.  Failure thus of the vendor a
retro to perform said resolutory condition vests upon
the vendee by operation of law absolute title and ownership over the property sold^[9] and failure of the vendee a retro to
consolidate his title under Article 1607 of the Civil Code does not impair such
title or ownership for the method prescribed thereunder
is merely for the purpose of registering the consolidated title.^[10] In the case at bar, absolute
ownership of the land in question was vested on private respondent in 1962 upon
failure of Deogracias Queriza
to repurchase said land.  Thus, in 1967
when he allegedly donated the same to Miguel Queriza,
he was no longer the owner thereof. 
Settled is the rule that a donor cannot lawfully convey what is not his
property.^[11] There being no title to the property
which Deogracias Queriza
could convey to Miguel Queriza, it necessarily
follows that no title to the property could be conveyed by the latter to
petitioners.  The registration of the
deeds under which they claimed to have acquired ownership of the land in
dispute was a useless ceremony. 
Registration does not vest title. 
It is not a mode of
acquiring ownership but is merely evidence of such title over a particular
property.  It does not give the holder
any better title than what he actually has. 
Besides, petitioners’ registration of their deed of sale was done in bad
faith.  The effect is that it is as if no
registration was made at all in so far as private respondent is concerned.  Conversely, actual knowledge of petitioners
of the sale to private respondent amounted to registration thereof.^[12]

WHEREFORE, the instant petition is hereby DENIED.  The decision of the Court of Appeals under review
declaring private respondent Raymunda Ringor Quirimit owner of the land
in dispute is affirmed, with costs against petitioners.

SO ORDERED.

Gutierrez, Jr., Feliciano, Bidin, and Cortes, JJ.,
concur.

*
Penned by Justice Lourdes P. San Diego and concurred in by Justices Mama D. Busran and Corazon Juliano Agrava.

^[1]
Exhibit 1

^[2]
Exhibit A

^[3]
Pars. 8, 9, 10 & 11, Answer, pp. 11-12, Record on Appeal, p. 57, Rollo

^[4]
Rollo, p. 14

^[5]
Exhibit B

^[6]
TSN, July 7, 1972, p. 4

^[7]
TSN, pp. 15-16, ibid

^[8]
Rollo, pp. 28-31

^[9]
Oviedo v. Garcia, 40 SCRA
17; Rosario, et al v.
Rosario, 110 Phil. 394; See also Tan Queto v. Candongo, 106 SCRA 197

^[10]
Defensor v. Blanco, 11 SCRA 1; Rosario, et al.
v. Rosario, supra; Paras, Civil
Code of the Philippines Annotated, Volume V, 1972 Edition, pp. 206-207

^[11]
Esquejo v. Fortaleza, 13 SCRA 187

^[12]
Cruz vs. Cabana, 129 SCRA 656