CANDIDO FRANCISCO, PETITIONER, VS. THE COURT OF APPEALS, ONOFRE ESPIRITU, POTENCIANA ESPIRITU, FELIX ESPIRITU, RITA ESPIRITU, CASIMIRO ESPIRITU, AND HEIRS OF DEOGRACIAS ESPIRITU…

The controversy at bar had its origin in the sale to two (2)
different persons of the same property comprised of three (3) parcels of land.
The contending parties are: the transferees of the first vendee of a portion of
the property, on the one hand, and on the other, the persons to whom the second
vendee conveyed the entire property thirty-one years after buying it. The
successors-in-interest of the first vendee ground their claim on the deed of
sale by which two of the three lots were sold to them, registered under Act No.
3344, and the fact of continuous occupancy of the property for more than thirty
(30) years. The buyers of the second vendee, on the other hand, rely on their
predecessor’s Transfer Certificate of Title as well as that subsequently issued
in their own names by the Register of Deeds. Between them, there is no dispute
about the essential facts, hereunder briefly narrated.

The two sales were made by Nicolasa Resurreccion. She was the owner in fee simple of the three
(3) parcels of land in question, located at Taytay, Rizal, covered by Transfer Certificate of Title No. 90-45
in her name. The parcels are inter alia described in the title as follows: Lot No. 1,
containing an area of 54,321 square meters; Lot No. 3, with an area of 86
square meters; and Lot No. 9, with an area of 21 square meters, more or less.^[1]

On August 19, 1925,
Nicolasa Resurreccion sold Lots Numbered 3 and 9 to one Agustin Esguerra. Some months later, or more precisely on March 16, 1926, Esguerra
sold the same two (2) parcels to the spouses, Pedro Francisco and Francisca Tolentino. Afterwards, the property was declared in the
name of their son, Candido Francisco, the petitioner
in this case, who continued in possession of the property after his parents’
demise.^[2]

Three (3) years later, Nicolasa Resurreccion executed another deed of sale dated August 16, 1928, this time conveying
all the three (3) parcels of land
covered by her title, TCT No. 9045, in favor of a certain Felisa
Afable. The sale included, in other words, not only
Lot No. 1, described in the title as having an area of 54,321 square meters but
also Lots Numbered 3 and 9 already
sold to Agustin Esguerra. Felisa
Afable registered the sale under the Torrens Act and
obtained title in her own name, numbered 14256.^[3]

Thirty-one (31) years afterwards, or on September 22, 1959, Felisa Afable sold the property
to the persons now private respondents in this case, to wit: Casimiro Espiritu, Onofre Espiritu, Potenciana Espiritu, etc., who
will hereafter be simply referred to as the
Espiritus. The Espiritus
obtained a Torrens title in their names, numbered 70517.

Shorty after the sale, the Espiritus asked Candido Francisco
to vacate lots Numbered 3 and 9, which the latter was occupying and on which
was in fact standing a house that he had constructed. As might be expected, Candido refused. The Espiritus
thereupon sued him for recovery of title and possession in the Court of First
Instance of Rizal.^[4]

The Trial Court’s verdict went against the Espiritus.
It dismissed their action and declared Candido
Francisco the rightful owner of Lots No. 3 and 9. The Court pointed out that
while a Torrens title is indefeasible, the reality could not be ignored that it
could be issued by mistake;^[5]
the registration of the sale by Nicolasa Resurreccion to Agustin Esguerra
the (immediate predecessor of Candido Francisco’s
parents) was binding on third parties and specially on the parties to the sale
themselves, so that when Resurreccion executed a
second deed of sale in favor of Felisa Afable, conveying not only Lot No. 1 but also Lots Numbered
3 and 9, the sale could not have been valid as regards the latter two (2) lots
because Resurreccion was no longer the owner thereof.^[6]

The Court of Appeals reversed the decision of the Trial Court, on
appeal taken by the Espiritus. By judgment
promulgated on December 19, 1968,
the Appellate Court declared Candido Francisco to
have no right over Lots Numbered 3 and 9, and ordered him to vacate the same.^[7]
It ruled that registration by Candido’s parents (or
their predecessor) of the deed of sale in their favor under Act No. 3344 was
ineffectual to bind registered land, such as that subject of the case at bar
(citing Soriano, et al. v. Heirs of Magali, L-15133, May 31, 1963, at p. 396, The Phil. Torrens
System, F.D. R. Ponce); that the Espiritus must be
deemed purchasers in good faith considering that no annotation regarding the
prior sale of the property appeared in either the title of their immediate
predecessor, Felisa Afable
(No. 142561) or that of the latter’s own predecessor, Nicolasa
Resurreccion (No. 9045), awareness of the alleged
prior conveyance of Lots Numbered 3 and 9 to the Franciscos
having come to them only after their acquisition of the property from Afable; and that the principle – that as between two
innocent purchasers of the same property the party negligent must suffer – must
be applied adversely to Candido Francisco, since his
parents and their predecessor (as first vendee) were negligent in omitting to
have the sale in their favor annotated on TCT No. 9045.

Candido Francisco has filed with us a
petition for review on certiorari
urging us to reverse the decision of the Court of Appeals because of what he
submits to be serious errors committed by it, viz (1) applying the general
principle that a person dealing with registered land need not go beyond the
certificate of title, (2) holding the Espiritus to be
purchasers in good faith; (3) applying the rule that as between two innocent
purchasers, the one negligent must suffer the loss; (4) not adjudging that Felisa Afable (the Espiritus’ predecessor) had no title to transfer to the Espiritus and not applying the law on double sale embodied
in Article 1478 (now Article 1544) of the Civil Code and (5) not recognizing Candido Francisco’s title to the property under general
principles of equity, laches and prescription, in
light of their actual, continuous, peaceful and open possession of the property
under a bona fide claim of ownership,
for no less than thirty-six (36) years.

The whole controversy ultimately boils down to the question,
whether or not under the admitted facts, the Espiritus
are buyers in good faith, and therefore entitled to the full protection of the
Torrens Act. The Court of Appeals declared them to be so, as already earlier
stated. It said that the Espiritus –

“x x purchased the lots in question in
good faith and for a valuable consideration. Good faith is presumed (Art. 527,
New Civil Code) Defendant-appellee (Candido Francisco) did not present: any evidence to rebut this
legal presumption.”^[8]

We find that there are facts on record of which unaccountably the
Court of Appeals did not take account.

There is evidence, for instance, that Casimiro
Espiritu and Candido
Francisco had known each other for “quite a long time, x x
even before the war;” that Lots 3 and 9 are residential lots adjacent to each
other and are situated at Rizal Avenue, Poblacion, only a few meters away from the municipal
building,^[9]
and said lots are about fifty meters (50 m.) away from his (Casimiro’s)
house.^[10]

There is evidence, not disputed, that Candido
and his family had been occupying that property at Rizal
Avenue for more than thirty years, and that Candido
was residing in a house built thereon, and it is not unreasonable to assume
that these facts were at least in a general way known to Casimiro
Espiritu since he had known Candido
for “quite a long time x x even before the war.”^[11]

There is evidence, too, that Casimiro Espiritu, a businessman of no little experience, was one of
those who negotiated with Felisa Afable
for the purchase of the property; that the latter showed to Casimiro
and his sister, Potenciana, the plan of the property,
specifically indicating the bigger lot – Lot 1 x x
(the) one containing an area of more than 5 hectares;^[12]
and they had “agreed to buy x x (the property) after
we saw it,”^[13]
and that “after the sale x x (the [Casimiro]) happened to see that Lots 3 and 9 are included
in the total area x x (they) paid to Mrs. Felisa Afable,”^[14]
again, it is not unreasonable to assume that having actually seen Lots 3 and 9
before agreeing to buy the property, Casimiro also
saw Candido Francisco’s house there.

Considered in context, the evidence shows quite persuasively that
Casimiro Espiritu knew
definitely where his friend of many years, Candido
Francisco was residing and that indeed Candido and
his family had been living in that place for many, many years, that when he
viewed the property then being sold to him and his brothers and sisters by Felisa Afable, he could not but
have noticed that Candido’s house was in the area,
that when Felisa Afable
pointed out the three (3) lots to them: one big lot, and two smaller ones, Casimiro could not but have become aware, if not of the
actuality, at least of the possibility, that the smaller contiguous lots
adjacent to the main streets (Rizal), and presumably
through or beside which they had passed to view the bigger lot, appeared to be
that in which his friend, Candido, was living. At any
rate, it taxes credulity to think that Casimiro and
his sister had limited themselves to viewing and asking questions about the big
lot only, and had completely refrained from inquiring about the location and
condition of the two (2) other lots subject of the projected sale, preferring
to place total exclusive and unquestioning reliance on Felisa
Afable’s certificate of title. The only plausible
explanation for such a singular absence of curiosity would be their awareness
that the two (2) other lots were not included in the sale.

There were in a word sufficiently strong indications to impel a
closer inquiry into the location, boundaries and condition of the two (2)
smaller lots embraced in the purchase on the part of Casimiro
Espiritu and his co-vendees. That inquiry is in truth
dictated by common sense, expected of a man of ordinary prudence. “The earth,”
it has been said, is “that universal manuscript open to the eyes of all. When a
man proposes to buy or deal with realty his first duty is to read this public
manuscript, that is, to look and see who is there upon it, and what are his
rights.”^[15]
We ourselves stressed this duty several decades ago:

“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. His mere
refusal to believe that such defect exists, or his willful closing of the eyes
to the possibility of the existence of a defect in his vendor’s title will not
make him an innocent purchaser for value, if it afterwards develops that the
title was in fact defective and it appears that he had such notice of the
defect would have led to its discovery had he acted with the measure of
precaution which may reasonably be required of a prudent man in a like
situation.”^[16]

Had that inquiry been made, the adverse claim of Candido Francisco over the two (2) small lots would have
immediately come to light, and the controversy would have died a-borning. The Espiritus’ failure
to undertake such an inquiry precludes their successful invocation of the
character of purchasers in good faith. “(A) want to caution and diligence which
an honest man of ordinary prudence in accustomed to exercise in making
purchases is, in contemplation of law, a want of good faith.”^[17]
The buyer who could not have failed to know or discover that the land sold to
him was in the adverse possession of another, is a buyer in bad faith, such
knowledge being equivalent to registration.^[18]

On the other hand, while the registration of the deed of
acquisition of the lots in question (Numbered 3 and 9) under Act No. 3344 could
not and never operated to bind the land, or third persons,^[19]
the bona fides of that purchase by Candido Francisco’s parents and by their predecessor has
not at all been put at issue, nor the fact of the Franciscos’
possession of said two lots for more than thirty (30) years.

It thus results that not being buyers in good faith as regards
said Lots Numbered 3 and 9, the Espiritus cannot set
up their certificate of title to defeat the adverse claim thereto of Candido Francisco whose good faith, in contrast, and that
of his predecessors, is not and has not been placed in question.^[20]

WHEREFORE, the
decision of the Court of Appeals in CA-G.R. No. 34328-R is reversed and set
aside. Petitioner Candido Francisco is hereby
declared to be the owner in fee simple of the lots in question, Numbered 3 and
9, and the respondents are ordered to reconvey said
lots to Candido Francisco in an appropriate registrable deed. Costs against respondents.

Teehankee, C.J., Cruz, Paras and Gancayco, JJ., concur.

^[1]
Record on Appeal, pp. 27-28

^[2]
Id., p. 28.

^[3]
Id., Rollo, p. 30.

^[4]
Id., pp. 28-29.

^[5]
Id., p. 29.

^[6]
Id., pp. 29-30.

^[7]
Rollo, pp.
29-37.

^[8]
Rollo, p.
33.

^[9]
TSN, Aug. 12, 1963, pp. 7,
3 (Casimiro Espiritu).

^[10]
TSN, Sept. 9, 1963, p. 12 (Candido Francisco).

^[11]
See TSN, Aug. 12, 1963, p.
7.

^[12]
TSN, id., pp. 4-5.

^[13]
TSN, id., p. 6.

^[14]
Id., p. 7.

^[15]
Luther Oil Co. v. Miller Sibley Co., 44 SE 433, 438, citing Frame & Frame,
9 SE 901, 207.

^[16]
Leung Lee v. Strong, 37 Phil. 644, see also Emos v. Zuzuaarregui, 53 Phil. 197, 203-204.

^[17]
55 Am Jur. 069 footnote No. 5 citing Allen & McCella, 25 Iowa
454, 96 Am Jur. and other cases.

^[18]
SEE St. Peter Memorial Park, Inc. v. Cleofas, 92 SCRA
390, 403.

^[19]
Soriano v. Magali, 8 SCRA
490, 492-495.

^[20]
SEE Sec. 35, Land Registration Act (now Sec. 44, FD 1529), Ignacio v. Chua, 52
Phil. 940, 945, and Gatioen v. Gaffuc,
27 SCRA 707-708.