SPOUSES FRANCISCO B. SINFUEGO, JR. AND JESUSISIMA B. SINFUEGO, PLAINTIFFS-APPELLEES, VS. SPOUSES EDUARDO I. CHAN AND ROSELILY CHAN, ESTATE OF MARIA VDA. DE CORDERO, GODOLFO R. G…

Sinfuego versus Chan

The Case

This is the case of Sinfuego versus Chan, an appeal brought to the Supreme Court from a decision of the Regional Trial Court of Pasig City, stationed in Taguig City. The spouses Francisco and Jesusisima Sinfuego sued the spouses Eduardo and Roselily Chan, the estate of the late Maria Vda. de Cordero, the Register of Deeds, and the Treasurer of the Philippines, asking that the portion of land they had bought from Cordero be reconveyed to them. The case matters because it gathers in one decision the rules on purchasers in good faith, the effect of an annotated adverse claim, the requirement that a mortgagor be the absolute owner of the thing mortgaged, and the principle that registration does not vest title. These are staple Bar topics in sales, land registration, and mortgage.

Procedural History

The Sinfuegos filed a Petition for Reconveyance before the Regional Trial Court of Pasig City, Branch 153, on September 16, 2003. After trial, that court rendered its Decision on September 13, 2012, ordering the Chans to reconvey the 27.06 square meter portion of the property to the Sinfuegos, and to pay 20,000 pesos as moral damages, 20,000 pesos as attorney's fees, and the costs of suit. The Chans' counterclaims were dismissed for lack of merit. The Chans then went up to the Supreme Court on ordinary appeal, assigning as errors the finding that they were buyers in bad faith, the order of reconveyance and the award of damages, and the denial of their counterclaim. The Supreme Court dismissed the appeal and affirmed the trial court's decision in full.

Facts

On March 21, 1998, the Sinfuegos and Maria Vda. de Cordero executed a Kasulatan ng Bilihang Lampasan, a Deed of Absolute Sale, by which Cordero sold to the Sinfuegos 27.06 square meters out of her 237 square meter property in Upper Bicutan, Taguig City, covered by Transfer Certificate of Title No. 18551, for 65,000 pesos. Barely two months later, on May 19, 1998, Cordero mortgaged her entire 237 square meter property to the Chans to secure a loan of 60,000 pesos. That mortgage was annotated on the title on May 20, 1998.

The Sinfuegos repeatedly demanded the owner's duplicate copy of the title so they could register their purchase, but Cordero put them off, saying the title was with a third person. Only in February 2000 did the Sinfuegos obtain a photocopy, and they discovered that the entire property, including the portion they had bought, had been mortgaged to the Chans. On February 18, 2000, they filed an Affidavit of Adverse Claim, which was annotated on the title. Meanwhile, the Sinfuegos had taken possession of their portion and built a house and a beauty parlor on it.

Cordero failed to pay her loan. The Chans foreclosed the mortgage and were themselves the highest bidder at the auction sale. After the redemption period lapsed, they consolidated ownership, and a new title, Transfer Certificate of Title No. 40244, was issued in their names on September 12, 2002. At their instance, a writ of possession was issued on August 27, 2003, ordering the removal of all occupants, including the Sinfuegos. That prompted the Sinfuegos to file their petition for reconveyance on September 16, 2003.

Issues

• Whether or not the Chans were mortgagees and buyers in bad faith.
• Whether or not the sale by Cordero of the 27.06 square meter portion in favor of the Sinfuegos can bind third parties.
• Whether or not the trial court committed reversible error in ordering reconveyance and awarding damages, and in denying the Chans' counterclaim.

Applicable Provisions

Article 1544 of the Civil Code provides:

Article 1544. 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 is the rule on double sale, and the Court uses it to stress that the protection of prior registration belongs only to a buyer who registers in good faith.

Article 2085 of the Civil Code, as discussed in the decision, requires that the mortgagor be the absolute owner of the thing mortgaged. The Court invokes this requisite to hold that Cordero could not validly mortgage the portion she had already sold and delivered.

Ruling

On the first issue, the Court held that the Chans were not purchasers in good faith. The adverse claim of the Sinfuegos was annotated on the title on February 18, 2000, about four months before the auction sale, so the Chans had constructive notice of it. Worse, the Sinfuegos were in actual possession, with a house and a beauty parlor standing on the portion they had bought. A purchaser in good faith buys without notice of another's right and pays a fair price before such notice. While a buyer of registered land may generally rely on the certificate of title, that rule yields when facts would impel a reasonably cautious man to inquire. The Court quoted its ruling in Spouses Pudadera versus Magallanes:

His mere refusal to believe that such defect exists, or his willful closing of his 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 later develops that the title was in fact defective, and it appears that he had such notice of the defect had he acted with that measure of precaution which may reasonably be required of a prudent man in a like situation.

On the second issue, the Court held that the sale bound the Chans. Ownership passes to the vendee upon actual or constructive delivery, and the execution of a public instrument is equivalent to delivery. Since the 27.06 square meter portion was delivered to the Sinfuegos on March 21, 1998, Cordero was no longer its owner when she mortgaged the property. A mortgage is invalid if the mortgagor is not the owner. Following the maxim nemo dat quod non habet, no one can give what one does not have, the Chans could not acquire through foreclosure what Cordero no longer owned. The Court also held that registration does not vest title; it merely confirms a title already created or vested, and land erroneously included in another's certificate must be reconveyed to its true owner.

On the third issue, the Court sustained the award of moral damages and attorney's fees, since the Chans acted in bad faith and the Sinfuegos were compelled to litigate to protect their interest.

Doctrine

A purchaser in good faith buys without notice of another's right or interest and pays fair value before such notice. The protection of Article 1544 belongs only to a buyer who registers in good faith; knowledge of a prior sale taints the registration with bad faith. An annotated adverse claim, coupled with actual possession by another, imposes on a subsequent buyer the duty to inquire, and willful blindness makes him a buyer in bad faith. A mortgagor must be the absolute owner of the thing mortgaged; a mortgage over property already sold and delivered is invalid as to that portion, and a foreclosure sale transmits nothing under the maxim nemo dat quod non habet. Finally, registration is not a mode of acquiring ownership; it does not vest title but merely confirms one already created.

Disposition

The Supreme Court dismissed the appeal and affirmed in full the trial court's decision ordering the Chans to reconvey the 27.06 square meter portion to the Sinfuegos and to pay moral damages, attorney's fees, and costs.

Remember This

Memorize the line that registration does not vest title but merely confirms one already created or vested, and that a mortgagor must be the absolute owner of the thing mortgaged. Examiners use this case in double sale problems under Article 1544, in questions on buyers in bad faith and adverse claims, and in mortgage and foreclosure questions testing nemo dat quod non habet.