SPOUSES ADIEL DE LA CENA AND CARIDAD AREVALO DE LA CENA, PETITIONERS, VS. SPOUSES JOSE BRIONES AND HERMINIA LLEDO BRIONES, RESPONDENTS.

De la Cena versus Briones

The Case

This is a petition for review on certiorari brought by the spouses Adiel de la Cena and Caridad Arevalo de la Cena against the spouses Jose Briones and Herminia Lledo Briones. The de la Cenas sued to quiet title, recover possession, and claim damages over a six-meter by nine-meter portion of a registered lot in Daraga, Albay. The Brioneses had earlier bought that same portion from Caridad's parents, the Arevalos. The case matters because it is the Court's clean teaching on the double sale of immovable property under the Civil Code, and on how a buyer's knowledge of a prior sale destroys the good faith that registration presumes.

Procedural History

The de la Cenas filed a complaint for quieting of title, recovery of possession, and damages before the Regional Trial Court of Legazpi City. The trial court ruled for the de la Cenas. It found that a contract of sale had indeed been perfected between the Arevalos and the Brioneses, but held that the sale did not bind the de la Cenas because the acknowledgment receipt was not a public document and the sale was unregistered. It ordered the cloud removed from the de la Cenas' title, required them to reimburse the Brioneses for renovations, and directed the Brioneses to vacate and leave the house behind.

The Brioneses appealed. The Court of Appeals reversed the trial court. It likewise found a perfected and consummated sale, noted the Brioneses' full payment of the purchase price on installment, and concluded that Caridad had known of the sale. It ruled that even though the de la Cenas registered first, their registration was tainted with bad faith. It ordered a survey and the issuance of a new title to the Brioneses for their portion. The Court of Appeals denied the de la Cenas' motion for reconsideration, so they came to the Supreme Court by petition for review on certiorari.

Facts

The whole lot, about one thousand eleven square meters in Bagumbayan, Daraga, Albay, was originally owned by the spouses Antonio and Josefa Arevalo, the parents of Caridad Arevalo de la Cena. In 1969 the Brioneses rented from the Arevalos a house standing on the contested portion. Five months later they bought the house. Then, on the thirty-first of January 1977, they bought the contested portion of the lot itself from the Arevalos and paid one thousand two hundred sixty pesos as downpayment, evidenced by an acknowledgment receipt.

Unknown to the Brioneses, the Arevalos had mortgaged the whole lot to Albay Development Bank. On the twenty-fourth of April 1979, a transfer certificate of title was issued to the de la Cenas, who paid the Arevalos for the whole lot and paid the bank nine thousand pesos representing the balance of the Arevalos' loan. The Brioneses, for their part, continued paying the balance of their six thousand peso purchase price in installments, some weekly and without receipts, with four hundred pesos offset against a debt owed to Herminia's mother, until the last installment in 1980. They remained in actual possession.

When the de la Cenas demanded that the Brioneses vacate the contested portion, the Brioneses refused. Barangay conciliation failed, and the de la Cenas sued.

Issues

• Whether or not there existed a perfected contract of sale between the Arevalos, the predecessors in interest of the de la Cenas, and the Brioneses.
• Whether or not the de la Cenas had knowledge of that prior sale before they registered the property in their own names.

Applicable Provisions

Article 1475 of the Civil Code provides:

The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price.

This is the test the Court applies to the receipt and the installment payments, to show that the sale to the Brioneses was perfected by mere consent.

Article 1477 of the Civil Code provides:

The ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof.

This explains why ownership passed to the Brioneses upon delivery of the contested portion, even before any formal deed.

Article 1544 of the Civil Code 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.

This is the double sale rule the Court applies to the registered lot, where the contest is between two buyers of the same immovable property.

Ruling

On the first issue, the Court held that a perfected contract of sale existed. A contract of sale is perfected by mere consent, upon a meeting of the minds on the object and the price. When the Arevalos accepted the one thousand two hundred sixty pesos as downpayment, they had agreed to the sale of the contested portion to the Brioneses. The contract had in fact been consummated, so its enforcement cannot be barred by the Statute of Frauds, which applies only to an executory agreement. The Court also noted that the de la Cenas did not appeal the trial court's finding of a perfected sale, and are therefore deemed to have accepted it.

On the second issue, the Court held that the de la Cenas were not buyers in good faith. In a double sale of immovable property, ownership belongs to the person who in good faith first recorded it in the registry of property. The requirement is two-fold: acquisition in good faith and registration in good faith. Here the de la Cenas failed to show good faith, because as second buyers they were not ignorant of the first sale to the Brioneses. Caridad herself testified that when they acquired the whole lot in 1979, the Brioneses were already staying on the contested portion, that they had renovated the house after they allegedly purchased it, and that she had been hearing stories even before the demand to vacate that the Brioneses claimed to have bought the property. The Court stated the governing rule:

One who buys real property in actual possession of another should at least inquire as to the right of the ones in possession.

Absent such inquiry, the de la Cenas cannot be regarded as bona fide buyers as against the Brioneses, who were in possession. Registration made after knowledge of a prior sale or of another's claim is a registration in bad faith and confers no right.

Doctrine

First, a contract of sale is perfected by mere consent, upon a meeting of the minds on the object and the price, and ownership passes to the buyer upon actual or constructive delivery. Once consummated, it is not barred by the Statute of Frauds, which reaches only executory agreements.

Second, in a double sale of immovable property under Article 1544, ownership belongs to the buyer who in good faith first records the sale. Good faith has two components: good faith in acquisition and good faith in registration. A buyer who registers after learning of a prior sale or of another person's claim registers in bad faith, and such registration confers no right.

Third, a buyer of real property in the actual possession of another must inquire into the possessor's right. Failing that inquiry, the buyer cannot be considered a buyer in good faith as against the one in possession.

Disposition

The petition was denied for lack of merit. The de la Cenas were ordered to reconvey the six-meter by nine-meter contested portion to the Brioneses, the Register of Deeds of Albay to issue the corresponding title, all expenses shared equally, and the remaining area to stay with the de la Cenas, with costs against them.

Remember This

Memorize this line: a buyer who registers after knowledge of a prior sale registers in bad faith and gains no right, for one who buys property in another's actual possession must first inquire into that possessor's right. Examiners use this case for double sale problems, testing the two-fold good faith requirement and the duty to inquire when the land is visibly occupied by someone other than the seller.