WILFREDO T. VAGILIDAD AND LOLITA A. VAGILIDAD, PETITIONERS, VS. GABINO VAGILIDAD, JR. AND DOROTHY VAGILIDAD, RESPONDENTS.

Vagilidad versus Vagilidad

The Case

This is a petition for review on certiorari brought by spouses Wilfredo and Lolita Vagilidad against spouses Gabino Vagilidad, Junior and Dorothy Vagilidad. The respondents sued for annulment of a deed, reconveyance, and damages, claiming that a parcel of land originally owned by Zoilo Labiao, and later sold to Gabino, Junior, had been wrongfully transferred to Wilfredo through a second and fictitious sale. The case matters because it gathers in one decision the rules on co-ownership and the sale of an undivided share, the requisites of a determinate object of a contract, the doctrine of double sale under Article 1544 of the Civil Code, and the consequence of bad faith in registration.

Procedural History

The respondents filed their complaint for annulment of document, reconveyance, and damages with the Regional Trial Court of Antique, Sixth Judicial Region, Branch Eleven. The trial court ruled for the petitioners, finding that Wilfredo and Lolita had duly acquired ownership of the disputed portion, sustaining the validity of the transfer certificate of title issued in Wilfredo's name, and dismissing the complaint as well as the counterclaims. The respondents appealed to the Court of Appeals, which reversed and set aside the trial court's decision. The appellate court declared the deed of sale in favor of Wilfredo null and void, ordered the petitioners to reconvey the lot to the respondents, and awarded moral damages, attorney's fees, and litigation expenses. The petitioners moved for reconsideration, but the motion was denied. The petitioners then came to the Supreme Court by petition for review on certiorari.

Facts

A parcel of land, Lot Number 1253, situated in Atabay, San Jose, Antique, and measuring 4,280 square meters, was owned by Zoilo Labiao under an original certificate of title issued in 1931. Zoilo died sometime in 1931, leaving his children Loreto, Efren, and Priscilla as heirs. On May 12, 1986, Loreto sold a portion of the lot, measuring 1,604 square meters and later known as Lot Number 1253-B, to Gabino Vagilidad, Junior by a deed of absolute sale. On the same date, the Bureau of Internal Revenue certified that Loreto was not required to pay capital gains tax on the transfer because the property was classified as an ordinary asset. In 1987, Gabino, Junior paid the real estate taxes on the portion he had bought, and on July 31, 1987 he filed a petition for the surrender of Loreto's title so that the property could be transferred to his name.

In January 1987, the heirs executed an extrajudicial settlement adjudicating the entire lot to Loreto, and a transfer certificate of title was issued in his name alone. On December 7, 1989, two deeds were executed. By one, Gabino, Junior sold the same portion to Wilfredo. By the other, Loreto himself sold the same portion to Wilfredo. Both deeds were notarized by the same notary and bore the same notarial entry number. The sale to Wilfredo was registered in February 1990, and a new transfer certificate of title was issued in his name. Wilfredo thereafter mortgaged the lot to the Philippine National Bank and later to the Development Bank of the Philippines to secure loans, and both mortgages were subsequently cancelled upon payment.

The respondents then demanded the return of the property, claiming that the deed in Wilfredo's favor was executed without consideration and merely to enable him to obtain a loan, with the understanding that the land would be returned when they needed it. Wilfredo refused, insisting that he was the lawful owner. Hence the complaint.

Issues

• Whether or not the deed of absolute sale between Loreto and Gabino, Junior had a determinate object, and is therefore valid.
• Whether or not Article 1544 of the Civil Code and the doctrine of double sale should be applied in favor of Wilfredo as the buyer who registered his title in good faith.
• Whether or not the sale by Loreto of a definite portion of the co-owned lot before partition is void.
• Whether or not the award of moral damages, attorney's fees, and litigation expenses was proper.

Applicable Provisions

Article 1349 of the Civil Code provides:

Article 1349. The object of every contract must be determinate, as to its kind. The fact that the quantity is not determinate shall not be an obstacle to the existence of the contract, provided it is possible to determine the same, without the need of a new contract between the parties.

This provision governs the petitioners' claim that the first sale lacked a determinate object and was therefore void.

Article 1460 of the Civil Code provides:

Article 1460. A thing is determinate when it is particularly designated or physically segregated from all others of the same class. The requisite that a thing be determinate is satisfied if at the time the contract is entered into, the thing is capable of being made determinate without the necessity of a new or further agreement between the parties.

This provision supplies the test for determining whether the lot sold to Gabino, Junior was sufficiently identified.

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 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 provision is the basis of the petitioners' claim that Wilfredo's prior registration should prevail.

Ruling

On the first issue, the Court held that the object of the sale was determinate. The lot described in the first deed and the lot described in the second deed are the same parcel, and the stray statement in the first deed that the land was not registered under the Land Registration Act was uncorroborated and unexplained. The Court noted that Loreto himself did not deny the existence of the first deed, and that his claim that it was really a mortgage was negated by the tax certification issued on the same date. The object was therefore capable of being made determinate without a new agreement, satisfying Article 1460.

On the second issue, the Court held that Article 1544 did not apply in Wilfredo's favor, because he registered the property in evident bad faith. The two deeds of the same date covered the same lot, were notarized by the same notary, and bore the same notarial entry number. The notary's former secretary testified that she prepared both documents and that the notary instructed her to assign the same document number to both. The Clerk of Court testified that the entry could not be found in the notarial register, which showed unexplained gaps in the document numbers. The Court concluded that Wilfredo knew he could not use the deed from Gabino, Junior, who had no title to transfer, and that the scheme was designed to enable Wilfredo to use the land as loan collateral.

On the third issue, the Court held that the sale by Loreto of a definite portion before partition was not void. A co-owner has full ownership of his undivided share and may alienate it even without the consent of his co-heirs. What Gabino, Junior acquired were the rights Loreto held as co-owner. Since Loreto had already sold the portion in 1986, he no longer owned it when he purportedly sold it to Wilfredo in 1989, and the principle that no one can give what he does not have applies. The Court added that even if Loreto sold more than his aliquot share, the sale would affect only his share, and in any event his co-heirs had waived their rights in his favor in the extrajudicial settlement.

On the fourth issue, the Court sustained the award of moral damages, attorney's fees, and litigation expenses, the petition having failed to show reversible error in the appellate court's findings.

Doctrine

A co-owner has full ownership of his undivided share and may alienate, assign, or mortgage it even before partition and without the consent of his co-heirs. A sale of a definite portion by metes and bounds before partition is not void; it transfers only the vendor's ideal share, and if he sells more than his aliquot share, the sale affects only his share and not those of the non-consenting co-owners. The object of a contract is determinate under Article 1460 if it is capable of being made determinate without a new agreement. Under Article 1544, prior registration prevails only when made in good faith; bad faith in registration defeats the protection of the Torrens title. And under the principle that no one can give what he does not have, a second sale by a vendor who has already parted with the property is void.

Disposition

The petition was denied, and the decision of the Court of Appeals reversing the trial court and ordering reconveyance with damages was affirmed.

Remember This

Memorize the line that a co-owner may sell his undivided share before partition, and that the second sale by one who no longer owns the property is void. Examiners use this case to test Article 1544 good faith and the sale of co-owned property by metes and bounds.