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G.R. No. 170073. October 18, 2010.*

SPOUSES RAMY and ZENAIDA PUDADERA, petitioners, vs.

IRENEO MAGALLANES and the late DAISY TERESA CORTEL
MAGALLANES substituted by her children, NELLY M.
MARQUEZ, ELISEO MAGALLANES and ANGEL
MAGALLANES, respondents.

Property; Sales; Buyer in Good Faith; The buyers cannot be

considered in bad faith because the alleged flaw, the notice of lis pendens,
was already being ordered cancelled at the time of the sale and the
cancellation of the notice terminated the effects of such notice.—Based on
these established facts, petitioners correctly argue that the said notice of lis
pendens cannot be made the basis for holding that they are buyers in bad
faith. Indeed, at the time of the sale of the subject lot by Spouses Natividad
to petitioners on July 7, 1986, the civil case filed by Magallanes against
Spouses Natividad had long been dismissed for lack of jurisdiction and the
said order of dismissal had become final and executory. In Spouses Po Lam
v. Court of Appeals, 347 SCRA 86 (2000), the buyers similarly bought a
property while a notice of lis pendens was subsisting on its title.
Nonetheless, we ruled that the buyers cannot be considered in bad faith
because the alleged flaw, the notice of lis pendens, was already being
ordered cancelled at the time of the sale and the cancellation of the notice
terminated the effects of such notice.
Same; Same; Rules in Case of a Double Sale of Immovables.—Thus, in
case of a double sale of immovables, ownership shall belong to “(1) the first
registrant in good faith; (2) then, the first possessor in good faith; and (3)
finally, the buyer who in good faith presents the oldest title.” However, mere
registration is not enough to confer ownership. The law requires that the
second buyer must have acquired and registered the immovable property in
good faith. In order for the second buyer to displace the first buyer, the
following must be shown: “(1) the second buyer must show that he acted in
good faith (i.e., in ignorance of the first sale and of the first buyer’s rights)
from the time of acquisition until title is transferred to him by registration or
failing registration, by delivery of possession; and (2) the

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* FIRST DIVISION.

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Pudadera vs. Magallanes

second buyer must show continuing good faith and innocence or lack of
knowledge of the first sale until his contract ripens into full ownership
through prior registration as provided by law.”
Same; Same; Torrens Title; Well-settled is the rule that every person
dealing with registered land may safely rely on the correctness of the
certificate of title issued therefor and the law will in no way oblige him to go
beyond the certificate to determine the condition of the property; Exception.
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—One is considered a purchaser in good faith if he buys the property

without notice that some other person has a right to or interest in such
property and pays its fair price before he has notice of the adverse claims
and interest of another person in the same property. Well-settled is the rule
that every person dealing with registered land may safely rely on the
correctness of the certificate of title issued therefor and the law will in no
way oblige him to go beyond the certificate to determine the condition of the
property. “However, this rule shall not apply when the party has actual
knowledge of facts and circumstances that would impel a reasonably
cautious man to make such inquiry or when the purchaser has knowledge of
a defect or the lack of title in his vendor or of sufficient facts to induce a
reasonably prudent man to inquire into the status of the title of the property
in litigation.” “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.”
Same; Same; The burden of proof to establish the status of a purchaser
and registrant in good faith lies upon the one who asserts it; The onus
probandi cannot be discharged by mere invocation of the legal presumption
of good faith.—Petitioners miscomprehend the right to due process. The
records indicate that at no instance during the trial of this case were they
prevented from presenting evidence, including the testimonies of Spouses
Natividad, to support their claims. Thus, they were not denied their day in
court. Petitioners seem to forget that they were the ones who filed this action
to recover ownership and quiet title against Magallanes. If petitioners
intended to bolster their claim of good faith by impleading the Spouses
Natividad in this case, there was nothing to prevent them

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334 SUPREME COURT REPORTS ANNOTATED

Pudadera vs. Magallanes

from doing so. Time and again, we have ruled that the burden of proof to
establish the status of a purchaser and registrant in good faith lies upon the
one who asserts it. This onus probandi cannot be discharged by mere
invocation of the legal presumption of good faith.

PETITION for review on certiorari of the decision and resolution of

the Court of Appeals.
   The facts are stated in the opinion of the Court.
  Tirol & Tirol for petitioners.
  Alfonso Debuque for respondents.

DEL CASTILLO, J.:
One is considered a buyer in bad faith not only when he
purchases real estate with knowledge of a defect or lack of title in
his seller but also when he has knowledge of facts which should
have alerted him to conduct further inquiry or investigation.
This Petition for Review on Certiorari seeks to reverse and set
aside the Court of Appeal’s (CA’s) June 6, 2005 Decision1 in CA-
G.R. CV No. 55850, which affirmed the September 3, 1996
Decision2 of the Regional Trial Court (RTC) of Iloilo City, Branch
39 in Civil Case No. 22234. Likewise assailed is the September 20,
2005 Resolution3 denying petitioners’ motion for reconsideration.

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1  Rollo, pp. 10-17; penned by Associate Justice Pampio A. Abarintos and

concurred in by Associate Justices Mercedes Gozo-Dadole and Ramon M. Bato, Jr.
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2 Records, pp. 271-282; penned by Judge Jose G. Abdallah.

3 Rollo, p. 29; penned by Associate Justice Pampio A. Abarintos and concurred in
by Associate Justices Vicente L. Yap and Ramon M. Bato, Jr.

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Pudadera vs. Magallanes

Factual Antecedents
Belen Consing Lazaro (Lazaro) was the absolute owner of a
parcel of land, Lot 11-E, with an area of 5,333 square meters (sq. m.)
located in the District of Arevalo, Iloilo City and covered by
Transfer Certificate of Title (TCT) No. T-51250. On March 13,
1979, Lazaro sold a 400 sq. m. portion of Lot 11-E to Daisy Teresa
Cortel Magallanes (Magallanes) for the sum of P22,000.00 under a
“Contract To Sale”4 [sic] payable in two years. On July 21, 1980,
upon full payment of the monthly installments, Lazaro executed a
“Deed of Definite Sale”5 in favor of Magallanes. Thereafter,
Magallanes had the lot fenced and had a nipa hut constructed
thereon.
The other portions of Lot 11-E were, likewise, sold by Lazaro to
several buyers, namely, Elizabeth Norada, Jose Macaluda, Jose
Melocoton, Nonilon Esteya, Angeles Palma, Medina Anduyan,
Evangelina Anas and Mario Gonzales.6 On July 14, 1980, Lazaro
executed a “Partition Agreement”7 in favor of Magallanes and the
aforesaid buyers delineating the portions to be owned by each buyer.
Under this agreement, Magallanes and Mario Gonzales were
assigned an 800 sq. m. portion of Lot 11-E, with each owning 400
sq. m. thereof, denominated as Lot No. 11-E-8 in a Subdivision
Plan8 which was approved by the Director of Lands on August 25,
1980.
It appears that the “Partition Agreement” became the subject of
legal disputes because Lazaro refused to turn over the mother title,
TCT No. T-51250, of Lot 11-E to the aforesaid buyers, thus,
preventing them from titling in their names the subdivided portions
thereof. Consequently, Magallanes, along with the other buyers, filed
an adverse claim with the Regis-

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4 Records, p. 28; should be contract to sell as stated in the body of said contract
and as per the terms thereof.
5 Id., at p. 29.
6 Id., at pp. 31-32.
7 Id.
8 Id., at p. 34.

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336 SUPREME COURT REPORTS ANNOTATED

Pudadera vs. Magallanes

ter of Deeds of Ilolilo City which was annotated at the back of TCT
No. T-51250 on April 29, 1981.9 Thereafter, Magallanes and
Gonzales filed a motion to surrender title in Cadastral Case No. 9741
with the then Court of First Instance of Iloilo City, Branch 1 and
caused the annotation of a notice of lis pendens at the back of TCT
No. T-51250 on October 22, 1981.10
On November 23, 1981, Lazaro sold Lot 11-E-8, i.e., the lot
previously assigned to Magallanes and Mario Gonzales under the
aforesaid “Partition Agreement,” to her niece, Lynn Lazaro, and the
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latter’s husband, Rogelio Natividad (Spouses Natividad), for the

sum of P8,000.00.11 As a result, a new title, TCT No. T-58606,12
was issued in the name of Spouses Natividad. Due to this
development, Magallanes pursued her claims against Spouses
Natividad by filing a civil case for specific performance, injunction
and damages. On September 2, 1983, Magallanes caused the
annotation of a notice of lis pendens at the back of TCT No. T-
58606.13 Subsequently, Spouses Natividad subdivided Lot 11-E-8
into two, Lot 11-E-8-A and Lot 11-E-8-B, each containing 400 sq.
m.
The civil case filed by Magallanes was later dismissed by the trial
court for lack of jurisdiction as per an Order dated September 16,
1985 which was inscribed at the back of TCT No. T-58606 on July
7, 1986.14 Four days prior to this inscription or on July 3, 1986,
Spouses Natividad sold Lot 11-E-8-A (subject lot) to petitioner
Ramy Pudadera (who later married petitioner Zenaida Pudadera on
July 31, 1989) as evidenced by a “Deed of Sale”15 for the sum of
P25,000.00. As a conse-

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9  Id., at p. 26.
10 Id., at p. 27.
11 Id., at p. 194.
12 Id., at p. 137.
13 Id.
14 Id., at p. 138.
15 Id., at p. 127.

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Pudadera vs. Magallanes

quence, a new title, TCT No. 72734,16 was issued in the name of the
latter.
Sometime thereafter Magallanes caused the construction of two
houses of strong materials on the subject lot. On April 20, 1990,
petitioners filed an action for forcible entry against Magallanes with
the Municipal Trial Court in Cities of Iloilo City, Branch 2. On July
17, 1991, the trial court dismissed the action.17 It held that
Magallanes was first in possession of the subject lot by virtue of the
“Deed of Definite Sale” dated July 21, 1980 between Lazaro and
Magallanes. After the aforesaid sale, Magallanes filled the lot with
soil; put up a fence; and built a small hut thereon. On the other hand,
the trial court found that when petitioner Ramy Pudadera bought the
subject lot from Spouses Natividad on July 3, 1986, the former had
notice that someone else was already in possession of the subject lot.
Having failed to recover the possession of the subject lot through
the aforesaid forcible entry case, petitioners commenced the subject
action for Recovery of Ownership, Quieting of Title and Damages
against Magallanes and her husband, Ireneo, in a Complaint18 dated
February 25, 1995. Petitioners alleged that they are the absolute
owners of Lot 11-E-8-A as evidenced by TCT No. T-72734; that
Magallanes is also claiming the said lot as per a “Deed of Definite
Sale” dated July 21, 1980; that the lot claimed by Magallanes is
different from Lot 11-E-8-A; and that Magallanes constructed,
without the consent of petitioners, several houses on said lot. They
prayed that they be declared the rightful owners of Lot 11-E-8-A and
that Magallanes be ordered to pay damages.
In her Answer,19 Magallanes countered that she is the absolute
lawful owner of Lot 11-E-8-A; that Lot 11-E-8-A belongs

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16 Id., at p. 5.
17 Id., at pp. 18-25.
18 Id., at pp. 1-4.
19 Id., at pp. 11-17.

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338 SUPREME COURT REPORTS ANNOTATED

Pudadera vs. Magallanes

to her while Lot 11-E-8-B belongs to Mario Gonzales; that

petitioners had prior knowledge of the sale between her and Lazaro;
that she enclosed Lot 11-E-8-A with a fence, constructed a house
and caused soil fillings on said lot which petitioners were aware of;
and that she has been in actual possession of the said lot from March
11, 1979 up to the present. She prayed that TCT No. T-72734 in the
name of petitioner Ramy Pudadera be cancelled and a new one be
issued in her name.
During the pendency of this case, Magallanes passed away and
was substituted by her heirs, herein respondents.
Ruling of the Regional Trial Court
On September 6, 1996, the trial court rendered judgment in favor
of respondents, viz.:

“WHEREFORE, premises considered, judgment is hereby rendered in

favor of the [respondents] and against the [petitioners]:
1. Declaring the [respondent] Daisy Teresa Cortel Magallanes,
substituted by her heirs, Nelly M. Magallanes, Eliseo Magallanes and Angel
Magallanes and Ireneo Magallanes, as the rightful owners of Lot 11-E-8-A,
Psd-06-002539, which is now covered by Transfer Certificate of Title No. T-
72734, still in the name of Ramy Pudadera, situated in the District of
Arevalo, Iloilo City, with an area of 400 square meters more or less;
2.  The [petitioners] spouses Ramy Pudadera and Zenaida Pudadera are
hereby ordered to execute the necessary Deed of Reconveyance in favor of
the above-named parties, namely[,] Nelly M. Magallanes, Eliseo
Magallanes, x x x Angel Magallanes, and Ireneo Magallanes;
3.  Ordering the [petitioners] to pay jointly and severally the
[respondents] the amount of P10,000.00 as attorney’s fees and the costs of
the suit.
SO ORDERED.”20

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20 Id., at p. 282.

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The trial court ruled that respondents are the rightful owners of
the subject lot which was sold by Lazaro to their predecessor-in-
interest, Magallanes, on July 21, 1980. When Lazaro sold the subject
lot for a second time to Spouses Natividad on November 23, 1981,
no rights were transmitted because, by then, Magallanes was already
the owner thereof. For the same reason, when Spouses Natividad
subsequently sold the subject lot to petitioners on July 3, 1986,
nothing was transferred to the latter.
The trial court further held that petitioners cannot be considered
buyers in good faith and for value because after Magallanes bought

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the subject lot from Lazaro, Magallanes immediately took

possession of the lot, and constructed a fence with barbed wire
around the property. The presence of these structures should, thus,
have alerted petitioners to the possible flaw in the title of the
Spouses Natividad considering that petitioners visited the subject lot
several times before purchasing the same. Neither can petitioners
claim that the title of the subject lot was clean considering that a
notice of lis pendens was annotated thereon in connection with a
civil case that Magallanes filed against Spouses Natividad involving
the subject lot. Although the notice of lis pendens was subsequently
cancelled on July 7, 1986, the deed of sale between petitioners and
Spouses Natividad was executed on July 3, 1986 or four days before
said cancellation. Thus, petitioners had notice that the subject
property was under litigation. Since respondents are the rightful
owners of the subject lot, petitioners should execute a deed of
conveyance in favor of the former so that a new title may be issued
in the name of the respondents.
Ruling of the Court of Appeals
On June 6, 2005, the CA rendered the assailed Decision:

“WHEREFORE, with all the foregoing, the decision of the Regional

Trial Court, Branch 39, Iloilo City dated September 3, 1996 in

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Pudadera vs. Magallanes

civil case no. 22234 for Quieting of Title, Ownership and Damages is
hereby AFFIRMED in toto.
  All other claims and counterclaims are hereby dismissed for lack of
factual and legal basis.
No pronouncement as to cost.
SO ORDERED.”21

In affirming the ruling of the trial court, the appellate court

reasoned that under the rule on double sale what finds relevance is
whether the second buyer registered the second sale in good faith,
that is, without knowledge of any defect in the title of the seller.
Petitioners’ predecessor-in-interest, Spouses Natividad, were not
registrants in good faith. When Magallanes first bought the subject
lot from Lazaro on July 21, 1980, Magallanes took possession of the
same and had it fenced and filled with soil. This was made way
ahead of the November 23, 1981 Deed of Sale between Lazaro and
Spouses Natividad. With so much movement and transactions
involving the subject lot and given that Lyn Lazaro-Natividad is the
niece of Lazaro, the appellate court found it hard to believe that the
Spouses Natividad were completely unaware of any controversy
over the subject lot.
The CA, likewise, agreed with the trial court that at the time
petitioners acquired the subject lot from Spouses Natividad on July
3, 1986, a notice of lis pendens was still annotated at the back of
TCT No. T-58606 due to a civil case filed by Magallanes against
Spouses Natividad. Although the case was subsequently dismissed
by the trial court for lack of jurisdiction, the notice of lis pendens
was still subsisting at the time of the sale of the subject lot between
Spouses Natividad and petitioners on July 3, 1986 because the lis
pendens notice was cancelled only on July 7, 1986. Consequently,
petitioners cannot be considered buyers and registrants in good faith

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21 Rollo, p. 16.

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because they were aware of a flaw in the title of the Spouses

Natividad prior to their purchase thereof.

Issues

1. The Court of Appeals erred in not considering the judicial

admissions of Magallanes as well as the documentary
evidence showing that she was claiming a different lot, Lot
No. 11-E-8-B, and not Lot 11-E-8-A which is registered in the
name of petitioners under TCT No. T-72734, consequently, its
findings that Magallanes is the rightful owner of Lot 11-E-8-A
is contrary to the evidence on record;
2. The Court of Appeals erred in applying the principle of
innocent purchasers for value and in good faith to petitioners.
Granting that the said principle may be applied, the Court of
Appeals erred in finding that petitioners are not innocent
purchasers for value;
3. The Court of Appeals erred in affirming the award of
attorney’s fees against the petitioners.22
Petitioners’ Arguments
Petitioners postulate that the subject lot is different from the lot
which Magallanes bought from Lazaro. As per Magallanes’
testimony in the ejectment case, she applied for the zoning permit
for Lot 11-E-8-B and not Lot 11-E-8-A. Further, the tax declarations
submitted in evidence therein showed that Magallanes paid for the
real estate taxes of Lot 11-E-8-B and not Lot 11-E-8-A. Hence, there
is no conflict of claims since petitioners are asserting their rights
over Lot 11-E-8-A while respondents claim ownership over Lot 11-
E-8-B. Moreover, assuming that there was a double sale, the same
did not involve petitioners. The first sale was between Lazaro and
Magallanes while the second sale was between Lazaro and

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22 Id., at p. 44.

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Spouses Natividad. It was erroneous for the appellate court to

conclude that Lyn Natividad was in bad faith simply because she is
the niece of Lazaro. The Spouses Natividad were not impleaded in
this case and cannot be charged as buyers in bad faith without giving
them their day in court. Petitioners claim that respondents should
first impugn the validity of Spouses Natividad’s title by proving that
the latter acted in bad faith when they bought the subject lot from
Lazaro. Petitioners aver that the evidence on record failed to
overcome the presumption of good faith. Considering that Spouses
Natividad were buyers in good faith and considering further that
petitioners’ title was derived from Lazaro, petitioners should,
likewise, be considered buyers in good faith.
Petitioners further argue that the rule on notice of lis pendens was
improperly applied in this case. The trial court’s order dismissing the
civil case filed by Magallanes against Spouses Natividad had long
become final and executory before petitioners bought the subject lot
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from Spouses Natividad. While it is true that the order of dismissal

was annotated at the back of TCT No. T-58606 only on July 7, 1986
or four days after the sale between Spouses Natividad and
petitioners, the cancellation of the notice of lis pendens was a mere
formality. In legal contemplation, the notice was, at the time of the
sale on July 3, 1986, ineffective. Citing Spouses Po Lam v. Court of
Appeals,23 petitioners contend that the then existing court order for
the cancellation of the lis pendens notice at the time of the sale made
them buyers in good faith.
Finally, petitioners question the award of attorney’s fees in favor
of respondents for lack of basis. Petitioners claim that they should be
awarded damages because respondents unlawfully prevented them
from taking possession of the subject lot.

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23 400 Phil. 858; 347 SCRA 86 (2000).

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Respondents’ Arguments
Respondents counter that they are in possession of, and claiming
ownership over the subject lot, i.e., Lot 11-E-8-A, and not Lot 11-E-
8-B. The claim of petitioners that the subject lot is different from
what respondents assert to be lawfully theirs is, thus, misleading.
The subject lot was acquired by respondents’ predecessor-in-
interest, Magallanes, when Lazaro sold the same to Magallanes
through a contract to sell in 1979 and a deed of sale in 1980 after
full payment of the monthly installments.
After executing the contract to sell, Magallanes immediately took
possession of the subject lot; constructed a fence with barbed wire;
and filled it up with soil in preparation for the construction of
concrete houses. She also built a nipa hut and stayed therein since
1979 up to her demise. Respondents emphasize that upon payment
of the full purchase price under the contract to sell and the execution
of the deed of sale, Magallanes undertook steps to protect her rights
due to the refusal of Lazaro to surrender the mother title of the
subject lot. Magallanes recorded an adverse claim at the back of the
mother title of the subject lot and an initial notice of lis pendens
thereon. She then filed a civil case against Lazaro, and, later on,
against Lazaro’s successors-in-interest, Spouses Natividad, which
resulted in the inscription of a notice of lis pendens on TCT No.
51250 and TCT No. T-58606. When petitioners bought the subject
lot from Spouses Natividad on July 3, 1986, the said notice of lis
pendens was subsisting because the court dismissal of said case was
inscribed on the title only on July 7, 1986. Petitioners cannot,
therefore, be considered buyers in good faith.

Our Ruling

We affirm the decision of the CA with modifications.

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344 SUPREME COURT REPORTS ANNOTATED

Pudadera vs. Magallanes

Petitioners and respondents are claiming

ownership over the same lot.
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Petitioners contend that they are claiming ownership over Lot 11-
E-8-A while Magallanes’ claim is over Lot 11-E-8-B. Thus, there is
no conflict between their claims.
The argument is specious.
It is clear that Magallanes is claiming ownership over Lot 11-E-
8-A and not Lot 11-E-8-B. In her Answer to the Complaint, she
alleged that she is “the absolute lawful owner of Lot 11-E-8-A.”24
Her act of fencing Lot 11-E-8-A and constructing two houses of
strong materials thereon further evince her claim of ownership over
the subject lot. Thus, in the forcible entry case which petitioners
previously filed against Magallanes involving the subject lot, the
trial court noted:

“At the pre-trial conference held on June 13, 1990, both parties agreed to
a relocation survey of the lot whereupon the Court commissioned the
Bureau of Lands to undertake a relocation survey of the lot in question.
On October 1, 1990, the Bureau of Lands thru Engr. Filomeno P. Daflo
submitted the relocation survey report with the following findings: x x x
xxxx
5. That it was ascertained in our investigation that the entire lot
occupied by [Magallanes] (lot 11-E-8-A) is the very same lot claimed by
the [petitioners], as pointed out by its representative.”25 (Emphasis
supplied.)

After losing in the aforesaid forcible entry case, petitioners

commenced the subject action for quieting of title and recovery of
ownership over Lot 11-E-8-A. Plainly, both parties are asserting
ownership over the same lot, i.e. Lot 11-E-8-A, not-

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24 Records, p. 11.
25 Id., at p. 19.

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Pudadera vs. Magallanes

withstanding the error in the entries made by Magallanes in her

zoning application and tax declaration forms.
The notice of lis pendens at the back of
the mother title of the subject lot was
already ordered cancelled at the time of
the sale of the subject lot to petitioners,
hence, said notice cannot be made a
basis for finding petitioners as buyers in
bad faith.
A notice of lis pendens at the back of the mother title (i.e., TCT
No. T-58606) of Lot 11-E-8-A was inscribed on September 2, 1983
in connection with the civil case for specific performance, injunction
and damages which Magallanes filed against Spouses Natividad.
This case was subsequently dismissed by the trial court for lack of
jurisdiction in an Order dated September 16, 1985 which has already
become final and executory as per the Certification dated June 16,
1986 issued by the Branch Clerk of Court of the RTC of Iloilo City,
Branch 33.26 The aforesaid court dismissal was, however, inscribed
only on July 7, 1986 or three days after the sale of the subject lot to
petitioners.27
Based on these established facts, petitioners correctly argue that
the said notice of lis pendens cannot be made the basis for holding
that they are buyers in bad faith. Indeed, at the time of the sale of the
subject lot by Spouses Natividad to petitioners on July 7, 1986, the
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civil case filed by Magallanes against Spouses Natividad had long

been dismissed for lack of jurisdiction and the said order of
dismissal had become final and executory. In Spouses Po Lam v.
Court of Appeals,28 the buyers similarly bought a property while a
notice of lis pendens was subsisting on its title. Nonetheless, we
ruled

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26 Id., at p. 138.
27 Id.
28 Supra note 23.

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346 SUPREME COURT REPORTS ANNOTATED

Pudadera vs. Magallanes

that the buyers cannot be considered in bad faith because the alleged
flaw, the notice of lis pendens, was already being ordered cancelled
at the time of the sale and the cancellation of the notice terminated
the effects of such notice.29
This notwithstanding, petitioners cannot be considered buyers in
good faith because, as will be discussed hereunder, they were aware
of other circumstances pointing to a possible flaw in the title of
Spouses Natividad prior to the sale of the subject lot. Despite these
circumstances, petitioners did not take steps to ascertain the status of
the subject lot but instead proceeded with the purchase of the same.
One who buys a property with
knowledge of facts which should put him
upon inquiry or investigation as to a
possible defect in the title of the seller
acts in bad faith.
Lot 11-E-8, of which the subject lot (i.e., Lot 11-E-8-A) forms
part, was sold by Lazaro to two different buyers. As narrated earlier,
Lot 11-E-8 is a portion of Lot 11-E, a 5,333 sq. m. lot covered by
TCT No. T-51250. Lazaro subdivided the said lot and sold portions
thereof to several buyers. One of these buyers was Magallanes who
purchased a 400 sq. m. portion on March 13, 1979. The metes and
bounds of this lot were later delineated in a “Partition Agreement”
dated July 14, 1980 executed by Lazaro in favor of the aforesaid
buyers. As per this agreement, Magallanes and Mario Gonzales were
assigned Lot 11-E-8 comprising 800 sq. m. with each owning a 400
sq. m. portion thereof. This was the first sale involving Lot 11-E-8.
After the aforesaid sale, it appears Lazaro refused to turnover the
mother title of Lot 11-E which resulted in the filing of legal suits by
Magallanes and the other buyers against her (Lazaro). While these
suits were pending, Lazaro sold Lot 11-

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29 Id., at p. 871.

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Pudadera vs. Magallanes

E-8 to her niece Lynn and the latter’s husband Rogelio Natividad on
November 23, 1981. Consequently, a new title, TCT No. T-58606,
was issued covering Lot 11-E-8 in the name of Spouses Natividad.
This was the second sale of Lot 11-E-8.
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Subsequently, Spouses Natividad subdivided Lot 11-E-8 into

two, i.e., Lot 11-E-8-A and Lot 11-E-8-B, with each containing 400
sq. m. On July 3, 1986, they sold Lot 11-E-8-A to petitioners. Lot
11-E-8-A is the 400 sq. m. portion of Lot 11-E-8 which Magallanes
claims to be owned by her pursuant to the aforesaid “Partition
Agreement” while the other half, Lot 11-E-8-B, pertains to the lot of
Mario Gonzales.
The question before us, then, is who between petitioners and
respondents have a better right over Lot 11-E-8-A?
Article 1544 of the Civil Code provides:

“Art. 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.”

Thus, in case of a double sale of immovables, ownership shall

belong to “(1) the first registrant in good faith; (2) then, the first
possessor in good faith; and (3) finally, the buyer who in good faith
presents the oldest title.”30 However, mere registration is not enough
to confer ownership. The law requires that the second buyer must
have acquired and registered the immovable property in good faith.
In order for the second buyer

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30 Spouses Abrigo v. De Vera, 476 Phil. 641, 650; 432 SCRA 544, 551 (2004).

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348 SUPREME COURT REPORTS ANNOTATED

Pudadera vs. Magallanes

to displace the first buyer, the following must be shown: “(1) the
second buyer must show that he acted in good faith (i.e., in
ignorance of the first sale and of the first buyer’s rights) from the
time of acquisition until title is transferred to him by registration or
failing registration, by delivery of possession; and (2) the second
buyer must show continuing good faith and innocence or lack of
knowledge of the first sale until his contract ripens into full
ownership through prior registration as provided by law.”31
One is considered a purchaser in good faith if he buys the
property without notice that some other person has a right to or
interest in such property and pays its fair price before he has notice
of the adverse claims and interest of another person in the same
property.32 Well-settled is the rule that every person dealing with
registered land may safely rely on the correctness of the certificate
of title issued therefor and the law will in no way oblige him to go
beyond the certificate to determine the condition of the property.33
“However, this rule shall not apply when the party has actual
knowledge of facts and circumstances that would impel a reasonably
cautious man to make such inquiry or when the purchaser has
knowledge of a defect or the lack of title in his vendor or of
sufficient facts to induce a reasonably prudent man to inquire into
the status of the title of the property in litigation.”34 “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
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develops that the title was in fact defective, and it appears that he
had such notice of the defect had he

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31 Cheng v. Genato, 360 Phil. 891, 910; 300 SCRA 722, 740 (1998).
32  Hemedes v. Court of Appeals, 374 Phil. 692, 719-720; 316 SCRA 347, 371
(1999).
33 Id., at p. 719; p. 371.
34 Sigaya v. Mayuga, 504 Phil. 600, 614; 467 SCRA 341, 355-356 (2005).

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VOL. 633, OCTOBER 18, 2010 349

Pudadera vs. Magallanes

acted with that measure of precaution which may reasonably be

required of a prudent man in a like situation.”35
In the case at bar, both the trial court and CA found that
petitioners were not buyers and registrants in good faith owing to the
fact that Magallanes constructed a fence and small hut on the subject
lot and has been in actual physical possession since 1979. Hence,
petitioners were aware or should have been aware of Magallanes’
prior physical possession and claim of ownership over the subject lot
when they visited the lot on several occasions prior to the sale
thereof. Thus, the trial court held:

“This Court believes the version of [Magallanes], that when she bought
the property from [Lazaro], she took immediate possession of the 400-
square meter portion and constructed a fence [with] barbed wire
surrounding the said property. She also constructed a house made of nipa,
bamboo and concrete materials. This fact was even confirmed by
[petitioner] Zenaida Pudadera in her testimony.
This Court cannot believe the testimony of [petitioner] Zenaida Pudadera
that they were the ones who constructed the fence surrounding the 400-
square meter portion, because there was already an existing fence made of
bamboos and barbed wire put up by [Magallanes]. When the [petitioners]
therefore, visited the land in question, several times before the purchase,
particularly [petitioner] Ramy Pudadera, he must have seen the fence
surrounding the property in question. He should have been curious why
there was an existing fence surrounding the property? [sic] He should have
asked or verified as to the status of the said property. A real estate buyer
must exercise ordinary care in buying x x x real estate, especially the
existence of the fence in this case which must have [alerted him to inquire]
whether someone was already in possession of the property in question.”36

We find no sufficient reason to disturb these findings. The factual

findings of the trial court are accorded great weight and respect and
are even binding on this Court particularly

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35 Id.,
36 Records, pp. 278-279.

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Pudadera vs. Magallanes

where, as here, the findings of the trial and appellate courts concur.37
Although this rule is subject to certain exceptions, we find none

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obtaining in this case.

Petitioners next argue that since the second sale involves Lazaro
and their predecessor-in-interest, Spouses Natividad, due process
requires that Spouses Natividad should first be allowed to establish
that they (Spouses Natividad) are second buyers and first registrants
in good faith before any finding on petitioners’ own good faith can
be made considering that they (petitioners) merely acquired their
title from Spouses Natividad. Petitioners lament that Spouses
Natividad were not impleaded in this case. Thus, the finding that
petitioners acted in bad faith was improper.
The argument fails on two grounds.
First, as previously explained, the evidence duly established that
petitioners were aware of facts pointing to a possible flaw in the title
of Spouses Natividad when they visited the subject lot on several
occasions prior to the sale. This, by itself, was sufficient basis to rule
that they acted in bad faith. Stated differently, the presence or
absence of good faith on the part of Spouses Natividad during the
second sale involving the subject lot will not erase the bad faith of
petitioners in purchasing the subject lot from Spouses Natividad.
Second, petitioners miscomprehend the right to due process. The
records indicate that at no instance during the trial of this case were
they prevented from presenting evidence, including the testimonies
of Spouses Natividad, to support their claims. Thus, they were not
denied their day in court. Petitioners seem to forget that they were
the ones who filed this action to recover ownership and quiet title
against Magallanes. If petitioners intended to bolster their claim of
good faith by impleading the Spouses Natividad in this case, there
was nothing to prevent them from doing so. Time and again,

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37 Uraca v. Court of Appeals, 344 Phil. 253, 267; 278 SCRA 702, 714 (1997).

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Pudadera vs. Magallanes

we have ruled that the burden of proof to establish the status of a

purchaser and registrant in good faith lies upon the one who asserts
it.38 This onus probandi cannot be discharged by mere invocation of
the legal presumption of good faith.39
In sum, petitioners were negligent in not taking the necessary
steps to determine the status of the subject lot despite the presence of
circumstances which would have impelled a reasonably cautious
man to do so. Thus, we affirm the findings of the lower courts that
they cannot be considered buyers and registrants in good faith.
Magallanes, as the first buyer and actual possessor, was correctly
adjudged by the trial court as the rightful owner of the subject lot
and the conveyance thereof in favor of her heirs, herein respondents,
is proper under the premises. In addition, the trial court should be
ordered to cause the cancellation of TCT No. T-72734 by the
Register of Deeds of Iloilo City and the issuance of a new certificate
of title in the names of respondents.40 This is without prejudice to
any remedy which petitioners may have against Spouses Natividad
and/or Lazaro.
The award of attorney’s fees is improper.
On the issue of the propriety of attorney’s fees which the trial
court awarded in favor of respondents, we are inclined to agree with
petitioners that the same should be deleted for lack of basis. An
award of attorney’s fees is the exception rather than the rule.41 “The
right to litigate is so precious that a penalty should not be charged on

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those who may exercise it erroneously.”42 It is not given merely

because the defendant

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38 Supra note 34 at p. 613; p. 354.

39 Id.
40 Bautista v. Court of Appeals, 379 Phil. 386, 402; 322 SCRA 365, 377 (2000).
41 Albenson Enterprises Corp. v. Court of Appeals, G.R. No. 88694, January 11,
1993, 217 SCRA 16, 31.
42 De la Peña v. Court of Appeals, G.R. No. 81827, March 28, 1994, 231 SCRA
456, 462.

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Pudadera vs. Magallanes

prevails and the action is later declared to be unfounded unless there

was a deliberate intent to cause prejudice to the other party.43 We
find the evidence of bad faith on the part of petitioners in instituting
the subject action to be wanting. Thus, we delete the award of
attorney’s fees.
WHEREFORE, the petition is PARTIALLY GRANTED. The
June 6, 2005 Decision and September 20, 2005 Resolution of the
Court of Appeals in CA-G.R. CV No. 55850 are AFFIRMED with
the following MODIFICATIONS: (1) The Regional Trial Court of
Iloilo City, Branch 39 is ORDERED to cause the cancellation by the
Register of Deeds of Iloilo City of TCT No. T-72734 and the
issuance, in lieu thereof, of the corresponding certificate of title in
the names of respondents, heirs of Daisy Teresa Cortel Magallanes,
and (2) The award of attorney’s fees in favor of respondents is
DELETED.
No pronouncement as to costs.
SO ORDERED.

Corona (C.J., Chairperson), Velasco, Jr., Leonardo-De Castro

and Perez, JJ., concur.

Petition partially granted, judgment and resolution affirmed with

modifications.

Note.—The question of whether or not a person is a purchaser in

good faith is a factual matter that will not be delved into by the
Supreme Court; Exceptions. (Tio vs Abayata, 556 SCRA 175
[2008])
——o0o——

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43 Id.

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