In a dispute over land ownership, the Supreme Court affirmed the principle that a prior unregistered sale of real property prevails over a subsequent sale, even if the latter is registered under the Torrens system. This ruling protects the rights of the first buyer who took possession of the land, reinforcing the importance of conducting thorough due diligence before purchasing property. The Court emphasized that knowledge of a prior interest in the property, even if unregistered, binds subsequent buyers and negates any claim of good faith.

First in Time, First in Right: Resolving a Land Dispute in Agusan del Norte

The case of Cuizon v. Remoto revolves around a parcel of land in Agusan del Norte, where two parties claimed ownership based on different transactions. The petitioners, the Cuizon spouses, relied on a Transfer Certificate of Title (TCT) issued in their name in 1984, stemming from an Extra-Judicial Settlement with Sale. On the other hand, the respondents, the Remoto family, presented a Deed of Sale from 1968, executed by the original landowner in favor of their predecessor, although this deed was never registered. The central question before the Supreme Court was to determine which party had the superior right to the property, considering the competing claims and the principle of priority in real estate transactions.

The Regional Trial Court initially ruled in favor of the Remotos, ordering the Cuizons to reconvey the land. This decision was upheld by the Court of Appeals (CA). Both courts found that the 1968 Deed of Sale, although unregistered, was valid and binding between the parties and their successors-in-interest. The courts also noted that the Cuizons had knowledge of the prior sale before acquiring their title, negating their claim as innocent purchasers for value. This knowledge was a critical factor in the courts’ decisions, demonstrating the importance of actual notice in property disputes.

The Supreme Court, in its analysis, highlighted the principle of prior tempore, potior jure, which translates to “He who is first in time is preferred in right.” This principle is crucial in determining the outcome of cases involving conflicting claims to the same property. The Court emphasized that the only essential requirement for applying this rule is priority in time. In this case, the 1968 Deed of Sale predated the 1983 Extra-Judicial Settlement with Sale, giving the Remotos a superior right to the property. This demonstrates the weight given to the timing of transactions in property law.

The Court also addressed the significance of the notarized Deed of Sale. Documents acknowledged before notaries public are considered public documents, which are admissible in evidence without preliminary proof of their authenticity and due execution. The Court noted that the Cuizons failed to present any convincing evidence to challenge the validity of the 1968 Deed of Sale. This highlights the legal presumption of regularity afforded to notarized documents and the burden of proof required to overcome this presumption.

Moreover, the Supreme Court clarified that registration is not always a prerequisite for the validity of a contract. Registration primarily serves to bind third persons. The Court explained that the Cuizons, as heirs of the original landowner, were not considered third persons in this context and were therefore bound by the unregistered 1968 Deed of Sale. This distinction is important in understanding the scope and limitations of the registration rule in property law.

Article 1544 of the Civil Code provides the rules on double sales:

“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 first duly recorded it in the Registry of Property in good faith.

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.”

The Cuizons argued that they were purchasers in good faith, relying on the Transfer Certificate of Title (TCT) issued in their names. However, the Court found that they had prior knowledge of the 1968 Deed of Sale, which negated their claim of good faith. The Court cited the trial court’s finding that the Remotos had shown the Cuizons a copy of the 1968 Deed of Sale before they purchased the property. This emphasizes that good faith requires not only the absence of actual knowledge but also the exercise of reasonable diligence to ascertain any existing claims or interests in the property.

The Supreme Court reiterated the principle that no one can give what one does not have, expressed in the Latin maxim nemo dat quod non habet. Since the original landowner had already sold the property to the Remotos’ predecessor in 1968, her heirs could not validly transfer the same property to the Cuizons in 1983. This highlights the fundamental principle that a seller can only transfer what they legally own. Therefore, the Extra-Judicial Settlement with Sale executed by the heirs of Placida Tabada-Lambo in favor of the Cuizons was ineffective in transferring ownership of the portion already sold to Angel Remoto.

The Cuizons also argued that the respondents’ action was barred by prescription and laches. However, the Court dismissed this argument, noting that the respondents had been in actual and continuous possession of the property since 1968. The Court held that the right to seek reconveyance, which effectively seeks to quiet title to the property, does not prescribe when the claimant is in actual possession. The Supreme Court has ruled that:

“One who is in actual possession of a piece of land claiming to be the owner thereof may wait until his possession is disturbed or his title is attacked before taking steps to vindicate his right.”

The Court also found that the respondents were not guilty of laches, as they filed their action for reconveyance within a reasonable time after the execution and registration of the 1983 Extra-Judicial Settlement with Sale. This underscores the importance of timely action in asserting one’s rights in property disputes, while also recognizing that possession can serve as a continuous assertion of ownership.

In its final decision, the Supreme Court clarified the extent of the Remotos’ ownership. While affirming the validity of the 1968 Deed of Sale, the Court noted that it only covered Placida Tabada-Lambo’s pro indiviso share in the property. The property originally co-owned by four individuals measured 16 hectares. The Court concluded that the portion sold to Angel Remoto should only pertain to one-fourth of Placida’s share, which is equivalent to 4,000 square meters. This adjustment reflects the principle that a co-owner can only alienate their proportionate share in the common property.

In summary, this case serves as a reminder of the importance of conducting thorough due diligence before purchasing real property. Prospective buyers should investigate not only the registered title but also any unregistered claims or interests that may exist. Actual knowledge of a prior unregistered sale can defeat a subsequent buyer’s claim of good faith, even if they have a registered title. This ruling reinforces the principle of priority in time and the need for vigilance in protecting one’s property rights.

FAQs

What was the key issue in this case?	The key issue was determining who had the better right to the disputed property: the petitioners with a registered title or the respondents with a prior unregistered deed of sale. The Court had to reconcile conflicting claims based on the principles of priority in time and good faith.
What is the principle of prior tempore, potior jure?	Prior tempore, potior jure means “He who is first in time is preferred in right.” This legal principle gives preference to the party whose claim or interest was established earlier in time.
Is registration always required for a contract of sale to be valid?	No, registration is not always required for validity between the parties. Registration primarily serves to bind third persons without notice.
What constitutes bad faith in the purchase of real property?	Bad faith exists when the buyer has actual knowledge of a prior interest or claim on the property, or when the buyer fails to exercise reasonable diligence to inquire about potential claims. This includes being informed of an unregistered sale.
Can a co-owner sell more than their share of a property?	No, a co-owner can only sell their proportionate share of the property. A sale of the entire property by one co-owner without the consent of the others is valid only to the extent of the selling co-owner’s interest.
What is the effect of a notarized deed of sale?	A notarized deed of sale is considered a public document and is admissible in evidence without preliminary proof of its authenticity and due execution. It carries a presumption of regularity.
How does possession affect a claim of prescription?	When a person is in actual possession of a property, claiming ownership, their right to seek reconveyance or quiet title does not prescribe. They can wait until their possession is disturbed before taking action.
What is the significance of due diligence in property transactions?	Due diligence is crucial to uncover any existing claims or interests on the property, including unregistered sales. Failing to conduct due diligence can result in a buyer being deemed in bad faith.
Who has the burden of proof in challenging a notarized deed?	The party challenging the validity of a notarized deed has the burden of presenting clear and convincing evidence to overcome the presumption of regularity.
What does ‘nemo dat quod non habet’ mean in this context?	‘Nemo dat quod non habet’ means no one can give what they do not have. In this case, it means Placida’s heirs could not sell property she had already sold in 1968.

This case underscores the critical importance of conducting thorough due diligence before engaging in any real estate transaction. Understanding the principles of priority, good faith, and the effects of registration can significantly impact the outcome of property disputes. Diligence can mean the difference between securing your investment and facing costly litigation.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Cuizon v. Remoto, G.R. No. 143027, October 11, 2005