LAW ON SALES | URACA VS. COURT OF APPEALS, 278 SCRA 702, SEPTEMBER 05, 1997

URACA VS. COURT OF APPEALS, 

278 SCRA 702, SEPTEMBER 05, 1997

 

TOPIC/DOCTRINE

A purchaser in good faith and for value is one who buys 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.

 

FACTS

The Velezes were the owners of the lot and commercial building in Cebu while the petitioners were lessees of the said building. The Velezes through Ting wrote a letter offering to sell the subject property for P1,050,000.00.

Uraca went to see Ting about the offer to sell but she was told by the latter that the price was P1,400,000.00 in cash or managers check and not P1,050,000.00 as erroneously stated in their letter-offer after some haggling. Emilia Uraca agreed to the price of P1,400,000.00 but counter- proposed that payment be paid in installments with a down payment of P1,000,000.00 and the balance of P400,000 to be paid in 30 days.

The Velezes sold the lot and commercial building to the Avenue Group for P1,050,000.00. The Avenue Group had actual knowledge of the Velezes’ prior sale of the same property to the petitioners.

Trial court ruled infavor of petitioners. The Court of Appeals set aside the Decision.

 

ISSUE

Whether or not the CA erred in not ruling that petitioners have better rights to buy and own the Velezes property for registering their notice of lis pendens ahead of the Avenue Groups registration of their deeds of sale.

 

RULING

The court held that before the second buyer can obtain priority over the first, he must show that he acted in good faith throughout (i.e., in ignorance of the first sale and of the first buyer’s rights)—from the time of acquisition until the title is transferred to him by registration or failing registration, by delivery of possession. Knowledge gained by the first buyer of the second sale cannot defeat the first buyer’s rights except where the second buyer registers in good faith the second sale ahead of the first, as provided by the Civil Code. Such knowledge of the first buyer does not bar her from availing of her rights under the law, among them, to register first her purchase as against the second buyer. But in converso, knowledge gained by the second buyer of the first sale defeats his rights even if he is first to register the second sale, since such knowledge taints his prior registration with bad faith.

Here, the court held that because the registration by the Avenue Group was in bad faith, it amounted to no “inscription” at all. Hence, the third and not the second paragraph of Article 1544 should be applied to this case. Under this provision, petitioners are entitled to the ownership of the property because they were first in actual possession, having been the property’s lessees and possessors for decades prior to the sale.https://www.instagram.com/lawyalstudent/

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