G.R. No. 129760 December 29, 1998RICARDO CHENG,petitioner,vs.RAMON B. GENATO and ERNESTO R. DA JOSE & SOCORRO DA JOSE,respondents.MARTINEZ,J.:This petition for review oncertiorariseeks to annul and set aside the Decision of the Court of Appeals (CA)1dated July 7, 1997 in CA-G.R. No. CV No. 44706 entitled "Ricardo Cheng, plaintiff-appellee vs. Ramon B. Genato, defendant-appellant, Ernesto R. Da Jose & Socorro B. Da Jose, Intervenors-Appellants" which reversed the ruling of the Regional Trial Court, Branch 96 of Quezon City dated January 18, 1994. The dispositive portion of the CA Decision reads:WHEREFORE, based on the foregoing, appealed decision is hereby REVERSED and SET ASIDE and judgment is rendered ordering;1. The dismissal of the complaint;2. The cancellation of the annotations of the defendant-appellant's Affidavit to Annul Contract to Sell and plaintiff-appellee's Notice of Adverse Claim in the subject TCT's, namely, TCT No. T-76.196 (M) and TCT No. T-76.197 (M);3. Payment by the intervenors-appellants of the remaining balance of the purchase price pursuant to their agreement with the defendant-appellant to suspend encashment of the three post-dated checks issued since 1989.4. Ordering the execution by the defendant-appellant Genato of the Deed of Absolute Sale over the subject two lots covered by TCT No. T-76.196 (M) and TCT No. T-76.197 (M) in favor of intervenors-appellants Spouses Da Jose;5. The return by defendant-appellant Genato of the P50,000.00 paid to him by the plaintiff-appellee Cheng, and6. Payment by plaintiff-appellee Cheng of moral damages to herein intervenors-appellants Da Jose of P100,000.00, exemplary damages of P50,000.00, attorney's fees of P50,000.00, and costs of suit; and to defendant-appellant, of P100,000.00 in exemplary damages, P50,000.00 in attorney's fees. The amounts payable to the defendant-appellant may be compensated by plaintiff appellee with the amount ordered under the immediately foregoing paragraph which defendant-appellant has to pay the plaintiff-appellee.SO ORDERED.2The antecedents of the case are as follows:Respondent Ramon B. Genato (Genato) is the owner of two parcels of land located at Paradise Farms, San Jose del Monte, Bulacan covered by TCT No. T-76.196 (M)3and TCT No. T-76.197 (M)4with an aggregate area of 35,821square meters, more or less.On September 6, 1989, respondent Genato entered into an agreement with respondent-spouses Ernesto R. Da Jose and Socorro B. Da Jose (Da Jose spouses) over the above-mentioned two parcels of land. The agreement culminated in the execution of a contract to sell for which the purchase price was P80.00 per square meter. The contract was in a public instrument and was duly annotated at the back of the two certificates of title on the same day. Clauses 1and 3 thereof provide:1. That the purchase price shall be EIGHTY (P80.00) PESOS, Philippine Currency per square meter, of which the amount of FIFTY THOUSAND (P50,000.00) PESOS shall be paid by the VENDEE to the VENDOR as partial down payment at the time of execution of this Contract to Sell.xxx xxx xxx3. That the VENDEE, Thirty (30) DAYS after the execution of this contract, and only after having satisfactorily verified and confirmed the truth and authenticity of documents, and that no restrictions, limitations, and developments imposed on and/or affecting the property subject of this contract shall be detrimental to his interest, the VENDEE shall pay to the VENDOR, NINE HUNDRED FIFTY THOUSAND (P950,00.00) PESOS. Philippine Currency, representing the full payment of the agreed Down Payment, after which complete possession of the property shall be given to the VENDEE to enable him to prepare the premises and any development therein.On October 4, 1989, the Da Jose spouses, not having finished verifying the titles mentioned in clause 3 as aforequoted, asked for and was granted by respondent Genato an extension of another 30 days or until November 5, 1989. However, according to Genato, the extension was granted on condition that a new set of documents is made seven (7) days from October 4, 1989.6This was denied by the Da Jose spouses.Pending the effectivity of the aforesaid extension period, and without due notice to the Da Jose spouses, Genato executed an Affidavit to Annul the Contract to Sell,7on October 13, 1989. Moreover, no annotation of the said affidavit at the back of his titles was made right away. The affidavit contained,inter alia, the following paragraphs;xxx xxx xxxThat it was agreed between the parties that the agreed downpayment of P950,000.00 shall be paid thirty (30) days after the execution of the Contract, that is on or before October 6, 1989;The supposed VENDEES failed to pay the said full downpayment even up to this writing, a breach of contract;That this affidavit is being executed to Annul the aforesaid Contract to Sell for the vendee having committed a breach of contract for not having complied with the obligation as provided in the Contract to Sell;8On October 24, 1989, herein petitioner Ricardo Cheng (Cheng) went to Genato's residence and expressed interest in buying the subject properties. On that occasion, Genato showed to Ricardo Cheng copies of his transfer certificates of title and the annotations at the back thereof of his contract to sell with the Da Jose spouses. Genato also showed him the aforementioned Affidavit to Annul the Contract to Sell which has not been annotated at the back of the titles.Despite these, Cheng went ahead and issued a check for P50,000.00 upon the assurance by Genato that the previous contract with the Da Jose spouses will be annulled for which Genato issued a handwritten receipt (Exh. "D"), written in this wise:10/24/89Received from Ricardo Chengthe Sum of Fifty Thousand Only (P50.000-)as partial for T-76196 (M)T-76197 (M) area 35.821 Sq.m.Paradise Farm, Gaya-Gaya, San Jose Del MonteP70/m2 Bulacanplus C. G. T. etc.Check # 470393 (SGD.) Ramon B. Genato10/24/899On October 25, 1989, Genato deposited Cheng's check. On the same day, Cheng called up Genato reminding him to register the affidavit to annul the contract to sell.10The following day, or on October 26, 1989, acting on Cheng's request, Genato caused the registration of the Affidavit to Annul the Contract to Sell in the Registry of Deeds, Meycauayan, Bulacan as primary entry No. 262702.11While the Da Jose spouses were at the Office of the Registry of Deeds of Meycauayan, Bulacan on October 27, 1989, they met Genato by coincidence. It was only then that the Da Jose spouses discovered about the affidavit to annul their contract. The latter were shocked at the disclosure and protested against the rescission of their contract. After being reminded that he (Genato) had given them (Da Jose spouses) an additional 30-day period to finish their verification of his titles, that the period was still in effect, and that they were willing and able to pay the balance of the agreed down payment, later on in the day, Genato decided to continue the Contract he had with them. The agreement to continue with their contract was formalized in a conforme letter dated October 27, 1989.Thereafter, Ramon Genato advised Ricardo Cheng of his decision to continue his contract with the Da Jose spouses and the return of Cheng's P50,000.00 check. Consequently, on October 30, 1989, Cheng's lawyer sent a letter12to Genato demanding compliance with their agreement to sell the property to him stating that the contract to sell between him and Genato was already perfected and threatening legal action.On November 2, 1989, Genato sent a letter13to Cheng (Exh. "6") enclosing a BPI Cashier's Check for P50,000.00 and expressed regret for his inability to "consummate his transaction" with him. After having received the letter of Genato on November 4, 1989, Cheng, however, returned the said check to the former via RCPI telegram14dated November 6, 1989, reiterating that "our contract to sell your property had already been perfected."Meanwhile, also on November 2, 1989, Cheng executed an affidavit of adverse claim15and had it annotated on the subject TCT's.On the same day, consistent with the decision of Genato and the Da Jose spouses to continue with their Contract to Sell of September 6, 1989, the Da Jose spouses paid Genato the complete down payment of P950,000.00 and delivered to him three (3) postdated checks (all dated May 6, 1990, the stipulated due date) in the total amount of P1,865,680.00 to cover full payment of the balance of the agreed purchase price. However, due to the filing of the pendency of this case, the three (3) postdated checks have not been encashed.On December 8, 1989, Cheng instituted a complaint16for specific performance to compel Genato to execute a deed of sale to him of the subject properties plus damages and prayer for preliminary attachment. In his complaint, Cheng averred that the P50,000.00 check he gave was a partial payment to the total agreed purchase price of the subject properties and considered as an earnest money for which Genato acceded. Thus, their contract was already perfected.In Answer17thereto, Genato alleged that the agreement was only a simple receipt of an option-bid deposit, and never stated that it was a partial payment, nor is it an earnest money and that it was subject to condition that the prior contract with the Da Jose spouses be first cancelled.The Da Jose spouses, in their Answer in Intervention,18asserted that they have a superior right to the property as first buyers. They alleged that the unilateral cancellation of the Contract to Sell was without effect and void. They also cited Cheng's bad faith as a buyer being duly informed by Genato of the existing annotated Contract to Sell on the titles.After trial on the merits, the lower court ruled that the receipt issued by Genato to Cheng unerringly meant a sale and not just a priority or an option to buy. It cannot be true that the transaction was subjected to some condition or reservation, like the priority in favor of the Da Jose spouses as first buyer because, if it were otherwise, the receipt would have provided such material condition or reservation, especially as it was Genato himself who had made the receipt in his own hand. It also opined that there was a valid rescission of the Contract to Sell by virtue of the Affidavit to Annul the Contract to Sell. Time was of the essence in the execution of the agreement between Genato and Cheng, under this circumstance demand, extrajudicial or judicial, is not necessary. It falls under the exception to the rule provided in Article 116919of the Civil Code. The right of Genato to unilaterally rescind the contract is said to be under Article 119120of the Civil Code. Additionally, after reference was made to the substance of the agreement between Genato and the Da Jose spouses, the lower court also concluded that Cheng should be preferred over the intervenors-Da Jose spouses in the purchase of the subject properties. Thus, on January 18, 1994 the trial court rendered its decision the decretal portion of which reads:WHEREFORE, judgment is hereby rendered:1. Declaring the contract to sell dated September 6, 1989 executed between defendant Ramon Genato, as vendor, and intervenors Spouses Ernesto and Socorro Da Jose, as vendees, resolved and rescinded in accordance with Art. 1191, Civil Code, by virtue of defendant's affidavit to annul contract to sell dated October 13, 1989 and as the consequence of intervenors' failure to execute within seven (7) days from October 4, 1989 another contract to sell pursuant to their mutual agreement with defendant;2. Ordering defendant to return to the intervenors the sum of P1,000,000.00, plus interest at the legal rate from November 2, 1989 until full payment;3. Directing defendant to return to the intervenors the three (3) postdated checks immediately upon finality of this judgment;4. Commanding defendant to execute with and in favor of the plaintiff Ricardo Cheng, as vendee, a deed of conveyance and sale of the real properties described and covered in Transfer Certificates of Title No. T-76-196 (M) and T-76.197 (M) of the Registry of Deeds of Bulacan, Meycauayan Branch, at the rate of P70.000/square meter, less the amount of P50,000.00 alreaddy paid to defendant, which is considered as part of the purchase price, with the plaintiff being liable for payment of the capital gains taxes and other expenses of the transfer pursuant to the agreement to sell dated October 24, 1989; and5 Ordering defendant to pay the plaintiff and the intervenors as follows:a/ P50,000.00, as nominal damages, to plaintiff;b/ P50,000.00, as nominal damages, to intervenors;c/ P20,000.00, as and for attorney's fees, to plaintiff;d/ P20,000.00, as and for attorney's fees, to intervenors; ande/ Cost of the suit.xxx xxx xxxNot satisfied with the aforesaid decision, herein respondents Ramon Genato and Da Jose spouses appealed to the courta quowhich reversed such judgment and ruled that the prior contract to sell in favor of the Da Jose spouses was not validly rescinded; that the subsequent contract to sell between Genato and Cheng, embodied in the handwritten receipt, was without force and effect due to the failure to rescind the prior contract; and that Cheng should pay damages to the respondents herein being found to be in bad faith.Hence this petition.21This petition for review, assails the Court of Appeals' Decision on the following grounds: (1) that the Da Jose spouses' Contract to Sell has been validly rescinded or resolved; (2) that Ricardo Cheng's own contract with Genato was not just a contract to sell but one of conditional contract of sale which gave him better rights, thus precluding the application of the rule on double sales under Article 1544, Civil Code; and (3) that, in any case, it was error to hold him liable for damages.The petition must be denied for failure to show that the Court of Appeals committed a reversible error which would warrant a contrary ruling.No reversible error can be ascribed to the ruling of the Court of Appeals that there was no valid and effective rescission or resolution of the Da Jose spouses Contract to Sell, contrary to petitioner's contentions and the trial court's erroneous ruling.In a Contract to Sell, the payment of the purchase price is a positive suspensive condition, the failure of which is not a breach, casual or serious, but a situation that prevents the obligation of the vendor to convey title from acquiring an obligatory force.22It is one where the happening of the event gives rise to an obligation. Thus, for its non-fulfillment there will be no contract to speak of, the obligor having failed to perform the suspensive condition which enforces a juridical relation. In fact with this circumstance, there can be no rescission of an obligation that is still non-existent, the suspensive condition not having occurred as yet.23Emphasis should be made that the breach contemplated in Article 1191 of the New Civil Code is the obligor's failure to comply with an obligation already extant, not a failure of a condition to render binding that obligation.24Obviously, the foregoing jurisprudence cannot be made to apply to the situation in the instant case because no default can be ascribed to the Da Jose spouses since the 30-day extension period has not yet expired. The Da Jose spouses' contention that no further condition was agreed when they were granted the 30-days extension period from October 7, 1989 in connection with clause 3 of their contract to sell dated September 6, 1989 should be upheld for the following reason, to wit;firstly, If this were not true, Genato could not have been persuaded to continue his contract with them and later on agree to accept the full settlement of the purchase price knowing fully well that he himself imposed suchsine qua noncondition in order for the extension to be valid;secondly, Genato could have immediately annotated his affidavit to annul the contract to sell on his title when it was executed on October 13, 1989 and not only on October 26, 1989 after Cheng reminded him of the annotation;thirdly, Genato could have sent at least a notice of such fact, there being no stipulation authorizing him for automatic rescission, so as to finally clear the encumbrance on his titles and make it available to other would be buyers. It likewise settles the holding of the trial court that Genato "needed money urgently."Even assumingin gratia argumentithat the Da Jose spouses defaulted, as claimed by Genato, in their Contract to Sell, the execution by Genato of the affidavit to annul the contract is not even called for. For with or without the aforesaid affidavit their non-payment to complete the full downpayment of the purchase priceipso factoavoids their contract to sell, it being subjected to a suspensive condition. When a contract is subject to a suspensive condition, its birth or effectivity can take place only if and when the event which constitutes the condition happens or is fulfilled.25If the suspensive condition does not take place, the parties would stand as if the conditional obligation had neverexisted.26Nevertheless, this being so Genato is not relieved from the giving of a notice, verbal or written, to the Da Jose spouses for his decision to rescind their contract. In many cases,27even though we upheld the validity of a stipulation in a contract to sell authorizing automatic rescission for a violation of its terms and conditions, at least a written notice must be sent to the defaulter informing him of the same. The act of a party in treating a contract as cancelled should be made known to the other.28For such act is always provisional. It is always subject to scrutiny and review by the courts in case the alleged defaulter brings the matter to the proper courts. InUniversity of the Philippines vs. De Los Angeles,29this Court stressed and we quote:In other words, the party who deems the contract violated may consider it resolved or rescinded, and act accordingly, without previous court action, but it proceeds at its own risk. For it is only the final judgment of the corresponding court that will conclusively and finally settle whether the action taken was or was not correct in law. But the law definitely does not require that the contracting party who believes itself injured must first file suit and wait for a judgment before taking extrajudicial steps to protect its interest. Otherwise, the party injured by the other's breach will have to passively sit and watch its damages accumulate during the pendency of the suit until the final judgment of rescission is rendered when the law itself requires that he should exercise due diligence to minimize its own damages (Civil Code, Article 2203).This rule validates, both in equity and justice, contracts such as the one at bat, in order to avoid and prevent the defaulting party from assuming the offer as still in effect due to the obligee's tolerance for such non-fulfillment. Resultantly, litigations of this sort shall be prevented and the relations among would-be parties may be preserved. Thus, Ricardo Cheng's contention that the Contract to Sell between Genato and the Da Jose spouses was rescinded or resolved due to Genato's unilateral rescission finds no support in this case.Anent the issue on the nature of the agreement between Cheng and Genato, the records of this case are replete with admissions30that Cheng believed it to be one of a Contract to Sell and not one of Conditional Contract of Sale which he, in a transparent turn-around, now pleads in this Petition. This ambivalent stance of Cheng is even noted by the appellate court, thus:At the outset, this Court notes that plaintiff-appellee was inconsistent in characterizing the contract he allegedly entered into. In his complaint.31Cheng alleged that the P50,000.00 down payment was earnest money. And next, his testimony32was offered to prove that the transaction between him and Genato on October 24, 1989 was actually a perfected contract to sell.33Settled is the rule that an issue which was not raised during the trial in the court below cannot be raised for the first time on appeal.34Issues of fact and arguments not adequately brought to the attention of the trial court need not be and ordinarily will not be considered by a reviewing court as they cannot be raised for the first time on appeal.35In fact, both courts below correctly held that the receipt which was the result of their agreement, is a contract to sell. This was, in fact Cheng's contention in his pleadings before said courts. This patent twist only operates against Cheng's posture which is indicative of the weakness of his claim.But even if we are to assume that the receipt, Exh. "D," is to be treated as a conditional contract of sale, it did not acquire any obligatory force since it was subject to suspensive condition that the earlier contract to sell between Genato and the Da Jose spouses should first be cancelled or rescinded a condition never met, as Genato, to his credit, upon realizing his error, redeemed himself by respecting and maintaining his earlier contract with the Da Jose spouses. In fact, a careful reading of the receipt, Exh. "D," alone would not even show that a conditional contract of sale has been entered by Genato and Cheng. When the requisites of a valid contract of sale are lacking in said receipt, therefore the "sale" is neither valid or enfoceable.36To support his now new theory that the transaction was a conditional contract of sale, petitioner invokes the case ofCoronel vs. Court of Appeals37as the law that should govern their Petition. We do not agree. Apparently, the factual milieu in Coronel is not on all fours with those in the case at bar.In Coronel, this Court found that the petitioners therein clearly intended to transfer title to the buyer which petitioner themselves admitted in their pleading. The agreement of the parties therein was definitively outlined in the "Receipt of Down Payment" both as to property, the purchase price, the delivery of the seller of the property and the manner of the transfer of title subject to the specific condition that upon the transfer in their names of the subject property the Coronels will execute the deed of absolute sale.Whereas, in the instant case, even by a careful perusal of the receipt, Exh. "D," alone such kind of circumstances cannot be ascertained without however resorting to the exceptions of the Rule on Parol Evidence.To our mind, the trial court and the appellate court correctly held that the agreement between Genato and Cheng is a contract to sell, which was, in fact, petitioner connection in his pleadings before the said courts. Consequently, both to mind, which read: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 possession; and in the absence thereof, to the person who presents he oldest title, provided there is good faith.However, a meticulous reading of the aforequoted provision shows that said law is not apropos to the instant case. This provision connotes that the following circumstances must concur:(a) The two (or more) sales transactions in issue must pertain to exactly the same subject matter, and must be valid sales transactions.(b) The two (or more) buyers at odds over the rightful ownership of the subject matter must each represent conflicting interests; and(c) The two (or more) buyers at odds over the rightful ownership of the subject matter must each have bought from the very same seller.These situations obviously are lacking in a contract to sell for neither a transfer of ownership nor a sales transaction has been consummated. The contract to be binding upon the obligee or the vendor depends upon the fulfillment or non-fulfillment of an event.Notwithstanding this contrary finding with the appellate court, we are of the view that the governing principle of Article 1544, Civil Code, should apply in this situation. Jurisprudence38teaches us that the governing principle is PRIMUS TEMPORE, PORTIOR JURE (first in time, stronger in right). For not only was the contract between herein respondents first in time; it was also registered long before petitioner's intrusion as a second buyer. This principle only applies when the special rules provided in the aforcited article of the Civil Code do not apply or fit the specific circumstances mandated under said law or by jurisprudence interpreting the article.The rule exacted by Article 1544 of the Civil Code for the second buyer to be able to displace the first buyer are:(1) that 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;39(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.40Thus, in the case at bar, the knowledge gained by the Da Jose spouses, as first buyers, of the new agreement between Cheng and Genato will not defeat their rights as first buyers except where Cheng, as second buyer, registers or annotates his transaction or agreement on the title of the subject properties in good faith ahead of the Da Jose spouses. Moreover, although the Da Jose spouses, as first buyers, knew of the second transaction it will not bar them from availing of their rights granted by law, among them, to register first their agreement as against the second buyer.In contrast, knowledge gained by Cheng of the first transaction between the Da Jose spouses and Genato defeats his rights even if he is first to register the second transaction, since such knowledge taints his prior registration with bad faith."Registration", as defined by Soler and Castillo, means any entry made in the books of the registry, including both registration in its ordinary and strict sense, and cancellation, annotation, and even marginal notes.41In its strict acceptation, it is the entry made in the registry which records solemnly and permanently the right of ownership and other real rights.42We have ruled43before that when a Deed of Sale is inscribed in the registry of property on the original document itself, what was done with respect to said entries or annotations and marginal notes amounted to a registration of the sale. In this light, we see no reason why we should not give priority in right the annotation made by the Da Jose spouses with respect to their Contract to Sell dated September 6, 1989.Moreover, registration alone in such cases without good faith is not sufficient. Good faith must concur with registration for such prior right to be enforceable. In the instant case, the annotation made by the Da Jose spouses on the titles of Genato of their "Contract To Sell" more than satisfies this requirement. Whereas in the case of Genato's agreement with Cheng such is unavailing. For even before the receipt, Exh. "D," was issued to Cheng information of such pre-existing agreement has been brought to his knowledge which did not deter him from pursuing his agreement with Genato. We give credence to the factual finding of the appellate court that "Cheng himself admitted that it was he who sought Genato in order to inquire about the property and offered to buy the same.44And since Cheng was fully aware, or could have been if he had chosen to inquire, of the rights of the Da Jose spouses under the Contract to Sell duly annotated on the transfer certificates of titles of Genato, it now becomes unnecessary to further elaborate in detail the fact that he is indeed in bad faith in entering into such agreement. As we have held inLeung Yee vs. F.L. Strong Machinery Co.:45One who purchases real estate with knowledge of a defect . . . of title in his vendor cannot claim that he has acquired title thereto in good faith as against . . . . an interest therein; and the same rule must be applied to one who has knowledge of facts which should have put him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the title of his vendor. A purchaser cannot close his eyes to facts which should put a reasonable man upon his guard, and then claim that he acted in good faith under the belief that there was no defect in the title of the vendor. 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 afterwards develops that the title was in fact defective, and it appears that he had such notice of the defect as would have led to its discovery had he acted with that measure of precaution which may reasonably be required of a prudent man in a like situation. Good faith, or lack of it, is in its last analysis a question of intention; but in ascertaining the intention by which one is actuated on a given occasion, we are necessarily controlled by the evidence as to the conduct and outward acts by which alone the inward motive may with safety, be determined. So it is that "the honesty of intention," "the honest lawful intent," which constitutes good faith implies a "freedom from knowledge and circumstances which ought to put a person on inquiry," and so it is that proof of such knowledge overcomes the presumption of good faith in which the courts always indulge in the absence of the proof to the contrary. "Good faith, or the want of it, is not a visible, tangible fact that can be seen or touched, but rather a state or condition of mind which can only be judge of by actual or fancied tokens or signs." (Wilder vs. Gilman, 55 Vt. 504, 505; Cf. Cardenas vs. Miller, 108 Cal., 250; Breaux-Renoudet, Cypress Lumber Co. vs. Shadel, 52 La. Ann., 2094-2098; Pinkerton Bros. Co. vs. Bromely, 119 Mich., 8, 10, 17.) (Emphasis ours)Damages were awarded by the appellate court on the basis of its finding that petitioner "was in bad faith when he filed the suit for specific performance knowing fully well that his agreement with Genato did not push through.46Such bad faith, coupled with his wrongful interference with the contractual relations between Genato and the Da Jose spouses, which culminated in his filing of the present suit and thereby creating what the counsel for the respondents describes as "a prolonged and economically unhealthy gridlock47on both the land itself and the respondents' rights provides ample basis for the damages awarded. Based on these overwhelming evidence of bad faith on the part of herein petitioner Ricardo Cheng, we find that the award of damages made by the appellate court is in order.WHEREFORE, premises considered, the instant petition for review is DENIED and the assailed decision is hereby AFFIRMEDEN TOTO.

G.R. No. L-20075November 27, 1968DANAO COAL MINING SYNDICATE, LTD.,applicant,SOUTHWESTERN UNIVERSITY,petitioner-appellee,vs.CENON LAURENTE,oppositor-appellant.Deen Law Offices for petitioner-appellee.Ramon Duterte for oppositor-appellant.REYES, J.B.L.,J.:Forwarded to us for review by the Court of Appeals1is this appeal from two orders issued by the Court of First Instance of Cebu in the latter's capacity as land registration court.2The first was a grant to a buyer'sex partepetition praying,inter alia, for cancellation of annotation of incumbrances on the transfer certificate of title covering a parcel of land it purchased from the heirs of registered owner. The second was a denial of a motion for reconsideration of the first order which was filed by a third person whose interest, purportedly, might have been prejudiced by the cancellation.The transfer certificate of title (TCT No. 7567) in question covered a parcel of land situated in Camansi, Danao, Cebu. The same was issued in 1928 by the Register of Deeds of Cebu in favor of H. M. H. Nemazee, the proprietor of the original applicant, Danao Coal Mining Syndicate, Ltd. On the face thereof were annotated the following incumbrances:(a) the condition that the applicant shall be required to produce from the mining claims referred to a minimum amount of coal equal to an average daily production of two hundred tons of twenty hundred and forty English pounds for every day exclusive of Sundays and holidays, and in the event of the failure of the said Coal Mining Syndicate to produce such amount of coal, to pay to the Government of the Philippine Islands a royalty at the rate of twenty centavos per ton upon each and every ton of the deficiency between the amount actually produced, and the minimum amount herein specified, (b) the use and occupancy of the surface of the said parcel of land in favor of Filomeno del Mar, as administrator of Roque del Mar, deceased; Lazaro Osmea, as administrator of Tomas Osmea, deceased; H. B. Walker, as administrator of Candelario Cuizon, deceased; Juan Medio, Eleno Hungug, Bernardo Cal, Faustino Batucan, Perfecto Lavador, Agustin Tito and Salvador Gonzalez in accordance with the agreement dated at Cebu, November 22, 1913.In a quitclaim deed, dated 14 January 1960, the heirs of Nemazee transferred and quitclaimed in favor of Southwestern University their rights, title, interest and participation in, including their mining and leasehold rights over, said land.Subsequently, Southwestern University petitioned the lower court to order (1) the cancellation of the aforequoted annotation of incumbrances on the ground that the condition and agreement constituting the same were cancelled and rendered inoperative by the outbreak of World War II as well as by the death of all the listed beneficiaries thereof; (2) the registration of the quitclaim deed; and (3) the cancellation of TCT No. 7567 itself, and issuance of a new certificate of title in its name. The petition was immediately granted,3with the lower court dispensing with the usual notice to interested parties. A new certificate of title (TCT No. RT-2164) was thereafter issued in favor of Southwestern University.On 12 September 1960, one Cenon Laurente moved the lower court to reconsider its order of cancellation, specifically of the second portion of the annotation of incumbrances in question. He alleged that Southwestern University had filed an ejectment suit4before another branch of the same court against him and several other occupants of the land covered by TCT No. 7567, over which land, he claimed, he might possibly have an interest as a purchaser of a certain parcel of land situated also in Camansi, Danao, Cebu, from Filomeno del Mar, one of the persons in whose favor "the use of occupancy of the surface of the ... land" covered by said TCT No. 7567 was reserved. Laurente thus argued that the cancellation of the annotation of the incumbrance in favor of Filomeno del Mar and others should not have been ordered without giving notice, at least through publication, to the parties who, like him, being a successor-in-interest of said Filomeno del Mar, might thereby be adversely affected. Laurente's alleged interest was, however, never registered.The motion for reconsideration was denied, as previously intimated. Reasoned the lower court:The Court is in accord with his contention (thatif there should be notice, it should be limited to the parties annotated in the certificate of title itself, and should not be extended to subsequent parties who, even granting that they acquired the interests of these persons annotated in the certificate of title, failed to have their rights accordingly annotated in said certificate of title) of petitioner Southwestern University, and maintains that inasmuch as the law specifically provides notice to parties in interest, such notice if any, should be limited to the parties listed or annotated on the certificate of title. Hence,if such parties are already dead, as had been alleged and substantiated by petitioner Southwestern University, thennotice to said parties would be superfluous or notice would not be necessary. The Court acting within its limited jurisdiction as a Court of Land Registration, can only act on what appears on the face of the certificate of title, and cannot go beyond what appears therein as movant Cenon Laurente would now want this Court to believe. Notice by Publication is not necessary in connection with the this petition which has been duly filed in accordance with Section 112 of Act 496.Granting that the use and occupancy which was annotated in the certificate of title is a real right which could be transferred or disposed of by the person named in the certificate of title to a third person (in this caseCenon Laurente), the lattershould have taken the precaution of having his right annotatedon said (certificate of title).His failure to do so is therefore fatal, in the sense that this Court cannot consider him as a party in interest who is entitled to noticebefore the petition for cancellation of incumbrance could be acted upon ...5We find no error in the order appealed from.Cancellation of registered interests that have terminated and ceased may be ordered by the land registration court under, and in conformity with, section 112 of Act No. 496, otherwise known as the Land Registration Act. The new owner, Southwestern University, of the land herein involved took the right step by petitioning the court under said section to have the registered interests the deceased persons' rights of use and occupancy of the surface of said land ordered cancelled on the ground that the same had terminated and ceased. Notice was no longer necessary for the court to acquire jurisdiction over the petition insofar as the second portion of the annotation of incumbrances was concerned. With the death of all the registered adverse claimants thereof, there were no more parties in interest to be notified.Appelant Laurente was not and can not now be considered a party in interest entitled to notice. He was, as he is now, a stranger representing no adverse claim as to render the petition for cancellation controversial and, thereby, divest the lower court of its jurisdiction. For Laurente's claim avers that the cancellation of the right of the persons recorded as entitled to use and occupancy of the surface of the landcouldaffect him adversely because the interest acquired by him from Filomeno del Mar "might beincluded in that which is referred to in the aforementioned annotation." (Record on Appeal, page 43) This is too vague and unsubstantial to give him standing to claim right to notice or to contest the order of cancellation. Before a claimant can be considered as possessing a genuine adverse interest that would deprive the Registration Court of jurisdiction to proceed under section 112 of Act 496 in the absence of notice to him, there must be a showing of theprima facietruth and validity of such adverse interest. Laurente has failed to make such a showing. His motion merely speaks of apossibilityof being prejudiced. He has not produced and deed of conveyance from Filomeno del Mar, or secondary evidence thereof. A mere verbal agreement will not do here; there must be a public instrument in order to affect a stranger (such as the holder of the certificate of title or his successors in interest). For Article 1280, No. 1, of the Civil Code of 1889 (in force in 1920 when Laurente claims to have acquired title) prescribes:The followingmustbe reduced towritingin apublic instrument:1. Acts or contracts whose object is the creation,transmission, modification or extinction of rights which affect immovable property. (Emphasis supplied)And to affect registered land, such as is covered by the Certificates of Title of appellee Southwestern University and its predecessor in interest (TCT No. 7567 and RT-2164), the public document above referred to must be recorded and annotated in the certificate, as pointed out in the appealed order; and admittedly, there is no record of any deed in favor of Laurente. It is elementary that, under the Torrens system, registration is the operative act that binds the parties thereto, without affecting the rights of strangers to such contract (Act 496, section 51) unless they have actual knowledge thereof,6which is not alleged here.What is worse is that Laurente allowed more than 20 years to elapse without asserting the alleged conveyance in his favor, when a period of 10 years sufficed under Act 190 (then in force) to bar any claim to or over real property. Nor has Laurente adequately explained such laches on his part..He avers that he could not cause the recording of the conveyance in his favor because the registered owner resided in Hongkong. This is no excuse, for the claimant could have asked the proper court to have the owner summoned by publication. Laurente also pleads that the records of the Cebu Register of Deeds were destroyed in the last war. But the war only broke out in 1941, and the enemy occupied Cebu in 1942, while Laurente's vendor, Filomeno delo Mar, ceased to be administrator of the Estate of Roque del Mar as far back as 1920, when the proceedings were closed (Record on Appeal, page 61). Thus, Laurente unaccountably permitted 21 years to elapse without attempting to record or enforce the alleged conveyance in his favor.All the foregoing circumstances cast a dense pall of doubt over the genuineness and validity of Laurente's adverse claim, and fully justify its rejection by the lower court.WHEREFORE, the orders appealed from are sustained and affirmed. Costs against appellant Cenon Laurente in all instances.

G.R. No. L-79787 June 29, 1989APOLONIO EGAO AND BEATRIZ EGAO,petitioners,vs.THE HONORABLE COURT OF APPEALS (NINTH DIVISION), SEVERO DIGNOS AND SEVERO BONTILAO,respondents.Eliud J. Pailagao for petitioners.Guerrero A. Adaza for private respondents.PADILLA,J.:This is a land dispute which culminated in the filing by private respondents Severo Dignos and Severo Bontilao of a verified complaint for Quieting of Title and/or Recovery of Possession and Ownership before the RTC of Manolo Fortich, Bukidnon,*against petitioners Apolonio and Beatriz Egao.Private respondents' complaint alleged that they are the legitimate owners and possessors of two (2) parcels of land situated at Lonocan, Manolo Fortich, Bukidnon, per deed of absolute sale dated 21 December 1979 which, among others, recited thus:WHEREAS, the abovementioned Parcels of land Lot No. 662 is covered by Original Certificate of Title No. P-3559 Free Patent No. 298112 registered in the name of APOLONIO EGAO married to Beatriz Menosa and Lot No. 661 is covered by Original Certificate of Title No. P-3558 Free Patent No. 303249 registered in the name of RAULITA CONEJOS married to Pedro Conejos, all transcribed in the Registration Book in the Register of Deeds for the Province of Bukidnon;WHEREAS, Lot No. 662 has been transferred in ownership from BEATRIZ MENOSA EGAO, married to Apolonio Egao in favor of ROBERTO N. MARFORI per Deed of Absolute Sale executed before Tommy C. Pacana, Notary Public of Cagayan de Oro City entered in his Notarial Registry under Doc. No. 75; Page No. 15; Book V Series of 1965; and Lot No. 661 likewise has been transferred in ownership from RAULITA R. CONEJOS in favor of ROBERTO N. MARFORI per Deed of Absolute Sale executed before Tommy C. Pacana, Notary Public of Cagayan de Oro City, dated June 3, 1965, entered in his Notarial Registry under Doc. No. 20; Page 4; Book V; Series of 1965.WHEREAS, the VENDEES herein is [sic] aware of the fact that the Certificate of Title over the abovementioned parcels of land have not yet been transferred in favor of ROBERTO N. MARFORI except for the tax declarations but that the VENDOR herein is in actual, physical, continuous, uninterrupted, and adverse possession of the above described parcels of land free from all liens and encumbrances whatsoever;1Allegedly, upon purchase of Lot No. 662 from Roberto Marfori, improvements were introduced and taxes paid by private respondents. Sometime in June 1983, herein petitioners allegedly occupied illegally portions of the land.2Petitioners' answer to the complaint asserted that Apolonio Egao is the registered owner of the parcel of land known as Lot No. 662, Pls 854 with an area of 3,451 sq. meters evidenced by OCT No. P-3559 issued by the Register of Deeds of Bukidnon pursuant to Free Patent No. 298112 dated 12 August 1965; that he (Apolonio Egao) and his family have been in actual, physical, adverse, open and continuous possession thereof even before the issuance to him of the free patent; that the land has never been sold by reason of the prohibition against alienation under Commonwealth Act No. 141 (Public Land Law); and that the instant case was the fourth in a series filed against the Egaos and is part of respondents' scheme to grab said parcel of land from the petitioners.Judge Felicidario M. Batoy ruled in favor of the Egaos, herein petitioners (defendants in the courta quo), ordering respondent Severo Bontilao (plaintiff in the court a quo) to immediately deliver to the Egaos the owner's duplicate copy of Original Certificate of Title No. P-3559. Said trial judge held:In the instant case, granting arguendo, that defendants executed the 2 documents in favor of Marfori (Exhs. A & B) after the filing of the application for free patent but before the issuance of the latter, without the approval of the Director of Lands, upon issuance of Free Patent No. 29811 2 on August 12, 1965, the said deeds of sale (Exhs. A & B) wereipso factocancelled or superseded by said free patent. Moreover, it appears from the evidence that defendants never vacated or abandoned their possession of Lot No. 662 as they have continuously lived on said lot since 1950, a fact admitted by the plaintiffs themselves. And as long as Original Certificate of Title No. P-3559 remains in the name of defendant Apolonio Egao, married to Beatriz Menoza Egao, this is the ultimate and best evidence of title granted by the government which must be honored and respected by the courts. In a nutshell, the plaintiffs miserably failed to present or show any title to Lot No. 662, PLS-854 which should be quieted or freed from any cloud of doubt as prayed for in their complaint and they further failed to show that they are entitled to the ownership and possession to Lot No. 662, PLS-854.3Private respondents went to the Court of Appeals in CA-G.R. No. 09539. Setting aside the RTC decision, the appellate court**held, in part, thus-That the land is titled in the name of defendant Apolonio Egao is not in question. The main point in issue is whether defendants could validly sell the land to Marfori who in turn transferred ownership thereof to the plaintiff.4Marfori and Egao were both held by the Court of Appeals inpari delictofor violating the five (5) year restriction under Sec. 118, Commonwealth Act No. 141 as amended by Act No. 496 against encumbrance or alienation of lands acquired under a free patent or homestead; hence, they cannot, according to the appellate court, seek affirmative relief, but respondents on the other hand were declared innocent purchasers for value who obtained the owner's duplicate copy of the OCT (still in the name of the Egaos) from Marfori who transferred to them (respondents) physical possession of the property. Finally, the Court of Appeals held:WHEREFORE, the decision appealed from is hereby SET ASIDE and a new one is rendered:1. Declaring the plaintiffs as the absolute owners of the land known as Lot No. 662, Pls-854 of the Land Registry of Bukidnon;2. Ordering the Register of Deeds of Bukidnon to effect the cancellation of Original Certificate of Title No. P-3559 in the name of Apolonio Egao and in lieu thereof, another one be issued in the names of plaintiffs, after payment of the proper fees;3. Ordering the defendants to surrender peaceful possession of the land to plaintiffs and to desist from further disturbing the possession over the land of plaintiffs;4. Ordering the defendants to pay the costs.SO ORDERED.5Petitioners turn to this Court for relief, assailing the appellate court for allegedly committing grave abuse of discretion amounting to lack of jurisdiction in holding that:a. Petitioners sold Lot 662 to Roberto Marfori;b. It was only in 1983 when Petitioners wrested possession over the land from private respondents;c. Petitioners never denied the sales made in favor of Marfori, in their answer;d. Private Respondents are "innocent purchasers for value.6and/or for allegedly deciding questions of substance not in accordance with law and/or applicable decisions of this Court.Without giving due course to the petition, the Court required respondents to comment.7After comment, the Court resolved to require petitioners to file a reply, which they did. Respondents filed a rejoinder. Considering the allegations, issues and arguments adduced, the Court resolved to give due course to the petition. Upon submission by the parties of their respective memorandum, the petition was submitted for decision.8Validity of the Deeds of Sale executed between Marfori (as purchaser) and the petitioners (as sellers) is the main issue to be resolved, in determining respondents' right over the disputed land, the respondents being the transferees of Marfori.It is undisputed that Free Patent No. 298112 was issued to petitioner Apolonio Egao over Lot No. 662 on 12 August, 1965. Sec. 118 of Commonwealth Act No. 141, as amended, prohibits the alienation or encumbrance, within a period of five (5) years from the date of issuance of the patent, of lands acquired under free patent or homestead. Assuming,arguendo, the authenticity of the Deeds of Sale executed by the Egaos in favor of Marfori over portions of Lot No. 662 (the land in question), dated 7 May 1964, 14 January and 6 October 1965, it clearly appears that all deeds were executed within the prohibited period of five (5) years. As correctly found by the appellate court-Section 124 of the Public Land Act provided [sic] that any acquisition, conveyance, abenation, transfer or other contract made or executed inviolation of any of the provisions of Sections 118,121,120,122 and 123 of this Act shall be unlawful, null and void from its execution and shall produce the effect of annulling and cancelling the grant, title, patent or permit originally issued, recognized or confirmed, actually or prescriptively, and cause the reversion of the property and its improvements to the state.9Petitioners deny the authenticity and due execution of the notarized deeds of sale in favor of Marfori, asserting continued ownership over the land by virtue of a Torrens Certificate of Title issued in their name. While the Court is not satisfied with respondents' explanation of their failure to present the notaries public (who were residents of a neighboring province) to affirm their participation in the preparation of the Deeds, the Court also finds as insufficient the mere denials by petitioners as to due execution and authenticity of said Deeds of Sale. A notarial document is evidence of the facts in clear unequivocal mariner therein expressed. It has in its favor the presumption of regularity To contradict all these there must be evidence that is clear, convincing and more than merely preponderant.10The question of authenticity being one of fact, the Court will not disturb the conclusions of the Court of Appeals on the matter.Original Certificate of Title No. P-3559 over the land in dispute was issued on 1 March 1966, a few monthsafterthe execution by the Egaos of the last Deed of Sale in favor of Marfori.11The OCT is registered in the name of the Egaos, herein petitioners.A Torrens title, once registered, cannot be defeated, even by adverse open and notorious possession. A registered title under the Torrens system cannot be defeated by prescription. The title, once registered, is notice to the world. All persons must take notice. No one can plead ignorance of the registration.12Contrary to the appellate court's conclusion, respondents are not innocent purchasers for value.13An "innocent purchaser for value" is deemed, under the Torrens system, to include an innocent lessee, mortgagee or other encumbrancer for value.14Where a purchaser neglects to make the necessary inquiries and closes his eyes to facts which should put a reasonable man on his guard as to the possibility of the existence of a defect in his vendor's title, and relying on the belief that there was no defect in the title of the vendor, purchases the property without making any further investigation, he cannot claim that he is a purchaser in good faith for value.15Furthermore, a private individual may not bring an action for reversion or any action which would have the effect of cancelling a free patent and the corresponding certificate of title issued on the basis thereof, with the result that the land covered thereby will again form part of the public domain, as only the Solicitor General or the officer acting in his stead may do so.16The rule ofpari delicto non oritur actio(where two persons are equally at fault neither party may be entitled to relief under the law), admits of exceptions and does not apply to an inexistent contract, such as, a sale voidab initiounder the Public Land Act, when its enforcement or application runs counter to the public policy of preserving the grantee's right to the land under the homestead law.17Sec. 51, par. 2 of the Property Registration Decree (PD 1529), formerly Sec. 50 of the Land Registration Act (Act No. 496) expressly provides that the registration of the Deed is the operative act that binds or affects the land insofar as third persons are concerned. The law requires a higher degree of prudence from one who buys from a person who is not the registered owner, when the land object of the transaction is registered land. While one who buys from the registered owner need not look behind the certificate of title, one who buys from another who isnotthe registered owner is expected to examine not only the certificate of title but all factual circumstances necessary for him to determine if there are any flaws in the title of the transferor, or in his capacity to transfer the land. Failing to exercise caution of any kind whatsoever is tantamount to bad faith.18Deeds of sale of patented lands, perfected within the prohibited five (5) year period are null and void (Sec. 124, Public Land Act). No title passed from the Egaos to Marfori which could be validly transferred to herein respondents Bontilao and Dignos.Nemo dat quod non habet(nobody can dispose of that which does not belong to him).19While the government has not taken steps to assert its title, by reversion, to a homestead sold in violation of the Public Land Act, the vendor or his heirs is better entitled to the possession of the said, the vendee being in no better situation than any intruder.20Accordingly, respondents who are not innocent purchasers for value have no standing to question petitioners' right to the land and to file an action for quieting of title.WHEREFORE, the appealed decision of the Court of Appeals in CA G.R. CV No. 09539 is REVERSED and SET ASIDE. Meanwhile, petitioners as registered owners are entitled to remain in physical possession of the disputed property. Respondents are ordered to deliver the owner's duplicate copy of the OCT (No. P-3559) to petitioners, without prejudice to an action for reversion of the land, which may be instituted by the Solicitor General for the State.

G.R. Nos. L-48971 & 49011 January 22, 1980PACIFICO GARCIA,petitioner-appellant,vs.BENJAMIN M. GOZON, TECLA GUTIERREZ, ROSARIO FELIX, PAULINO D. BUENAVENTURA, RAYMUNDO DIONISIO, VIRGILIO AUSTRIA and MARCEON VICENCIO,respondents-appellees;PHILIPPINE NATIONAL BANK,petitioner-appellant,vs.COURT OF APPEALS (Third Division), CAROLINA LAPUZ- GOZON, assisted by her husband BENJAMIN M. GOZON, TECLA GUTIERREZ, ROSARIO FELIX, PAULINO D. BUENAVENTURA, RAYMUNDO DIONISIO, VIRGILIO AUSTRIA and MARCEON VICENCIO,respondents-appellees.AQUINO,J.:This case is about the issuance of two or more transfer certificates of title to different persons forthe same lots, or subdivisions thereof, due to the fact that the original title was allegedly not cancelled when the first transfer certificates of title were issued to replace the original title. The factual background is as follows:1. On August 9, 1918, a deed of sale for two parcels of land, E and G (with a total area of more than seven hectares) of the Hacienda Maysilo, located in Malabon, Rizal and covered by Original Certificate of Title No. 983, was executed in favor of Ismael Lapus abona fideoccupant thereof. The deed was executed pursuant to an order of the Court of First Instance of Rizal in Civil Case No. 391,Negao vs. Vidal, a partition proceeding involving the said hacienda (See Bustamante vs. Tuason, 47 Phil. 433, 434).2. The deed of sale was presented for registration at two-twenty five in the afternoon of January 15, 1920 and was recorded as Primary Entry No. 7710. That deed of sale itself contains the following entriesshowing that it was annotated on the back of OCT NO. 983:Presentado en este Registro a las 2:25 de la tarde del dia de hoy segun el Asiento No. 7710 de tomo 10 del Libro Diario, Pasig, Rizal, Enero 15, 1920.Register of Deeds (Exh. B-12)Inscrito el documento que precede al dorso del certificado de Titulo Original No. 983 del Tomo A-9, de inscritor en las paginas 113 y 114 ambos del libro T-25 de registro como certificados de titulo Nos. 4910 y 4911, archivado en el legajo T-#4910. Pasig, Rizal, Enero 15, 1920.:Register of Deeds (Exh. B-1).However, it seemed that, contrary to the foregoing entry and the official routine or standard operating procedure, the deed of sale was not annotated on OCT No. 983 and that, consequently, that title was apparently not cancelled. Why that annotation did not appear in OCT No. 983 and why there was no notation of the cancellation of that title, as it appeared in1962, is a mystifying circumstance in this case.3. As a result of the registration of that deed of sale, Transfer Certificate of 'Title No. 4910 was issued to Lapus for the two parcels of land, E and G, and I Transfer Certificate of Title No. 4911 was issued for the remaining five lots covered by OCT No. 983 (which embrace an area of more than two hundred fifty-eight hectares registered in the names of more than twenty-six-co-owners). TCT Nos. 4910 and 4911 contain the following entries: "Transfer from No. 983. Originally registered on the 29th day of January, in the year 1917 in Book No. A-9, page 215, of the said Province of Rizal, pursuant to a decree entered in Case No. 3850."4. Lapus on different occasions mortgaged the two parcels of land to secure his obligations to the Philippine National Bank, the Government and the Philippine Trust Company. He died in 1951. The two parcels of land were inherited by his daughter, Carolina Lapuz-Gozon. She became the registered owner of the two lots. She subdivided them into fifty-five lots. She sold some of the subdivision lots to her co-respondents-appellees herein. Lapus and his successors-in-interest have been in possession of the two parcels even before 1910 or for more than seventy years.5. Meanwhile,in 1962, certain. alleged heirs (collectively known as the Riveras) of the late Maria de la Concepcion Vidal filed a motion in Land Registration Cases Nos. 4429 and 4496 of the Court of First Instance of Rizal, alleging that they were deprived of their participation in the Hacienda Maysilo covered by OCT No. 983 and for other titles and that, since only OCT No. 983 was supposedly unencumbered, all the land covered by that title should be adjudicated to them. The court granted the motion. It should be stressed that OCT No. 983 appears to have remained uncancelled notwithstanding the sale to Lapus of two parcels covered by it and the fact that it had been replaced by TCT Nos. 4910 and 4911.6. On June 7, 1963, OCT No. 983 was definitely cancelled and in lieu thereof Transfer Certificate of Title No. 112236 was issued to the Riveras. Later, Lots 5 and 7 of the said title (corresponding to parcels E and G which were sold to Ismael Lapus in 1918 as stated earlier) were assigned by Bartolome Rivera to Sergio Cruz and Pacifico Garcia and TCT Nos. 112743 and 112742 were issued to Cruz and Garcia, respectively. Thus, two sets of transfer certificates of title for Lots E and G or 5 and 7, originally covered by OCT No. 983, were issued, one to the heir of Ismael Lapus and another set to the successors-in-interest of the Riveras.7. On October 22, 1964, Garcia subdivided Lot 7 (G) into Lots A and B. Garcia retained Lot A and obtained TCT No. 134958 for it. He assigned Lot B to Antonio Muoz on November 5, 1964. As a consequence of the assignment, TCT No. 112742 was cancelled and TCT No. 134957 was issued to Muoz. In 1965, he mortgaged Lot B to the Associated Banking Corporation to secure a loan of P200,000.8. On the other hand, on July 17, 1964 Cruz sold to Santiago Go Lot 5 (E) covered by TCT No. 112743. TCT No. 131329 was issued to Go on August 25,1964. On December 23, 1964, Go mortgaged Lot 6 to the Philippine National Bank (PNB) to secure a loan of P50,000 which was later increased to P60,000.9. Muoz and Go did not pay their mortgage debts. The two banks foreclosed the mortgages. The PNB bought the mortgaged lot at the auction sale held on May 4. 1967. The sheriff issued to it a certificate of sale dated May 19, 1967 but at that time there was already a notice oflis pendensannotated on the title of the mortgaged lot. TCT Nos. 212163 and 236881 for the mortgaged lots were issued to the Associated Banking Corporation and the Philippine National Bank, respectively.10. The Riveras and their successors-in-interest have never set foot on the disputed lots.11. Mrs. Gozon later learned that the Riveras and their successors-in-interest had acquired the land (more than two hundred fifty-eight hectares) covered by OCT No. 983. Her lawyer and a surveyor informed her that parcels E and G, which she inherited from her father, were identical to Lots 5 and 7 which were conveyed to Cruz and Garcia. She registered adverse claims on the titles covering Lots 5 and 7. On December 27, 1965 she and the persons to whom she had transferred portions of parcels E and G filed with the Court of First Instance of Rizal at Caloocan City against the Riveras, Cruz, Muoz, Garcia, Associated Banking Corporation, PNB and others an action to quiet title and for damages.12. A notice oflis pendenswas annotated on January 25, 1966 on the titles of Garcia, Muoz and Go. The notice oflis pendenswas annotated on the title of the PNB when the sale in its favor was registered on December 13, 1969.13. The trial court in its decision of July 30, 1975 declared valid TCT Nos. 141802 to 141855 and 143512 issued to Mrs. Gozon and her co-plaintiffs. It voided TCT No. 112235 issued to the Riveras and all titles and transactions emanating therefrom insofar as those titles covered the lots embraced in plaintiffs' titles. The Riveras were ordered to pay the plaintiffs twenty thousand pesos as attorney's fees.14. The trial court also ordered Muoz to pay the Associated Banking Corporation, in the event that the bank would be evicted from the lot covered by TCT No. 212153, two hundred sixty-five thousand seventy-two pesos and fifteen centavos with twelve percent interestper annumfrom the date of the eviction plus ten thousand pesos as attorney's fees.15. Santiago Go was ordered to pay the PNB, should it be evicted from the lot covered by TCT No. 236881, the sum of sixty thousand pesos plus nine percent interestper annumfrom the date of the eviction and six thousand pesos as attorney's fees.16. That judgment of the trial court was affirmed by the Court of Appeals in its decision of May 25, 1978. Garcia and the PNB appealed from that decision. The Associated Banking Corporation, now the Associated Citizens Bank, tried to appeal but it was not able to file its petition for review (L-49010).Garcia contends that the Court of Appeals erred in not holding that his title is valid and that the titles of Ismael Lapus and his successors-in-interest lost their right to the disputed lots due to their negligence or inaction.The issue is whether the1920title issued to Lapus and the titles derived therefrom should prevail over the1963title issued to the Riveras and the subsequent titles derived from it. Should Lapus' title prevail even if it was not annotated by the register of deeds on the anterior or parent title which was not cancelled before 1963? It was that noncancellation which led to the issuance of the duplicative title to the Riveras and eventually to the execution of the controversial mortgages and foreclosure sales to the two banks.We hold that the two appeals have no merit. The title of Lapus and the titles derived therefrom should be given effect. The title of the Riveras and the titles springing from it are void.There can be no doubt that Lapus was an innocent purchaser for value. He validly transmitted to his successors-in-interest his indefeasible title or ownership over the disputed lots or parcels of land. That title could not be nullified or defeated by the issuance forty-three Years later to other persons of another title over the same lots due to the failure of the register of deeds to cancel the title preceding the title issued to Lapuz. This must be so considering that Lapus and his interest remained in possession of the disputed successors in lots and the rival claimants never possessed the same."The general rule is that in the case of two certificates of title, purporting to include the same land,the earlier in date prevail,whether the land comprised in the latter certificate be wholly, or only in part, comprised in the earlier certificate" (Hogg, Australian Torrens System 823, citing cases and cited in Legarda and Prieto vs. Saleeby, 31 Phil. 590, 595)."Where two certificates (of title) purport to include the same land, the earlier in date prevails. ... In successive registrations, where more than once certificate is issued in respect of a party estate or interest in land, the Person claiming under the prior certificate is entitled to the estate or interest; and that person is deemed to hold under theprior certificatewho is the holder of, or whose claim is derived directly or indirectly from the person who was the holder of the earliest certificate issued in respect thereof " (Niblack, Analysis of the Torrens System page 237, cited in Legarda and Prieto vs. Saleeby,supra,pages 595-6).And the rule that in case of double registration the owner of the earlier certificate is the owner of the landapplies to the successive vendees of the owners of such certificates. "The vendee of the earlier certificate would be the owner as against the vendee of the owner of the later certificate" (Legarda and Prieto vs. Saleeby,supra, pages 597-9).It is settled that is this jurisdiction the maximprior est in tempore, potior est in jure(he who is first in time is preferred in right) is followed in land registration matters (La Urbana vs. Bernardo, 62 Phil. 790, 806).Appellant Garcia invokes the ruling that the mere entry of a document in the day or entry book without noting it on the certificate of title is not a sufficient registration (Bass vs. De la Rama, 73 Phil. 682, 685).That ruling was superseded by the holding in the later six cases ofLevin vs. Bass, 91 Phil. 420, where a distinction was made betweenvoluntaryandinvoluntaryregistration, such as the registration of an attachment, levy upon execution, notice of his pendens, and the like. In cases ofinvoluntaryregistration, an entry thereof in the day book is a sufficient notice to all persons even if the owner's duplicate certificate of title is not presented to the register of deeds.On the other hand, according to the said cases ofLevin vs. Bass, in case ofvoluntaryregistration of documents an innocent purchaser for value of registered land becomes the registered owner, and, in contemplation of law the holder of a certificate of title, the moment he presents and files a duly notarized and valid deed of sale and the same is entered in the day book andat the same time he surrenders or presents the owner's duplicate certificate of title covering the land soldand pays the registration fees, because what remains to be done lies not within his power to perform. The register of deeds is duty bound to perform it. (See Potenciano vs. Dineros, 97 Phil. 196.)The instant case is not Identical to the Bass cases. Here the deed of sale in favor of Lapus, which was judicially authorized, was entered in the entry book and anew title was issued to him.As already stated, and this point should be underscored,the deed of sale in favor of Lapus contains the notation that it was annotated on the back of OCT No. 983(presumably, the original and owner's duplicate thereof).But why in 1962 it appeared that no such annotation was found on the back of OCT No. 983, contrary to what was stated in the 1918 deed of sale, is a mystery that the trill court and the plaintiffs failed to unravel during the trial. Moreover, the title issued to Lapus contains the usual notation that it was a transfer from a previous title which in this case was OCT No. 983.It should be further observed that the deed of sale in favor of Lapus and the titles issued to him and his successors interest together with his mortgage in 1929 of the disputed lots to the PNB itself, are all a matter of public record in the registry of deeds.As stressed in Legarda andPrieto vs. Saleeby, 31 Phil. 590, 600, "the record is notice to all the world. All persons are charged with the knowledge of what it contains. All persons dealing with the land so recorded, or any portion of it, must be charged with notice of whatever it contains. The purchaser is charged with notice of every fact shown by the record and is presumed to know every fact which the record discloses."When a conveyance has been properly recorded, such record is constructive notice of its contents and all interests, legal and equitable, included therein." "Under the rule of notice, it is presumed that the purchaser has examined every instrument of record affecting the title. Such presumption is irrefutable. He is charged with notice of every fact shown by the record and is presumed to know every fact which an examination of the record would have disclosed" (Legarda and Prieto vs. Saleeby,supra, page 600).As Justice Johnson says, "this presumption cannot be overcome by proof of innocence or good faith. Otherwise, the very purpose and object of the law requiring a record would be destroyed. Such presumption cannot be defeated by proof of want of knowledge of what the record contains any more than one may be permitted to show that he was ignorant of the provisions of the law. The rule that all persons must take notice of the facts which the public record contains is a rule of law. The rule must be absolute. Any variation would lead to endless confusion and useless litigation" (Legarda and Prieto vs. Saleeby,supra, pp. 600-601).As to the PNB's claim that it was a mortgagee and purchaser in good faith and for value, the Appellate Court held that the bank should have made an on-the-spot investigation of the lot mortgaged by Go to ascertain whether he was in possession of it or it was claimed by other persons. Its failure to do so precludes the bank from being considered as a mortgagee in good faith and for value (Gatioan vs. Gaffud, L-21953, March 28, 1969, 27 SCRA 706).On the other hand, the trial court held that the PNB was not a buyer in good faith when it bought Go's lot at the auction sale because there was already a notice of his pendens annotated on his title.In theGatioancase, it appears that in 1935 Rufina Permison secured a Torrens title for a parcel of land on the basis of a free patent. The land was sold to Encarnacion Gatioan and Transfer Certificate of Title No. T-1212 was issued to her. She mortgaged the land three times to the PNBIn 1956, the spouses Sixto Gaffud and Villamora Logan were able to secure a Torrens title for thesame lotalso on the basis of a free patent. They mortgaged the land also to the PNB. The Secretary of Agriculture and Natural Resources, on discovering that two Torrens titles were issued for the same land, recommended the cancellation of the later title issued to the Gaffud spouses. As the PNB refused to cancel the mortgaged executed by Gatioan, in spite of the fact that she had made full payment of the mortgage debt, she filed against the Gaffud spouses and the PNB an action to quiet title.It was held that Gatioan's title should prevail over that of the Gaffud spouses and that the mortgage executed by them in favor of the PNB was void. The Gaffud spouse were ordered to pay damages to Gatioan.Since the applicable rule in the instant case is that the earlier certificate of title should be recognized as superior and controlling there is no justification for relying on the doctrine laid down by Justice Holmes inEliason vs. Wilborn281 U.S. 457, that "as between two innocent persons, one of whom must suffer the consequence of a breach of trust, the one who made it possible by his act of confidence must bear the loss."There was no breach of trust in this case. What is note. worthy in this case is that after it was recited in the registered deed of sale that sale was annotated at the back of the title covering the lots sold, it turned out that the title did not contain such an annotation and that the title was not cancelled. For that anomaly, the purchaser, Ismael Lapus, the how" of the earlier title, was not culpable or blameworthy.WHEREFORE, the judgment of the Court of Appeals, affirming the decision of the trial court, should stand. Costs against the appellants.

G.R. Nos. 74226-27 July 27, 1989PEOPLE OF THE PHILIPPINES,petitioner,vs.MIZPAH R. REYES,respondent.Pacianito B. Cabaron for respondent.Celso C. Dimayuga co-counsel for respondent.CORTES,J.:The crime of falsification of a public document carries with it an imposable penalty ofprision correccionalin its medium and maximum periods and a fine of not more than P5,000.00 [Art. 172, Revised Penal Code (RPC)]. Being punishable by a correctional penalty, this crime prescribes in ten (10) years [Art. 90, par. 3 (RPC)]. The ten (10) year prescriptive period commences to run "from the day on which the crime is discovered by the offended party, the authorities, or their agents . . ." [Art. 91, (RCP)]. In the instant case, the public document allegedly falsified was a notarized deed of sale registered on May 26, 1961 with the Register of Deeds in the name of the accused, private respondent herein, Mizpah R. Reyes. The two informations for falsification of a public document subject matter of the controversy were, however, filed only on October 18, 1984. The complainants claim that they discovered the falsified notarized deed of sale in June 1983. The Court is tasked with determining whether the crime has prescribed which hinges on whether or not its discovery may be deemed to have taken place from the time the document was registered with the Register of Deeds, consistent with the rule on constructive notice.The antecedent facts are as follows:The spouses Julio Rizare and Patricia Pampo owned a parcel of land located in Lipa City registered in their names under TCT No. T-7471. Both are now deceased, the husband having died on September 6, 1970 and his wife on August 7, 1977. They were survived by the following children: the accused Mizpah R. Reyes and the complainants Cristina R. Masikat, Julieta R. Vergara and Aurora Rizare Vda. de Ebueza.In June 1983, the complainants allegedly discovered from the records of the Register of Deeds of Lipa City that the abovementioned property had already been transferred in the name of Mizpah Reyes, single, of legal age, Filipino and resident of the City of Lipa, Philippines" under TCT No. T-9885. They further allegedly discovered that the conveyance was effected through a notarized deed of sale executed and signed on May 19, 1961 by their parents Julio Rizare and Patricia Pampo. The deed of sale was registered with the Register of Deeds of Lipa City on May 26, 1961. Upon examination of the document, they found that the signature of their parents were allegedly falsified and that accused also made an untruthful statement that she was single although she was married to one Benjamin Reyes on May 2, 1950. The document was referred by the complainants to the National Bureau of Investigation (N.B.I.) for examination of the signatures of their parents and a report was returned with the finding that the signature of Julio Rizare was genuine but that of Patricia Pampo was forged. Upon complaint by the sisters of the accused and after conducting an investigation, the fiscal filed with the Regional Trial Court of Batangas, Branch XIII, Lipa City on October 18, 1984 two (2) informations both for falsification of public document, the first in Criminal Case No. V-1163, for allegedly making it appear in the notarized deed of sale that Patricia Pampo, the mother of the accused, participated in the sale of a parcel of land by falsifying Pampo's signature, and the second in Criminal Case No. V-1164, for allegedly making an untruthful statement of fact in the deed of sale, more specifically, by stating that accused was single.Before arraignment, accused filed a motion to quash both informations on grounds that: (1) "The criminal action or liability has been extinguished by prescription of the crime in the light ofCabral v. Puno, 70 SCRA 606;" and (2) "The trial court had no jurisdiction over the offense charged and the person of accused because of non-compliance with the pre-conciliation requirement of P.D. No. 1508." [Rollo, p. 33].The trial court granted the motion and quashed the informations in the two (2) cases stating that:x x x...The title, once registered, is a notice to the world. All Persons must take notice. No one can plead ignorance of registration.The essence, therefore, of registration is to serve notice to the whole world of the legal status and the dealing therewith.If registration is a notice to the whole world, then registration is in itself a notice and therefore, the prescriptive period of registered document must start to run from the date the same was annotated in the Register of Deeds.In these two cases in question, prescriptive period of ten (10) years should have started from May 26, 1960 (sic).Considering the lapse of more than twenty (20) years before the two informations were filed, the crimes for which the accused, Mizpah Reyes, are charged have already prescribed.WHEREFORE, and as prayed for, Criminal Cases Nos. V-1163 and V-1164 are quashed. [Rollo, pp. 33-34].From the trial court's order quashing the two (2) informations, the People, petitioner herein, filed an appeal with the Court of Appeals (then designated as the Intermediate Appellate Court). In a decision**promulgated on April 3, 1986, the Court of Appeals affirmed the trial court's order. The Court of Appeals rejected the theory of petitioner that the prescriptive period should commence on June 1983, when the complainants actually discovered the fraudulent deed of sale. The appellate court sustained the trial court's ruling that the prescriptive period started on May 26, 1961, when the deed of sale was registered with the Register of Deeds of Lipa City. Hence, this petition for review oncertiorariof the decision of the Court of Appeals, filed by the People, through the Solicitor-General.Among the authorities relied upon by the Court of Appeals in dismissing petitioner's appeal is the case ofCabral v. Puno,G.R. No. L-41692, April 30, 1976, 70 SCRA 606, where the Supreme Court made a statement to the effect that in the crime of falsification of a public document, the prescriptive period commences from the time the offended party had constructive notice of the alleged forgery after the document was registered with the Register of Deeds. However, petitioner contends that this particular statement is not doctrine but merely anobiter dictum.The Cabral case stemmed from the filing on September 24, 1974 of an information accusing Eugenio Cabral of the crime of falsification of public document for allegedly falsifying on August 14, 1948 the signature of the complainant Silvino San Andres in a deed of sale of a parcel of land. Before arraignment, petitioner moved to quash the information on the ground of prescription of the crime, as the notarized deed of sale was registered with the Register of Deeds on August 26, 1948. After hearing the motion, the judge issued a resolution granting the motion to quash and dismissing the information on the ground of prescription. Private prosecutor filed a motion for the reconsideration of the resolution. Acting on said motion, the trial court ordered the fiscal to make known his position. The fiscal filed a comment stating that the crime has not prescribed as the complainant San Diego claimed that he only discovered the crime in October 1970. Thereafter, the trial court set aside its resolution granting the accused's motion to quash and reinstated the information. The accused brought the case to the Supreme Court questioning the trial court's authority to set aside its resolution granting his motion to quash. The Supreme Court ruled in favor of the accused by holding that the aforementioned resolution has already become final and executory for failure of the fiscal to file a motion for reconsideration within the reglementary period. The motion for reconsideration filed by the private prosecutor was disregarded because of the latter's lack of legal standing. Another reason given by the Court for its decision is the following:. . .The Rules of Court is explicit that an order sustaining a motion to quash based on prescription is a bar to another prosecution for the same offense [Secs. 2(f) and 8, Rule 117, Revised Rules of Court]. Article 89 of the Revised Penal Code also provides that "prescription of the crime is one of the grounds for "total extinction of criminal liability." Petitioner was charged with the crime of falsification under Article 172, sub-paragraphs (1) and (2) of the Revised Penal Code, which carries an imposable penalty ofprision correccionalin its medium and maximum periods and a fine of not more than P5,000.00. This crime prescribes in ten (10) years [Article 90, Revised Penal Code]. Here, San Diego had actual if not constructive notice of the alleged forgery after the document was registered in the Register of Deeds on August 26, 1948.x x x[Cabral v. Puno,supraat p. 609].Although the prescription of the crime was not squarely in issue inCabral, it is apparent that the statement of the Court on prescription and constructive notice was not totally irrelevant to the disposition of the case. Moreover, it is not without any legal basis.The rule is well-established that registration in a public registry is a notice to the whole world. The record is constructive notice of its contents as well as all interests, legal and equitable, included therein. All persons are charged with knowledge of what it contains [Legarda and Prieto v. Saleeby, 31 Phil. 590 (1915); Garcia v. Court of Appeals, G.R. Nos. L-48971 and 49011, January 22, 1980, 95 SCRA 380; Hongkong and Shanghai Banking Corporation v. Pauli, et al., G.R. No. L-38303, May 30, 1988,161 SCRA 634;See alsoSec. 52, Pres. Decree No. 1529 (1978)].Pursuant to this rule, it has been held that a purchaser of registered land is presumed to be charged with notice of every fact shown by the record. The Court, in explaining the nature of the rule on constructive notice and the presumption arising therefrom stated inGatioan v. Gaffud, G.R. No. L-21953, March 28 1969, 27 SCRA 706, 712-713, that:x x xWhen a conveyance has been properly recorded such record is constructive notice of its contents and all interests, legal and equitable, included therein ...Under the rule of notice, it is presumed that the purchaser has examined every instrument of record affecting the title. Such presumption is irrebutable. He is charged with notice of every fact shown by the record and is presumed to know every fact which an examination of the record would have disclosed. This presumption cannot be overcome by proof of innocence or good faith. Otherwise the very purpose and object of the law requiring a record would be destroyed. Such presumption cannot be defeated by proof of want of knowledge of what the record contains any more than one may be permitted to show that he was ignorant of the provisions of the law. The rule that all persons must take notice of the facts which the public record contains is a rule of law. The rule must be absolute. Any variation would lead to endless confusion and useless litigation.x x xIt has also been ruled that when an extrajudicial partition of the property of the deceased was executed by some of his heirs, the registration of the instrument of partition with the Register of Deeds is constructive notice that said heirs have repudiated the fiduciary relationship between them and the other heirs vis-a-vis the property in question. The heirs who were not included in the deed of partition are deemed to have notice of its existence from the time it was registered with the Register of Deeds [De la Cerna v. De la Cerna, G.R. No. L-28838, August 31, 1976, 72 SCRA 514]. Likewise, the rule on constructive notice has been applied in the interpretation of a provision in the Civil Code on the prescription of actions for annulment of contracts which is parallel to Art. 91 of the Revised Penal Code. The Civil Code provision states:Art. 391. The action for annulment shall be brought within four years.This period shall begin:x x xIn case of mistake or fraud,from the time of the discovery of the same[Emphasis supplied].InArmentia v. Patriarca, G.R. No. L-18210, December 29, 1966,18 SCRA 1253, where a notarial document recorded with the Registry of Deeds was sought to be annulled, the Court, interpreting the phrase "from the time of the discovery" found in the aforequoted provision of the Civil Code, ruled that "in legal contemplation, discovery must be reckoned to have taken place from the time the document was registered in the Register of Deeds, for the familiar rule is that registration is a notice to the whole world . . ." [See alsoAvecilla v. Yatco, 103 Phil. 666 (1958); Gerona v. De Guzman, G.R. No. L-19060, May 29, 1964, 11 SCRA 153; Carantes v. Court of Appeals, G.R. No. L-33360, April 25, 1977, 76 SCRA 514; Cultura v. Tupacar, G.R. No. L-48430, December 3, 1985,140 SCRA 311; Cimafranco v. IAC, G.R. No. L-68687, January 31, 1987, 147 SCRA 611; Hongkong and Shanghai Banking Corporation v. Pauli, et al.,supra.] However, petitioner contends that Art. 91 of the Revised Penal Code which states that "the period of prescription shall commence to run from the day the crime isdiscoveredby the offended party,the authorities, or their agents. . cannot be construed in the same manner because the rule on constructive notice is limited in application to land registration cases. It is argued that haste should be avoided in applying civil law presumptions to criminal suits.Although caution should be observed in applying the rules of construction in civil cases in the interpretation of criminal statutes, the Court will not hesitate to do so if the factual and legal circumstances so warrant. Hence, inMercado v. Santos, 66 Phil. 215 (1938), the Court applied the presumption arising from the allowance of a will to bar a criminal action. In theft particular case, the petitioner filed a petition for the probate of the will of his deceased wife. The will was duly probated. Sixteen (16) months thereafter, a criminal complaint was filed against petitioner for falsification or forgery of the will. Petitioner filed a motion to dismiss the case claiming that the order probating the will is conclusive as to its authenticity and due execution. The motion having been denied, the petitioner filed a petition for certiorari with the Court of Appeals (CA) which ruled that "the judgment admitting the will to probate is binding upon the whole world as to the due execution and genuineness of the will insofar as civil rights and liabilities are concerned, but not for the purpose of punishment of a crime." But the Supreme Court reversed the CA decision by ruling that, in accordance with See. 625 of the then Code of Civil Procedure which provides that "the allowance by the court of a will of real and personal estate shall be conclusive as to its due execution,"***a criminal action will not lie in this jurisdiction against the forger of a will which had been duly admitted to probate by a court of competent jurisdiction.It is, however, insisted in this case that the rule on constructive notice applies only in civil cases. It is argued that the law on prescription of crimes is founded on a principle different from that of the law on prescription in civil actions. The difference, it is claimed, precludes the application of the rule on constructive notice in criminal actions.The statute of limitations of civil actions was explained inPenales v. Intermediate Appellate Court, G.R. No. 73611, October 27, 1986, 115 SCRA 223, 228 in the following manner:Pre