Romeo Co. v CA GR No. 93687, May 6, 1991

Double Sale of Immovable Property

Facts:

Petitioner Marcelita Co brought two parcels of land. She sold one of the lots and the other lot was titled in the name of her brother Ruperto Padonan as a trustee of the property and a house was constructed thereon. In furtherance of their trust agreement, Ruperto executed a deed of absolute sale in favor of Marcelita who took possession of the house and lot. The deed of sale however was not registered. More than a year later, Ruperto executed another deed of sale of the house and lot registered in his name in favor of the respondent Eduardo Memije who was unable to take possession of the properties because the petitioners are occupying the same. Respondent now sued for recovery of possession and quieting of title but it was dismissed. Thereafter they filed petition for writ of possession in the original land registration proceeding, which the lower court issued but was set aside by the appellate court. Petitioner now filed an action to annul the deed of sale and title against the respondents before the RTC of Caloocan City. This was dismissed on ground of improper venue. Respondents filed for the recovery of possession of the property and the petitioner raised the affirmative defense of fraud on their ownership of the property and interposed the same as compulsory counterclaim instead of re-filing a separate action for annulment of the deed of sale executed in favor of the respondents.

Lower court: ruled against petitioner

CA: affirmed lower court decision with modification citing that an action to recover possession of realty attacking the transfer certificate of title by way of affirmative defense on ground of fraud  committed by Ruperto when he sold the property to respondent is an improper procedure as this constitutes an attack to the indefeasibility of the Torrens Title.  Petitioner should have pursued their original complaint for the annulment of deed of sale which was dismissed without prejudice of re-filing it again before the proper court at Malabon. Moreover, the respondents have the right to possession being the registered owners of the property.

Issue:

Who has the better right of possession over the property between the petitioner and respondent?

Ruling:

The petitioner filed an affirmative defense on attacking the validity of the deed of absolute sale executed by Ruperto to the respondents and at the same time attacking the Transfer of Certificate of Title of the respondents over the property issued by the Register of Deeds of Rizal by virtue of the same deed. Attacking the TCT of the respondents by way of affirmative defense is an improper procedure. The petitioner should have pursued its case filed at the RTC of Caloocan annulling the deed of sale and title with damages before the RTC of Malabon as the proper venue for the action.

The affirmative defense by the petitioner alleging fraudulent connivance between Ruperto and respondents cannot overcome the evidence of the respondent’s ownership over the title covered by the Torrens Title. It was held that the respondents were in good faith with no attendance of fraud when they acquired title over the property because they already paid and registered the property before they know of the adverse claim of the petitioner. Respondent paid for the mortgage over the property and thereafter Ruperto executed the deed of sale. By virtue of such deed, the Register of Deeds released the mortgage over said property and issued a Transfer of Certificate of Title in the name of the respondents. The keys of the house were given to them by Ruperto however they were not able to possess the property because petitioners prevented them from doing so. Although having reported the matter to Ruperto, no further action was taken thus the respondents sought to take judicial recourse.

Petitioner asserts that no double sale took place because the sale made by Ruperto to them is by virtue of their trust agreement. However the court held that the respondents are not privy of such agreement, the conflict of which is only between the petitioner and Ruperto. Respondents mainly relied on the clean transfer of certificate of title in the name of Ruperto, the title of which does not contain annotation of such trust agreement. The Civil Code provides that on the question of double sale of immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it to the Registry of Property. Therefore the respondents were held as the rightful owner of the property in dispute.