G.R. No.

144225; June 17, 2003

ALFREDO VS. BORRAS
CARPIO, J.:

DOCTRINE: There was a perfected contract of sale and the Subsequent Buyers were not
innocent purchasers.

FACTS: The spouses Alfredo owned a land that was mortgaged for P7,000 to DBP. To pay
their debt, they sold the land to spouses Borras for P15,000. The spouses Borras subsequently
paid the balance of the purchase price of the land for which the Alfredo issued a receipt dated
11 March 1970 as well as the corresponding owner’s duplicate copy of the land’s OCT, the
document of cancellation of mortgage, the official receipts of realty tax payments and the tax
declaration in the name of Godofredo Alfredo. After the spouses Borras took possession of the
said land, they found out that the spouses Alfredo re-sold the land to other buyers by securing
duplicate copies of the OCT’s upon petition with the court.

ISSUES: 1. Whether the alleged sale of the Subject Land in favor of the spouses Borras is valid
and enforceable, where (1) it was orally entered into and not in writing; (2) Carmen Alfredo did
not obtain the consent and authority of her husband, Godofredo, who was the sole owner of the
Subject Land in whose name the title thereto (OCT No. 284) was issued; and (3) it was entered
into during the 25-year prohibitive period for alienating the Subject Land without the approval of
the Secretary of Agriculture and Natural Resources.
2. Whether the action to enforce the alleged oral contract of sale brought after 24
years from its alleged perfection had been barred by prescription and by laches.
3. Whether the deeds of absolute sale and the transfer certificates of title over the
portions of the Subject Land issued to the Subsequent Buyers, innocent purchasers in good
faith and for value whose individual titles to their respective lots are absolute and indefeasible,
are valid.

HELD: The petition is without merit.

Issue 1: The contract of sale between the spouses Alfredo and spouses Borras was a perfected
one, where in there is consent of the contracting parties on the object certain and on the cause
of the obligation. The contract of sale of the Subject Land has also been consummated because
the sellers and buyers have performed their respective obligations under the contract.
The Statute of Frauds provides that a contract for the sale of real property shall be
unenforceable unless the contract or some note or memorandum of the sale is in writing and
subscribed by the party charged or his agent. The existence of the receipt dated 11 March
1970, which is a memorandum of the sale, removes the transaction from the provisions of the
Statute of Frauds.
 In the Article 173 of the Civil Code it provides that the disposition of conjugal property
without the wifes consent is not void but merely voidable. If the sale was truly unauthorized,
then Godofredo Alfredo should have filed an action to annul the sale but he did not.
In this case, there are no apparent constitutional or legal grounds for the Secretary to
disapprove the sale of the Subject Land. The absence of approval by the Secretary does not
nullify a sale made after the expiration of the 5-year period, for in such event the requirement of
Section 118 of the Public Land Act becomes merely directory or a formality.

Issue 2: The spouses Borras mistakenly filed complaint as one of specific performance. The
correct relief should be reconveyance, one that seeks to transfer property wrongfully registered
by another to its rightful and legal owner.
Article 1456 of the Civil Code provides that a person acquiring property through fraud
becomes, by operation of law, a trustee of an implied trust for benefit of real owner of property.
In the case, the fraud creates an implied trust in favor of the spouses Borras and gives right to
seek reconveyance of property from Subsequent Buyers and such action prescribes in 10
years.
The Court of Appeals mistakenly ruled that issue of prescription prescribed in 4 years
from discovery of fraud, it should be that prescription period for reconveyance of fraudulently
registered real property is 10 years from date of issuance of Certificate of Title or registration of
deed, correlating Articles 1529 and 1456 of the Civil Code. In the case, prescription could not
have set since the case was filed before 10-year prescription. Either is action barred by laches
for the spouses Borras discovered the subsequent sale on January 1994 and filed case on
March 7, 1994, there was no neglect for an unreasonable time to exercise their due diligence.

Issue 3: The settled rule is when ownership or title passes to the buyer, the seller ceases to
have any title to transfer to any third person. If the seller sells the same land to another, the
second buyer who has actual or constructive knowledge of the prior sale cannot be a registrant
in good faith. Such second buyer cannot defeat the first buyer's title. In case a title is issued to
the second buyer, the first buyer may seek reconveyance of the property subject of the sale.
Thus, the second buyer must act in good faith in registering deed, which in this case, the
spouses Alfredo already sold land to Borras and latter registered their adverse claim with
Register of Deeds on February 9, 1994 while Alfredo and the subsequent buyer purchased their
lots only on February 22, 1994 as showin in the deeds of sale. Consequently, adverse claim
registered prior to second sale charged Borras with constructive notice of defects in title of
Alfredo. Thus, Borras were not buyers in good faith when they purchased lot of February 22,
1994 and were not registrants in good faith when they registered their deed on February 24,
1994. Thus, subsequent buyer individual titles to their respective lands are not absolutely
indefeasible. Defense of indefeasibility of Torrens Title does not extend to a transferee who
takes certificate of title with notice of flaw in his title, as in this case.