A sale has been invalidated by the Supreme Court (SC) because the buyer knew that the seller was not the real owner of the property.
In a decision written by Associate Justice Maria Filomena D. Singh dated 26 February 2025, the SC’s Third Division cancelled the sale made by Bayani S. Cerilla to Edward C. Ciacho after the SC found that Ciacho knew the sold properties did not belong to the seller.
The case involves two parcels of land in Tacloban City inherited by Adolfo T. De Guia. When the properties were about to be foreclosed due to unpaid debt, he asked Cerilla to help by paying off the mortgage. A deed of sale was signed, and the land titles were transferred to Cerilla’s name.
A few months later, they signed another agreement to re-sell the land to De Guia. To protect his rights under this new agreement, De Guia filed an adverse claim on the titles.
They later entered into another agreement where Cerilla would buy the properties from De Guia for PHP 15 million, but only after De Guia removed the illegal settlers from the properties. Cerilla gave De Guia PHP 1.675 million as partial payment.
But when De Guia failed to remove the illegal settlers, Cerilla asked Ciacho for a loan, using the properties as collateral. However, Cerilla could not pay back the loan, so Ciacho asked Cerilla to sign a deed of sale on the properties, which he agreed to, but asked Ciacho not to transfer the properties under his name.
Ciacho, despite this, registered the lands under his name. When De Guia found out, he filed a case with the Regional Trial Court (RTC) to invalidate the sale.
The RTC and the Court of Appeals ruled in De Guia’s favor, stating that Cerilla had no authority to sell the properties as he was just an “accommodation party,” or someone who helped with the paperwork but was not the real owner.
They also said that Ciacho was not an innocent buyer because he knew De Guia had a legal claim on the properties.
The SC upheld their rulings. Under the Civil Code, for a sale to be valid, the parties must clearly agree to the sale. The parties’ actions during and after the agreement can serve as a basis to determine their intent. The seller must also be the owner of the property or have authority to sell it.
In this case, there was no real intention to transfer ownership from De Guia to Cerilla. Even after the land titles were transferred under his name, Cerilla did not act as if he owned the lands. He was just helping with the paperwork to facilitate the sale of the properties. This was supported by the fact that the properties were quickly re-sold to De Guia.
Further, Cerilla asked Ciacho not to register the properties under his name, which shows that De Guia remained the true owner. The SC said clearly, Cerilla did not have authority to sell the properties to Ciacho. De Guia, on the other hand, could not have approved the sale since he filed a case to cancel the deed of sale between Cerilla and Ciacho.
The SC added that Ciacho cannot claim to be an innocent buyer because he was aware of facts that should have raised doubts about Cerilla’s ownership of the properties. He knew about the earlier sale between Cerilla and De Guia and should have questioned the resale. Ciacho also knew about De Guia’s legal claim as annotated on the titles.
“Generally, to be considered an innocent purchaser for value, the buyer does not have any notice of defect or irregularity as to the right or interest of the seller, and the buyer is without notice that a third party has a claim to the subject property.The court said that if there is anything on the certificate of title that leads to suspicion or raises any cloud on the title, right or ownership of the subject property, the buyer cannot be deemed as an innocent purchaser for value.”