Land Boobies 2018-2019
Estavilla, Fernandez, Kinaadman
GABUTAN v. NACALABAN
Case:
Petitioner seeking to reverse the portion of the CA
Decision declaring Cagayan Capital College as a buyer in
good faith.
FACTS:
1. Godofredo Nacalaban purchased an 800 sq.m. parcel
of prime land in CDO form certain Petra, Fortunata,
Francisco, and Dolores Daamo.
2. TCT (No. T-2259) was issued under the name of
Godofredo and built a house therein.
3. Godofredo then died and was survived by his wife,
Baldomera, and their children. (Dante, Helen, and
Susan)
4. Baldomera then issued a certification in favor of her
mother (Melecia) to build and occupy in favor of the
portion of the property and such house was declared for
taxation purposes.
5. Baldomera died and her children executed an
Extrajudicial Settlement with Sale where they
adjudicated unto themselves the property and sold it to
a certain Cagayan Capital College (College)
6. Thus, the previous TCT was cancelled and a new TCT
was issued under the name of the College.
7. The mother of Baldomera then died and was survived
by her children. (Trifonia D. Gabutan, Buna, Crisanta,
and Tirso)
8. The College then demanded the heirs of Melecia
(including the petitioner in this case) who were
occupying the house on the property to vacate the
premises.
9. Gabutan (Petitioner) then filed a complaint for
Reconveyance of Real Property, Declaration of Nullity of
Contracts, Partition and Damages with Writ of Prelim.
Attachment and Injunction against Nacalaban, et.al. and
the College.
10. They alleged that:
a. Melecia bought the property using her own
money but Godofredo had the Deed of Absolute
Sale executed in his name instead of his
motherin-law.
b. Godofredo and Baldomera were only trustees
of the property in favor of the real owner and
beneficiary, Melecia
c. They only knew about the Extrajudicial
Settlement with Sale upon verification with the
RD
d. The College was a buyer in bad faith, being
aware they were co-owners of the property.
COLLEGE DEFENSE:
1. Buyer in good faith and for value having “made
exhaustive investigation and verification from all reliable
sources” that Melecia and her heirs were staying in the
property by mere tolerance.
2. In the tax declaration of the residential house,
Melecia admitted that the lot owner is Godofredo.
3. The occupancy permit of Melecia was issued only
after Godofredo issued a certification to the effect that
Melecia was allowed to occupy a portion of the
property.
4. The Extrajudicial Settlement with Sale was published
in three consecutive issues of Mindanao Post, a
newspaper of gen. circulation.
NACALABAN’S DEFENSE:
1. They have acquired the property by intestate
succession from their parents who exercised
unequivocal and absolute ownership over the property
2. Defense of laches and prescription and asserted that
action for reconveyance was improper because the
property had already been sold to an innocent
purchaser for value.
RTC: (in favor of Gabutan)
• Found that the testimonies of their witnesses credible,
in that the money of Melecia was used in buying the
property but the name of Godofredo was used when
the title was obtained because Godofro lived in CDO
while Melecia lived in Misamis Oriental.
• Held that a trust was established by operation of law
pursuant to Art. 1448 of the CC.
• Also declared that the other defendant (College) was a
buyer in good faith and for value of the subject land
CA: (affirmed RTC)
Issue/s:
1. WON the College is a buyer in good faith.
GOOD FAITH ISSUE:
RTC:
1. College is an innocent purchaser for value.
2. Their findings are grounded on the ff:
• Gabutan, et.al.’s claim was never annotated in
Godofredo’s title.
• Extrajudicial Settlement with Sale was duly published
and the College was able to effect the transfer of the
title in its name
• Baldorema issued a certification in favor of Melecia
allowing her to occupy a portion of the lot and;
• The tax declaration showed that Melecia owned only
the building on the land owned by Godofredo
3. Reiterated the rule that the buyer of a land registered
under the Torrens System may rely upon the face of the
certificate of title and does not have to look beyond it.
CA:
1. These facts would reasonably constitute enough
reason
for the College or any buyer to conclude that the
property is free from any adverse claim, thereby making

any further investigation unnecessary. Absent any
showing that the College knew of the actual
arrangement between Godofredo and Melecia, it must
be deemed a buyer in good faith.
GABUTAN:
1. Alleged that the lower courts erred in ruling that the
College is a buyer in good faith raising the ff:
• Nacalaban, et.al. are not the registered owners of the
property, Godofredo is.
• Not being the registered owners, the College, as buyer,
is expected to examine not only the certificate of title
but all the 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 property
• The College knew that other persons possessed the
property so it should have first established the capacity
of the Nacalaban children to sell the property.
SC Ruling:
NO. College is not a buyer in good faith.
1. Cited Bautista v. Silva, the requisites for one to be
considered purchaser in good faith.
• To prove good faith, a buyer of registered and titled
land need only show that he relied on the face of the
title to the property.
• Such degree of proof of good faith, HOWEVER, is
sufficient only when the ff. conditions concur:
The seller is the registered owner of the Land The latter
is in possession thereof At the time of the sale, the
buyer was not aware of any claim or interest of some
other person in the property, or of any defect or
restriction in the title of the seller or in his capacity to
convey title to the property.
• Absent one or two of the conditions, then the law
itself puts the buyer on notice and obliges the latter to
exercise a higher degree of diligence of examining all
circumstances in order to determine the seller’s title
and capacity to transfer any interest in the property.
• It is no longer sufficient for said buyer to merely show
that he relied on the face of the title, he must now show
that he exercised reasonable precaution by inquiring
beyond the title. Failure of such makes him a buyer in
bad faith.
2. Thus, the College, which has the burden to prove the
status of being a purchaser in good faith, is required to
prove the concurrence of the above conditions. The
Court find that the College failed to discharge such
burden. " First, as correctly pointed out by Gabutan, et
al., that Nacalaban, et.al. are not the registered owners
of the property, but Godofredo. (Citing the case of
Bautista v CA)
• When a purchaser buys from one who is not the
registered owner himself, the law requires a higher
degree of prudence even if the land object of the
transaction is registered. " Secondly, the College was
aware that aside from Nacalaban, et. al., the Heirs of
Melecia, were also in possession of the property. The
Land Boobies 2018-2019
Estavilla, Fernandez, Kinaadman
College cited the tax declaration which bore an
annotation that Melecia owned a residential building
and Godofredo owned the lot.
• Citing the case of Occeña v. Esponilla, it held that the
petitioner-sps. were not purchasers in good faith when
they merely relied on the representation of the seller
regarding the nature of possession of the occupants of
the land: At the trial, Tomas Occeña admitted that he
found houses build on the land during its ocular
inspection prior to his purchase. He relied on the
representation of vendor Arnold that these houses were
owned by squatters and that he was merely tolerating
their presence on the land. Tomas should have verified
from the occupants of the land the nature and authority
of their possession instead of merely relying on the
representation of the vendor that they were squatters,
having seen for himself that the land was occupied by
persons other than the vendor who was not in
possession of the land at that time.
• Although the College allegedly made an exhaustive
investigation and verification from all reliable sources
and found that the possession of Melecia and her heirs
was merely tolerated, it failed to specify who or what
these sources were. There is no evidence that the
College did inquire from Melecia or her heirs
themselves, who were occupying the property, the
nature and authority of their possession. Thus, it may be
concluded that College merely relied on the
representations of the sellers and the documents they
presented. In this regard, the College is not a buyer in
good faith.
• The “honesty of intention” which constitutes good
faith implies a freedom from knowledge of
circumstances which ought to put a person on inquiry. If
the land purchased is in the possession of a person
other than the vendor, the purchaser must be wary and
must investigate the rights of the actual possessor.
Without such, the purchaser cannot be said to be in
good faith and cannot have any right over the property.

[G.R. No. 193038. March 11, 2015.]
JOSEFINA V. NOBLEZA, petitioner, vs. SHIRLEY B.
NUEGA, respondent.
Facts:
 Respondent Shirley B. Nuega was married to
Rogelio A. Nuega.
 When the parties were still engaged, Shirley was
working as a domestic helper in Israel. Rogelio was
then also working abroad as a seaman.
 Upon the request of Rogelio, Shirley sent him
money for the purchase of a residential lot in
Marikina where they had planned to eventually
build their home.
 The following year, Rogelio purchased the subject
house and lot.
 Shirley claims that upon her arrival in the
Philippines sometime in 1989, she settled the
balance for the equity over the subject property
with the developer through SSS financing. She
likewise paid for the succeeding monthly
amortizations.
 On October 19, 1989, TCT No. 171963 over the
subject property was issued by the Registry of
Deeds of Marikina, Rizal solely under the name of
Rogelio.
 On September 1, 1990, Shirley and Rogelio got
married and lived in the subject property.
 The following year, Shirley returned to Israel for
work.
 While overseas, she received information that
Rogelio had brought home another woman, Monica
Escobar, into the family home.
 She also learned, and was able to confirm upon her
return to the Philippines in May 1992, that Rogelio
had been introducing Escobar as his wife.
 -In June 1992, Shirley filed two cases against
Rogelio: one for Concubinage before the Provincial
Prosecution Office of Rizal, and another for Legal
Separation and Liquidation of Property before the
RTC of Pasig City.
 Shirley later withdrew the complaint for legal
separation and liquidation of property, but re-filed
the same on January 29, 1993.
 In between the filing of these cases, Shirley learned
that Rogelio had the intention of selling the subject
property.
 Shirley then advised the interested buyers — one of
whom was their neighbor and petitioner Josefina V.
Nobleza (petitioner) — of the existence of the cases
that she had filed against Rogelio and cautioned
them against buying the subject property until the
cases are closed and terminated.
Land Boobies 2018-2019
Estavilla, Fernandez, Kinaadman
 Nonetheless, under a Deed of Absolute Sale dated
December 29, 1992, Rogelio sold the subject
property to petitioner without Shirley's consent.
 Meanwhile, the RTC of Pasig City, granted the
petition for legal separation and ordered the
dissolution and liquidation of the regime of
absolute community of property between Shirley
and Rogelio.
 RTC ordered:
“respondent is thus hereby enjoined from selling,
encumbering or in any way disposing or alienating any
of their community property including the subject
house and lot before the required liquidation.
Moreover, he, being the guilty spouse, must forfeit the
net profits of the community property in favor of the
petitioner who is the innocent spouse pursuant to Art.
43 of the aforesaid law. Finally, in the light of the claim
of ownership by the present occupants who have not
been impleaded in the instant case, a separate action
must be instituted by the petitioner against the alleged
buyer or buyers thereof to determine their respective
rights thereon.”
 On August 27, 1996, Shirley instituted a Complaint
for Rescission of Sale and Recovery of Property
against petitioner and Rogelio before the RTC of
Marikina City.
RTC:
After trial on the merits, the trial court rendered
judgement in favor of plaintiff Shirley Nuega and against
defendant Josefina Nobleza stating that:
1)the Deed of Absolute Sale dated December 29, 1992
insofar as the 55.05 square meters representing the one
half (1/2) portion of plaintiff Shirley Nuega is concerned,
is hereby ordered rescinded, the same being null and
void;
2) defendant Josefina Nobleza is ordered to reconvey
said 55.05 square meters to plaintiff Shirley Nuega, or in
the alternative to pay plaintiff Shirley Nuega the present
market value of said 55.05 square meters; and
3) to pay plaintiff Shirley Nuega attorney's fees in the
sum of Twenty Thousand Pesos (P20,000.00).
CA:
Petitioner sought recourse with the CA, while Rogelio
did not appeal the ruling of the trial court.
the appellate court affirmed with modification the trial
court's ruling. CA ordered that the Absolute Sale dated
29 December 1992 is hereby declared null and void in
its entirety, and defendant-appellant Josefina V. Nobleza
is ordered to reconvey the entire subject property to
plaintiff-appellee Shirley B. Nuega and defendant
Rogelio Nuega, without prejudice to said defendant-
appellant's right to recover from defendant Rogelio
whatever amount she paid for the subject property.
 Land Boobies 2018-2019
Estavilla, Fernandez, Kinaadman

Issue: observed by both courts a quo, the Deed of Absolute

Can the Petitioner be considered a buyer/purchaser in
good faith?
Held:
No
Petitioner’s argument:
She claims that she is a buyer in good faith of the
subject property which is titled under the name of the
seller Rogelio A. Nuega alone as evidenced by TCT No.
171963 and Tax Declaration Nos. D-012-04723 and D-
012-04724. Petitioner argues, among others, that since
she has examined the TCT over the subject property and
found the property to have been registered under the
name of seller Rogelio alone, she is an innocent
purchaser for value and "she is not required to go
beyond the face of the title in verifying the status of the
subject property at the time of the consummation of
the sale and at the date of the sale."
Sale was executed and dated on December 29, 1992.
However, the Community Tax Certificates of the
witnesses therein were dated January 2 and 20, 1993.
While this irregularity is not a direct proof of the intent
of the parties to the sale to make it appear that the
Deed of Absolute Sale was executed on December 29,
1992 — or before Shirley filed the petition for legal
separation on January 29, 1993 — it is circumstantial
and relevant to the claim of herein petitioner as an
innocent purchaser for value.
That is not all.
In the Deed of Absolute Sale dated December 29, 1992,
the civil status of Rogelio as seller was not stated, while
petitioner as buyer was indicated as "single,"viz.:
ROGELIO A. NUEGA, of legal age, Filipino citizen and
with postal address at 2-A-2 Ladislao Diwa St.,
Concepcion, Marikina, Metro Manila, hereinafter
referred to as the VENDOR

SC: And

A buyer cannot claim to be an innocent purchaser for JOSEFINA V. NOBLEZA, of legal age, Filipino citizen,
value by merely relying on the TCT of the seller while single and with postal address at No. L-2-A-3 Ladislao
ignoring all the other surrounding circumstances Diwa St., Concepcion, Marikina, Metro Manila,
relevant to the sale. hereinafter referred to as the VENDEE.

The TCT of the subject property states that its sole
owner is the seller Rogelio himself who was therein also
described as "single". However, as in the cases
ofSpouses Raymundo and Arrofo, there are
circumstances critical to the case at bar which convince
us to affirm the ruling of both the appellate and lower
courts that herein petitioner is not a buyer in good faith.
It puzzles the Court that while petitioner has repeatedly
claimed that Rogelio is "single" under TCT No. 171963
and Tax Declaration Nos. D-012-04723 and D-012-
04724, his civil status as seller was not stated in the
Deed of Absolute Sale — further creating a cloud on the
claim of petitioner that she is an innocent purchaser for
value.

First, petitioner's sister Hilda Bautista, at the time of the

sale, was residing near Rogelio and Shirley's house —
the subject property — in Ladislao Diwa Village,
Marikina City. Had petitioner been more prudent as a
buyer, she could have easily checked if Rogelio had the
capacity to dispose of the subject property. Had
petitioner been more vigilant, she could have inquired
with such facility — considering that her sister lived in
the same Ladislao Diwa Village where the property is
located — if there was any person other than Rogelio
who had any right or interest in the subject property.
To be sure, respondent even testified that she had
warned their neighbors at Ladislao Diwa Village —
including petitioner's sister — not to engage in any deal
with Rogelio relative to the purchase of the subject
property because of the cases she had filed against
Rogelio. Petitioner denies that respondent had given
such warning to her neighbors, which includes her sister,
therefore arguing that such warning could not be
construed as "notice" on her part that there is a person
other than the seller himself who has any right or
interest in the subject property. Nonetheless, despite
petitioner's adamant denial, both courts a quo gave
probative value to the testimony of respondent.
Second, issues surrounding the execution of the Deed of
Absolute Sale also pose question on the claim of
petitioner that she is a buyer in good faith. As correctly
 Land Boobies 2018-2019
Estavilla, Fernandez, Kinaadman

Held: The petitioners were NOT purchasers in good

faith.
Under the Torrens System of land registration, “a person
dealing in the registered land has the right to rely on the
Torrens certificate title and to dispense with the need of
inquiring further, except when the party has actual
Cusi vs. Domingo knowledge of facts and circumstances that would impel
Under the Torrens system of land registration, the a reasonably cautious man to make such inquiry.”
registered owner of realty cannot be deprived of her Their observance of a certain degree of diligence within
property through fraud, unless a transferee acquires the the context of the principles underlying the Torrens
property as an innocent purchaser for value. A System was not the only barometer for them to verify
transferee who acquires the property covered by a the acquisition of title. Under the law and
reissued owner's copy of the certificate of title without jurisprudence, it was not enough for them to show that
taking the ordinary precautions of honest persons in the property was unfenced and vacant nor it was safe
doing business and examining the records of the proper for them to rely on the face of Sy’s TCT No. 186142
Registry of Deeds, or who fails to pay the full market because they were aware that the TCT was derived only
value of the property is not considered an innocent from a duplicate owner’s copy reissued by virtue of the
purchaser for value. loss of the original duplicate owner’s copy. That
Facts: Respondent Lilia V. Domingo was the owner of circumstance should have already alerted them to the
the lot in dispute covered under Transfer Certificate of need to inquire beyond the face of the Sy’s TCT.
Title (TCT) No. N-165606.On July 18, 1997, without her Other circumstances that would impel a reasonably
consent, Radelia Sy (Sy) petitioned before the RTC for cautious man to make such inquiry in dealing with the
reissuance of new owner’s copy and, as proof, property are the almost simultaneous transactions
presented a deed of sale dated July 14, 1997 executed affecting the acquisition of the property that the
by Domingo in her favor, and an affidavit of loss dated petitioners were also aware of and the material,
July 17, 1997, stating that her bag containing the undervaluation of the property in the deed of sale, i.e.
owner’s copy of TCT No. N-165606 had been snatched the price in consideration of the property of Php 1M
while she was at the SM City, North EDSA. each half when the market value is at least Php 14M
After the RTC granted the petition, the Register of Deeds ostensibly at the request of Sy to minimize her liabilities
cancelled the TCT No. N-165606 and issued a new TCT for Capital Gains Tax.
No. 186142 in favor of Sy by virtue of the deed of
absolute sale date July 14, 1997. Sy immediately
subdivided the property and sold each half to Spouses
De Vera and Spouses Cusi, and were issued TCT Nos.
189568 and 189569 respectively, annotated on the TCT
a consideration of only Php 1M each but the entire lot
had an actual value of not less than Php 14M.
It was only on July 1999 when the respondent learned
the situation. She filed an action against Spouses Sy,
Spouses De Vera, and the Spouses Cusi seeking
annulment of titles, injunction, and damages. She also
applied for the issuance of writ of preliminary
prohibition and mandatory injunction, and a temporary
restraining order (TRO).
The RTC granted her application, however, the title of
Spouses De Vera and Spouses Cusi remain valid as they
were held purchasers in good faith. Dissatisfied with the
decision, Domingo filed a motion for reconsideration.
The RTC set aside its first decision and declaring the sale
between the respondent and Sy void; the buyers were
not purchasers in good faith; cancellation of TCT Nos.
189568 and 189569; the TCT No. 165606 shall be
revalidated in the name of Domingo.
This decision was brought up to the CA filed by the
petitioners but was denied. A motion for
reconsideration was also filed but the same was denied.
Hence, this petition.
Issue: Whether or not the petitioners are purchasers
in good faith and for value.

SABERON v. VENTANILLA
FACTS:
1. In the earlier cases, Manila Remnant Co. Inc. (MRCI),
being the owner of several parcels of land in QC,
constituting the subdivision known as Capital Homes
Subdivision. MRCI entered into a contract with A.U.
Valencia & Co. Inc. (AUVC) entitled “Confirmation of
Land Development and Sales Contract” whereby the
latter was to develop the aforesaid subdivision with
authority to manage the sales thereof, execute contracts
to sell to buyers, and issue official receipts.
2. MRCI and AUVC then executed two contracts to sell
covering certain lots (Lots 1 and 2 of Block 17) in favor
of the Ventanillas (Oscar and Carmen) for P66,571.00
payable monthly for 10 years. The latter then paid for
the down payment.
3. Valencia, holding out himself as president of MRCI,
and without the knowledge of the Ventanillas, resold
the same property to a certain Carlos Crisostomo,
without any consideration.
4. Subsequently, MRCI terminated its business
relationshiop with AUVC, and as a consequence of such,
Ventanillas was removed as president by the BOD of
MRCI.
5. Thus, he stopped transmitting the Ventanillas’
monthly installment.
6. AUVC then sued MRCI challenging the abrogation of
their agency agreement before the CFI, which then
ordered all lot buyers to deposit their monthly
amortizations with the court.
7. AUVC then informed the Ventanillas that it was still
authorized by the trial court to collect monthly
amortizations and requested them to continue remitting
their payment.
8. However, AUVC failed to forward the collections to
the trial court which resulted into a publication of a
notice cancelling the contracts to sell of lot buyers
(including those of Ventanillas)
9. It was then only later that the Ventanillas discovered
Valencia’s deception. Believing that they had already
remitted a certain amount for certain lots, Ventanillas
offered to pay the balance to MRCI. To their shock, their
names as lot buyers did not appear in MRCI’s records.
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Estavilla, Fernandez, Kinaadman
Instead, it was under the name of Crisostomo and that
they were merely paying for it. MRCI then refused the
Ventanillas’ offer to pay for the remainder of the price.
10. Aggrieved, the Ventanillas filed an action for specific
performance, annulment of deeds and damages against
MRCI, AUVC, and Crisostomo with the CFI. CFI of QC !
rendered a decision declaring the contracts to sell in
favor of the Ventanillas as valid and subsisting, and
annulling the contract to sell in favor of Crisostomo. It
ordered the MRCI to execute an absolute deed of sale in
favor of the Ventanillas, free from all liens and
encumbrances. ! Ruled further that if for any reason the
transfer of the lots could not be effected, MRCI, AUVC,
and Crisostomo would be solidarily liable to the
Ventanillas for the reimbursement equivalent to the
amount they paid for the 2 lots and legal interest
thereon plus damages and attorney’s fees. ! CA then
affirmed such decision.
11. MRCI then filed before this Court a petition for
certiorari to review the decision of CA upholding the
solidary liability of MRCI, AUVC, and Crisostomo.
However, this Court affirmed the decision of the CA.
12. The Ventanillas then moved for the issuance of a
writ of execution. The writ was then issued and served,
and a notice of levy was annotated in the titles of MRCI.
13. However, MRCI contended that the subject
properties could no longer be delivered to the
Ventanillas because they had already been sold to a
certain Samuel Marquez (Marquez) while its petition
was pending before this Court.
14. This case was then elevated to this Court where
MRCI argued that: ! the sale of the properties to
Marquez was valid because at the time of the sale, the
issue of the validity of the sale to the Ventanillas had
not yet been resolved.
15. Ventanillas countered that: ! the validity of the sale
to them had already been established even while the
previous petition was still awaiting resolution because
the petition only questioned the solidary liability of
MRCI to the Ventanillas
16. The Court decided in favor of Ventanilla.
17. As it turned out, the execution of judgment in favor
of the Ventanillas was yet far from fruition. Samuel
Cleofe, the RD for QC (ROD Cleofe) revealed to them
that MRCI registered a deed of absolute sale to Marquez
who eventually sold the same property to the Saberons,
which conveyance was registered.
18. ROD Cleofe opined that a judicial order for the
canellation of the titles in the name of the Saberons was
essential before he complied with the writ of execution.
Apparently, the notice of levy, through inadvertence,
was not carried over to the title issued to Marquez, the
same which was entered after the contract to sell to
Marquez had already been annotated.
19. Once again, the Ventanillas were constrained to go
to court to seek the annulment of the deed of sale
executed between MRCI and Marquez as well as the
deed of sale between Marquez and the Saberons, as the
 Land Boobies 2018-2019
Estavilla, Fernandez, Kinaadman

fruit of void conveyances. RTC ruled in favor of the

Ventanillas.
20. Meanwhile, the Saberons filed a case in the CA
relying on one central argument – that they were
purchasers in good faith, having relied on the
correctness of the certificates of title covering the lots in
question; and therefore, holders of a valid and
indefeasible title. CA ruled in favor of the Ventanillas.
The Saberons filed the present petition.
21. Unknown to the Saberons, the former owner of the
properties had entered into contracts to sell with the
Ventanillas, way back in 1970. It was only upon receipt
of summons in the case filed by the Ventanillas with the
RTC that they learned of the present controversy.
22. With the RTC and the CA rulings against their title
over the properties, the Saberons now come to the
Court with their vehement insistence that they were
purchasers in good faith and for value. Before
purchasing the lots, they exercised due diligence and
found no encumbrance or annotations on the titles. At
the same time, the Ventanillas also failed to rebut the
presumption of their good faith as there was no
showing that they confederated with MRCI and its
officers to deprive the Ventanillas of their right over the
subject properties.
23. According to the Saberons, the CA likewise erred in
ruling that there was no constructive notice of the levy
made upon the subject lands. (The main issue in this
case is w/n the notice of levy had produced constructive
notice that would bind third parties despite the failure
of the ROD of QC to annotate the same in the cert. of
title? Ruling is that fault of the ROD. However, SC said
that the notice of levy covering the subj property was
annotated in the entry book of the ROD-QC prior to the
issuance of a TCT in the name of the Saberons. Clearly,
the Ventanillas’ levy was placed on record prior to the
sale. This shows that Ventanillas has a superior right
over the property as against the Saberons)
ISSUE: Whether or not the Saberons are in good faith?
RULING:
Yes. The Saberons are builders in good faith. The court a
quo observed that “no actual evidence that the
Saberons connived with the MRCI and Marquez to have
the titles registered in their names to the prejudice of
the Ventanillas” and that it was obvious that “the
Saberons dealt with clean certificates of titles”. Also
quite telling is that mrci and marquez are liable to the
Saberons. On the contrary, the Saberons may be
considered victims of the same fraudulent employed by
the defendants MRCI and Marquez, and thus can
rightfully claim damages from the same. Consequently,
(additional ruling not related to good faith) Art 448 in
relation to Art. 546 of the civil code will apply. Thus, the
two options are available to the Ventanillas: 1. They may
exercise the right to appropriate after payment of
indemnity representing the value of the improvements
or; 2. They may forego payment of the said indemnity
and instead, oblige the Saberons to pay the price of the
land.

BPI v. Sanchez
Facts:
(Note that these are consolidated Petitions for Review
on Certiorari under Rule 45 of the Rules of Court)
Vicente Victor C. Sanchez (Vicente), Kenneth
Nereo Sanchez and Imelda C. Vda. De Sanchez owned a
parcel of land located at No. 10 Panay Avenue, Quezon
City consisting of 900 square meters. The property was
registered under Transfer Certificate of Title No. (TCT)
156254 of the Registry of Deeds of Quezon City (the
Subject Property).
On October 10, 1988, Jesus V. Garcia (Garcia),
doing business under the name TransAmerican Sales
and Exposition, Inc. (TSEI), wrote a letter to Vicente
offering to buy the Subject Property for One Million
Eight Hundred Thousand Pesos (P1,800,000) under
certain terms and conditions
The offer was good for only seven (7) days. The
period elapsed with the parties failing to come to an
agreement.
Sometime in the third week of October 1988,
Felisa Yap (Yap), the widow of Kenneth Nereo Sanchez,
and Garcia had a meeting at the Quezon City Sports
Club wherein the parties agreed to the sale of the
subject property.
Pursuant to this agreement, Yap turned over to
Garcia the original owner's copy of TCT 156254, while
Garcia paid Yap P50,000 as earnest money.
Afterwards, Yap required the occupants of the
subject property to vacate the same. Immediately after
it was vacated, Garcia, without Yap's knowledge and
consent, took possession of the lot and installed his own
caretaker thereon with strict instructions not to allow
anyone to enter the property. Yap later learned that
Garcia had also demolished the house on the property
and advertised the construction and sale of
"TransAmerican Townhouse V" thereon. The foregoing
developments notwithstanding and despite numerous
demands, Garcia failed to pay the balance of the
purchase price as agreed upon.
Then, on December 5, 1988, Yap was informed
that the checks representing the purchase price of the
subject property were ready but that Vicente must pick
up his checks personally. On December 8, 1988, Vicente
came to Manila from Laguna and proceeded to Garcia's
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office to get the checks. However, out of the six (6)
checks that were presented to them, four (4) of them
were post-dated, further delaying their overdue
payment. In order to properly document such check
payments, the parties executed an Agreement dated
December 8, 1988.
Subsequently, the first four (4) checks were
deposited with no issue. However, the last two (2)
checks, amounting to P400,000 each, were dishonored
for the reason of "DAIF" or drawn against insufficient
funds.
Thus, Yap wrote a letter dated
December 26, 1988 to Garcia informing him that
the two (2) checks were dishonored and asking
that the checks be replaced within five (5) days
from receipt of the letter. Such request was left
unheeded.
On January 10, 1989, Yap informed Garcia in a
letter that she and Vicente were rescinding the
Agreement while demanding the return of the original
owner's copy of TCT 156254. This prompted Garcia to
offer two (2) manager's checks in the aggregate
amount of P300,000 which Yap flatly refused,
reiterating the rescission of their Agreement and
demanding for the return of all documents entrusted
to Garcia through a January 21, 1989 letter.
However, in a letter dated January 27, 1989,
Garcia's counsel, Atty. Francisco Beato, Jr. (Beato),
informed Yap that they (Garcia, Vicente and Yap) had an
agreement that the P800,000 balance of the purchase
price was due to be paid by Garcia only upon Yap and
Vicente's payment of the realty, inheritance and capital
gains taxes due on the transfer of the property. Thus,
Garcia effectively refused to return the documents and
to vacate the subject property.
Yap referred Beato's letter to her own counsel,
Atty. Julian S. Yap, who wrote back in a letter dated
February 16, 1989, refuting the claim of Garcia that the
P800,000 was not yet due and reiterating their decision
to rescind the Agreement and demanding that Garcia
vacate the property and return the documents that
were surrendered to him by Yap.
In the meantime, on February 19, 1989, Yap
and Vicente discovered that Garcia posted an
advertisement in the classified ads of the Manila
Bulletin offering to sell units at the TransAmerican
Townhouse V situated at the subject property.
Thus, on February 27, 1989, Atty. Yap wrote the
Housing and Land Use Regulatory Board (HLURB)
informing the latter of the existing public advertisement
of TSEI offering for sale townhouses illegally constructed
on the subject property and urging the HLURB to cancel
any existing permit or license to sell the said townhouse
units or to deny any application therefor.
On March 17, 1989, the HLURB issued a Cease
and Desist Order (CDO) enjoining TSEI and Garcia from
further developing and selling the townhouses.
On May 5, 1989, the HLURB issued another
letter to TSEI reiterating its previous directive for it to
cease and desist from selling the townhouse units. In

compliance, Garcia and TSEI stopped construction of the
townhouses units on March 30, 1989.
In a delayed response to the CDO, TSEI wrote a
letter to the HLURB alleging that only ground leveling
works were being undertaken on the project. This was
rebuffed by the HLURB in a letter dated May 8, 1989
stating that ocular inspections of the project revealed
that 2nd floor construction on the townhouses were
already being undertaken.
To further protect their interests, Yap and
Vicente also inquired from the City Building Official of
Quezon City, whether a building permit had been issued
for the construction on the Subject Property. In a letter
dated March 14, 1989, the office found that the
construction on the subject property was indeed illegal.
Then, on August 21, 1989, Yap filed a formal
complaint with the Office of the City Building Official of
Quezon City. which both Garcia and TSEI failed to attend
the said hearing.
Thereafter, on February 15, 1990, Yap and
Vicente, in his own behalf and representing the heirs of
Imelda C. Vda. De Sanchez, filed before the Regional
Trial Court (RTC) in Quezon City, Branch 89 a Complaint
dated February 14, 1990 for the rescission of contract,
restitution and damages with prayer for
TRO/preliminary injunction against TSEI and Garcia.
Meanwhile, Garcia managed to cause the
cancellation of TCT 156254 and its replacement with
TCT 383697 in the name of TSEI. TCT 383697, however,
bore the date of issuance as June 9, 1988, way before
the parties agreed on the sale sometime in October
1988. Garcia apparently used TCT 383697 to entice
several buyers to buy the townhouse units being
constructed by TSEI on the subject lot. Claiming to
have bought townhouse units sometime in early 1989,
the following intervened in the instant case: the
spouses Jose and Visitacion Caminas (Caminas),
Reynaldo V. Maniwang (Maniwang), Generoso C.
Tulagan (Tulagan), Varied Traders Concept, Inc. (VTCI),
and Arturo Marquez (Marquez).
The records reveal that on January 31, 1989,
TSEI sold to Tulagan a 52-square meter portion of TCT
156254 and the townhouse unit that was going to be
built upon it for the amount of P800,000 as evidenced
by a Conditional Deed of Sale of even date. Later,
Tulagan bought another unit from TSEI this time for
P600,000 as shown by a Contract to Sell dated
February 21, 1989. Then, Maniwang bought a unit
from TSEI for P700,000 through an Absolute Deed of
Sale dated February 22, 1989. Later, Marquez
purchased a townhouse unit from TSEI for P800,000 in
a Contract to Sell dated March 13, 1989. Afterwards,
TSEI sold to Caminas a townhouse unit for P650,000
through an Absolute Deed of Sale dated March 21,
1989. Thereafter, VTCI bought three (3) townhouses
from TSEI for P700,000 each in three (3) separate
Absolute Deeds of Sale all dated October 30, 1989. TSEI
left the townhouse units unfinished, leaving these
intervenors to finish their townhouses by themselves.
Notably, except for the Absolute Deeds of Sale
executed between TSEI and VTCI, all the other
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intervenors' contracts conveying townhouses in their
favor identified their purchased lots as covered by TCT
156254 (the title of the Sanchezes). As culled from the
transcripts, the intervenors Caminas, Maniwang,
Tulagan, and Marquez asserted that they were all shown
TCT 383697 in the name of TSEI but nevertheless signed
their respective contracts with TSEI indicating the
subject property as covered by TCT 156254.
Subsequently, they all got a photocopy of TCT 383697
and verified the same with the Registry of Deeds of
Quezon City, which confirmed that the title was clean.
On the other hand, only the Absolute Deed of Sale in
favor of VTCI, dated October 30, 1987, reflected that the
property sold was covered by TCT 383697.
RTC:
the RTC found that TSEI and Garcia were builders in bad
faith as the Sanchezes never consented to the
construction of the townhouses. Furthermore, the
presentation by Garcia and TSEI to the intervenors of
TCT 383697 in TSEI's name sufficiently shows their bad
faith. Anent the rights of intervenors, the RTC found the
Sanchezes to have a better right over the subject
property considering that the transactions between
Garcia/TSEI and the intervenors suffered from several
irregularities, which they, the intervenors, in bad faith,
ignored.
CA:
the appellate court found the Sanchezes equally in bad
faith with TSEI and Garcia, and gave the Sanchezes the
option either to appropriate the townhouses by paying
for them or to oblige TSEI and Garcia to pay the price of
the land, unless the subject lot's value is considerably
more than that of the structures built thereon in which
case TSEI and Garcia would have to pay the Sanchezes
reasonable rent for the use of the subject property.
Hence, these petitions under Rule 45 separately
interposed by the intervenors.
Issue:
are the intervenors purchasers in good faith?
Held:
Intervenors Sps. Caminas, Maniwang, Tulagan, and
Marquez acted in bad faith
Prevailing jurisprudence reveals the following
established rules:
1. Well settled is the rule that all persons dealing
with property covered by a torrens certificate of title are
not required to go beyond what appears on the face of
the title. When there is nothing on the certificate of title
to indicate any cloud or vice in the ownership of the
property, or any encumbrance thereon, the purchaser is
not required to explore further than what the torrens
title upon its face indicates in quest for any hidden
defect or inchoate right that may subsequently defeat
his right thereto.
2. This rule, however, admits of an exception as where
the purchaser or mortgagee has knowledge of a defect
or lack of title in the vendor, or that he was aware of

sufficient facts to induce a reasonably prudent man to
inquire into the status of the property in litigation.
3. Likewise, one who buys property with full knowledge
of the flaws and defects in the title of the vendor is
enough proof of his bad faith and estopped from
claiming that he acquired the property in good faith
against the owners.
4. To prove good faith, the following conditions
must be present: (a) the seller is the registered owner of
the land; (b) the owner is in possession thereof; and (3)
at the time of the sale, the buyer was not aware of any
claim or interest of some other person in the property,
or of any defect or restriction in the title of the seller or
in his capacity to convey title to the property. All these
conditions must be present, otherwise, the buyer is
under obligation to exercise extraordinary diligence by
scrutinizing the certificates of title and examining all
factual circumstances to enable him to ascertain the
seller's title and capacity to transfer any interest in the
property.
The factual milieu of the case reveals that intervenors
are buyers in bad faith for the following reasons:
Firstly, they admitted that they executed either
contracts of sale or contracts to sell indicating that the
lot is covered by TCT No. 156254 registered under the
name of the respondent Sanchezes. While the
established rule is that persons dealing with property
covered by a Torrens certificate of title are not required
to go beyond what appears on the face of the title,
intervenors cannot seek haven from such doctrine as
the title of the lot does not pertain to the vendor
(Garcia or TSEI) they dealt with. The fact that the lot
being sold to them belonged to persons other than TSEI
or Garcia should have driven the intervenors, as
prudence would dictate, to investigate the true status of
the property. They should have gone to the Register of
Deeds of Quezon City (RD) to verify if in fact TCT No.
156254 had already been cancelled and a new title has
been issued to TSEI or Garcia. They should have asked
for the deed of absolute sale filed and registered with
the RD to find out if the Sanchezes indeed sold the lot in
question to TSEI. They could have verified from the
primary entry book of said office if the deed of absolute
sale from the Sanchezes in favor of TSEI was registered
in said book, which, under the Property Registration
Decree (PD No. 1529), is considered as an effective and
legal notice to third persons and the whole world of
such transfer. Evidently, the intervenors failed to do so.
Secondly, the intervenors know, based on the contract
of sale or contract to sell, that the property is registered
under TCT No. 156254 in the name of the Sanchezes. As
such, they should have insisted that they talk to the
Sanchezes before executing said conveyances. Had they
done so, they would have known that the Sanchezes
have not executed a written deed of absolute sale in
favor of TSEI for the latter's failure to pay the
consideration in full. Having failed to ferret out the truth
from the Sanchezes, intervenors cannot be considered
innocent purchasers for failure to exercise utmost
caution and extra diligence in determining the true
owner of the property.
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Thirdly, the intervenors should have been suspicious of
the explanation of Garcia that TCT No. 383697,
reflecting TSEI as the owner of the property, has been
burned and that he is in the process of reconstituting
the title. Before signing the contract of sale or contract
to sell, they should have asked Garcia where the
reconstitution case has been filed or is pending and
proceeded to verify with the said court the status of the
reconstitution. Had they done so, they would have
known that neither Garcia nor TSEI had a deed of
absolute sale executed in their favor over the lot in
question. The truth of the matter is that it is the
duplicate certificate of title of TCT No. 156254 that has
been lost or misplaced, and is being sought to be
reconstituted, not TCT No. 383697. Had intervenors
been prudent enough to verify with the court the status
of the alleged TCT No. 383697, they would have known
that Garcia planned to deceive them in the sale of the
subject property.
Fourthly, the intervenors knew that they were buying a
townhouse over a subdivision lot from TSEI and Garcia.
Such being the case, they should have verified with the
HLURB whether said project is registered with said
housing agency and if a license to sell has been issued to
TSEI or Garcia. Had they made such an inquiry, they
would have known that instead of a permit for the
project and a license to sell the property, a cease and
desist order was issued by the HLURB precisely to enjoin
TSEI and Garcia from selling said property to the public.
Similarly, they could have inquired from the City
Building Official of Quezon City if a building permit was
issued to TSEI and Garcia for the construction of the
townhouses, which would have yielded the same
negative result.
c. VCTI acted in bad faith
As compared to the other purchasers, the Deeds of
Absolute Sale of intervenor VTCI cited TCT 383697 in the
name of VTCI and not TCT 156254. Nevertheless, the
Court finds that respondent VTCI is a purchaser in bad
faith for the following reasons: SECHIA
Firstly, respondent VTCI has not shown that it verified
with the RD if the alleged TCT 383697 of respondent
TSEI is valid and genuine. It did not present any certified
true copy of said TCT 383697 to demonstrate that based
on the RD's records, said title exists and that it is
genuine and valid. It should be remembered that the
duplicate certificate of TCT 156254 was lost and subject
of reconstitution. Yet respondents Garcia and TSEI were
not able to show that it was already reconstituted. In
addition, there was no deed of absolute sale executed
by the Sanchezes in favor of TSEI as the latter failed to
pay the last two (2) installments and subsequently, the
agreement to sell was rescinded by the Sanchezes for
non-payment. There being no deed of absolute sale,
there is, consequently, no ground for the RD to cancel
TCT No. 156254 and subsequently issue TCT 383697 in
the name of TSEI. This goes to show that TCT 383697 of
TSEI appears to be spurious and a fake title. This is
buttressed by the fact that the date of the issuance of
TCT 383697 is June 9, 1988, pre-dating the execution of
the Agreement between the Sanchezes and TSEI on
December 8, 1988. With the failure of VTCI to exert
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earnest efforts to verify the authenticity of TCT 383697,

then it is not a purchaser in good faith.
Secondly, Garcia and TSEI stopped the construction of
the townhouses on March 30, 1989 pursuant to the
CDO of the HLURB. Thus, the townhouses were not fully
finished and completed. Yet on December 27, 1989
(date of notarization), VTCI entered into three (3) Deeds
of Absolute sale over three (3) townhouses on three (3)
lots covered by TCT 383697 and despite the non-
completion of the townhouses, it still fully paid the
uniform price of P700,000 for the townhouse on each of
the 3 lots — 1st lot with an area of 52.5 square meters;
2nd lot with an area of 72.5 square meters; and 3rd lot
with an area of 42.5 square meters. The price of
P700,000 was even applied to all lots even if ordinarily a
bigger lot will commend a higher price. These are
doubtful transactions since a man of average intellect
will not fully pay the price of a townhouse which has not
yet been completed. The alleged purchases are not in
accord with the normal business practice and common
behavior of an ordinary human being. These
circumstances sway the Court to believe that said
alleged conveyances are not genuine and that VTCI is
not a purchaser in good faith.
Thirdly, with the CDO and the warnings to the public
and prospective buyers published in the Philippine Daily
Inquirer on April 16, 1989 and in the Manila Bulletin on
April 19, 2014, VTCI should have been aware of the
irregularities in the proposed sale of townhouses by
Garcia and TSEI. The failure of VTCI to heed the
warnings and prohibition to buy said townhouses tends
to show that said respondent is not a purchaser in good
faith.
Fourthly, with the issuance of the CDO by the HLURB
and the notices in the major dailies, VTCI should have
inquired with the said HLURB if Garcia and TSEI have a
permit to sell the townhouses. Had it done so, it would
have discovered that the project, as it lacks the
necessary permits, is unauthorized and that the title
over the townhouses is questionable.

Fifthly, a buyer of a townhouse will ordinarily visit the

project site and look at and investigate the lot, the title
and the townhouses being sold. If it inspected the site
of the construction project, it would have known from
the other purchasers that the project has no permit
from the HLURB and that construction has been stopped
because of the CDO. Had VTCI done the inspection and
investigation, then it would not have entered into the
deeds of absolute sale with Garcia and TSEI. Thus,
respondent VTCI cannot be considered as a purchaser in
good faith.
From the foregoing, the fact that all the intervenors
turned a blind eye to the flaws and defects in the
ownership of TSEI over the property and miserably
failed to undertake measures required of a reasonably
prudent man to investigate the title of the pseudo
owner and the legality of the townhouse project
constitutes bad faith for which there is no available
relief under the law.

Home Bankers Savings vs. CA. et. al.
Facts: Each of private respondents entered into separate
contracts to sell with TransAmerican Sales and
Exposition (TransAmerican) through the latter's
Owner/General Manager, Engr. Jesus Garcia, involving
certain portions of land covered by Transfer Certificate
of Title (TCT) No. 19155, located at Quezon City,
together with one unit three-storey townhouse to be
built on each portion.
It is stipulated in their respective contracts that their
individual townhouses will be fully completed and
constructed as per plans and specifications and the
respective titles thereto shall be delivered and
transferred to private respondents free from all liens
and encumbrances upon their full payment of the
purchase price. However, despite repeated demands,
Garcia/TransAmerican failed to comply with their
undertakings.
On May 30, 1989, Engr. Garcia and his wife Lorelie
Garcia obtained from petitioner Home Bankers Savings
and Trust Company (formerly Home Savings Bank and
Trust Company) a loan in the amount of P4,000,000.00
and without the prior approval of the Housing and Land
Use Regulatory Board (HLURB), the spouses mortgaged
eight lots covered by TCT Nos. 3349 to 3356 as
collateral. Petitioner registered its mortgage on these
titles without any other encumbrance or lien annotated
therein. The proceeds of the loan were intended for the
development of the lots into an eight-unit townhouse
project. However, five out of these eight titles turned
out to be private respondents' townhouses subject of
the contracts to sell with Garcia/TransAmerican.
When the loan became due, Garcia failed to pay his
obligation to petitioner. Consequently, petitioner
instituted an extrajudicial foreclosure on the subject lots
and being the highest bidder in the public auction, a
certificate of sale in its favor was issued by the sheriff
on February 26, 1990. Subsequently, the sheriff's
certificate of sale was registered and annotated on the
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titles of the subject lots in the Register of Deeds of
Quezon City.
On November 8, 1990, private respondents filed a
complaint with the Office of Appeals, Adjudication and
Legal Affairs (OAALA), HLURB, against
Garcia/TransAmerican as seller/developer of the
property and petitioner, as indispensable party, for non-
delivery of titles and non-completion of the subdivision
project. They prayed for the completion of the units,
annulment of the mortgage in favor of petitioner,
release of the mortgage on the lots with fully paid
owners and delivery of their titles, and for petitioner to
compute individual loan values of amortizing
respondents and to accept payments from them and
damages.
Petitioner filed its Answer contending that private
respondents have no cause of action against it; that at
the time of the loan application and execution of the
promissory note and real estate mortgage by Garcia,
there were no known individual buyers of the subject
land nor annotation of any contracts, liens or
encumbrances of third persons on the titles of the
subject lots; that the loan was granted and released
without notifying HLURB as it was not necessary.
Issue: Petitioner contends that since the titles on their
face were free from any claims, liens and encumbrances
at the time of the mortgage, it is not obliged under the
law to go beyond the certificates of title registered
under the Torrens system and had every reason to rely
on the correctness and validity of those titles.
Held: We are not convinced.
While the cases cited by petitioner held that the
mortgagee is not under obligation to look beyond the
certificate of title when on its face, it was free from lien
or encumbrances, the mortgagees therein were
considered in good faith as they were totally innocent
and free from negligence or wrongdoing in the
transaction. In this case, petitioner knew that the loan it
was extending to Garcia/TransAmerican was for the
purpose of the development of the eight-unit
townhouses. Petitioner’s insistence that prior to the
approval of the loan, it undertook a thorough check on
the property and found the titles free from liens and
encumbrances would not suffice. It was incumbent
upon petitioner to inquire into the status of the lots
which includes verification on whether Garcia had
secured the authority from the HLURB to mortgage the
subject lots. Petitioner failed to do so. We likewise
find petitioner negligent in failing to even ascertain from
Garcia if there are buyers of the lots who turned out to
be private respondents. Petitioner’s want of knowledge
due to its negligence takes the place of registration, thus
it is presumed to know the rights of respondents over
the lot. The conversion of the status of petitioner from
mortgagee to buyer-owner will not lessen the
importance of such knowledge. Neither will the
conversion set aside the consequence of its negligence
as a mortgagee.
Judicial notice can be taken of the uniform practice of
banks to investigate, examine and assess the real estate
offered as security for the application of a loan. We
cannot overemphasize the fact that the Bank cannot
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barefacedly argue that simply because the title or titles

offered as security were clean of any encumbrances or
lien, that it was thereby relieved of taking any other step
to verify the over-reaching implications should the
subdivision be auctioned on foreclosure.
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