G.R No.

128573
NAAWAAN COMMUNITY RURAL BANK INC., VS COURT OF APPEALS & SPS. LUMO
JANUARY 13, 2003
CORONA, J:

FACTS:
On April 30, 1988, Guilllermo Comayas offered to sell to Sps. Alfredo and Annabelle
Lumo, a house and a lot measuring 340 sq.m. Located at Cagayan De Oro.

Sps. Lumo inquired at the Office of the Register of Deeds of Cagayan de Oro and
Bureau of Lands on legal status of the vendor's titles. Then, it was found out that the
property was mortgaged for 8,000 pesos to Mrs. Galupo, the said property was on her
possesion. Sps. Lumo directed Comayas to redeem the property at their expense
then gave 10,000 pesos.

On May 30, 1988, the property was released. Prior to that date, Comayas and Sps.
Lumo executed a Deed of Absolute Sale. The property was alleged sold for 125,000 but only
30,000 was reflected on the deed of sale, the balance payable by installment.

Thereafter, On June 9, 1988, the deed of absolute sale was registered and inscribed
on TCT No. 41499 and TCT-T50134 in favor of the sps. Lumo. After obtaining the TCT, they
requested for the new issuancce of tax declaration on their names. However, appearing in
the record of the Assessor's Office, that the property was also declared for tax purposes in
the name of Naawaan Community Rural Bank Inc.,.

Prior to these incidents, Comayas obtain a loan of 15,000 pesos from the Bank using
the subject property as security. (It was unregistered parcel of residential land, tax -declared
in the name of Sergio Balibay while the residential one-storey house was tax declared in the
name of Comayas.

They executed a Deed of Real Estate Mortgage and Special Power of Attorney were
recorded in Misamis Oriental, not in Cagayan De Oro. When the registration was made, there
was only one Register of Deeds for the entire Misamis Oriental, including Cagayan. Failure to
pay the loan, it was foreclosed and sold at a public auction won by the petitioner. Thereafter,
a sheriff's certificate of sale was issued and registered under Act. 3344 in the Register of
Deeds of the Province of Misamis Oriental.

On April 17, 1984, the subject property was registered in original proceedings under
LRA. It was entered under the book of Register of Deeds of Cagayan de Oro City. On July 23,
1984, a TCT in the name of Comayas was entered into the Register of Deeds of Cagayan de
Oro City.

On September 5, 1986, the period of redemption was lapsed and MTCC issued and
delivedred to the bank the sheriff's deed of final conveyance. Then, the bank obtained a tax
declaration.
 Thereafter, petitioner filed an ejectment case against Comayas before MTCC and
decided on their favor. Appealed to the RTC. RTC affirmed the decision. RTC ordered to
issue a writ of execution and MTCC issued the writ.

Upon execution, Comayas vacated the place and Sps. Lumo who bought the property
residing in the subject property. Sps. Lumo filed an action Quieting of Title. The RTC
rendered a decision, declaring that they are the lawful owner of the property. Appeealed to
CA. CA affirmed the RTC decision.

ISSUE:
Whether or not Sps. Lumo are in good faith buying the said property.

HELD:
YES. The Supreme Court held that Sps. Lumo bought the subject property to
Comayas, inquiries were made with the ROD and Bureau of Lands regarding the status of
vendor's title. No liens or encumbrances were found. Only the mortgage property to Mrs.
Galupo. Considering that the private respondents exercised the diligence required by law in
ascertaining the legal status of the subject property and found no flaws. They should be
considered as innocent purchasers for value and in good faith.