Republic of the Philippines the payment in her behalf.
payment in her behalf. Balen testified that he delivered the Deed On 7 January 2003, Land Bank filed its Answer with Compulsory
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 196577               February 25, 2013
LAND BANK OF THE PHILIPPINES, Petitioner,  Department Manager Marcelino Pulayan on 20 August 1999, 7 Maniego
vs.
BARBARA SAMPAGA POBLETE, Respondent.
DECISION
CARPIO, J.:
The Case
This Petition for Review on Certiorari1 seeks to reverse the Court of
Appeals' Decision2 dated 28  September 20 I 0 and its Resolution3 dated
19 April 2011 in C A-G.R. CV No. 91666. The Court of Appeals (C A)
affirmed in toto  the Decision4 of the Regional Trial Court (RTC) of San
Jose, Occidental Mindoro, Branch 46, in Civil Case No. R-1331.
The Facts
The facts, as culled from the records, are as follows:
Petitioner Land Bank of the Philippines (Land Bank) is a banking
institution organized and existing under Philippine laws. Respondent
Barbara Sampaga Poblete (Poblete) is the registered owner of a parcel of
land, known as Lot No. 29, with an area of 455 square meters, located in
Buenavista, Sablayan, Occidental Mindoro, under Original Certificate of
Title (OCT) No. P-12026. In October 1997, Poblete obtained a
₱300,000.00 loan from Kabalikat ng Pamayanan ng Nagnanais Tumulong
at Yumaman Multi-Purpose Cooperative (Kapantay). Poblete mortgaged
Lot No. 29 to Kapantay to guarantee payment of the loan. Kapantay, in
turn, used OCT No. P-12026 as collateral under its Loan Account No. 97-
CC-013 with Land Bank-Sablayan Branch.
In November 1998, Poblete decided to sell Lot No. 29 to pay her loan.
She instructed her son-in-law Domingo Balen (Balen) to look for a buyer.
Balen referred Angelito Joseph Maniego (Maniego) to Poblete. According
to Poblete, Maniego agreed to buy Lot No. 29 for ₱900,000.00, but
Maniego suggested that a deed of absolute sale for ₱300,000.00 be
executed instead to reduce the taxes. Thus, Poblete executed the Deed
of Absolute Sale dated 9 November 1998 (Deed dated 9 November 1998)
with ₱300,000.00 as consideration.5 In the Deed dated 9 November
1998, Poblete described herself as a "widow." Poblete, then, asked Balen
to deliver the Deed dated 9 November 1998 to Maniego and to receive
dated 9 November 1998 to Maniego. However, Balen stated that he did
not receive from Maniego the agreed purchase price. Maniego told Balen
that he would pay the amount upon his return from the United States. In
an Affidavit dated 19 November 1998, Poblete stated that she agreed to
have the payment deposited in her Land Bank Savings Account. 6
Based on a Certification issued by Land Bank-Sablayan Branch
paid Kapantay’s Loan Account No. 97-CC-013 for ₱448,202.08. On 8 June
2000, Maniego applied for a loan of ₱1,000,000.00 with Land Bank, using
OCT No. P 12026 as collateral. Land Bank alleged that as a condition for
the approval of the loan, the title of the collateral should first be
transferred to Maniego.
On 14 August 2000, pursuant to a Deed of Absolute Sale dated 11 August
2000 (Deed dated 11 August 2000), 8 the Register of Deeds of Occidental
Mindoro issued Transfer Certificate of Title (TCT) No. T-20151 in
Maniego’s name. On 15 August 2000, Maniego and Land Bank executed a
Credit Line Agreement and a Real Estate Mortgage over TCT No. T-
20151. On the same day, Land Bank released the ₱1,000,000.00 loan
proceeds to Maniego. Subsequently, Maniego failed to pay the loan with
Land Bank. On 4 November 2002, Land Bank filed an Application for
Extra-judicial Foreclosure of Real Estate Mortgage stating that Maniego’s
total indebtedness amounted to ₱1,154,388.88.
On 2 December 2002, Poblete filed a Complaint for Nullification of the
Deed dated 11 August 2000 and TCT No. T-20151, Reconveyance of Title
and Damages with Prayer for Temporary Restraining Order and/or
Issuance of Writ of Preliminary Injunction. Named defendants were
Maniego, Land Bank, the Register of Deeds of Occidental Mindoro and
Elsa Z. Aguirre in her capacity as Acting Clerk of Court of RTC San Jose,
Occidental Mindoro. In her Complaint, Poblete alleged that despite her
demands on Maniego, she did not receive the consideration of
₱900,000.00 for Lot No. 29. She claimed that without her knowledge,
Maniego used the Deed dated 9 November 1998 to acquire OCT No. P-
12026 from Kapantay. Upon her verification with the Register of Deeds,
the Deed dated 11 August 2000 was used to obtain TCT No. T-20151.
Poblete claimed that the Deed dated 11 August 2000 bearing her and her
deceased husband’s, Primo Poblete, supposed signatures was a forgery
as their signatures were forged. As proof of the forgery, Poblete
presented the Death Certificate dated 27 April 1996 of her husband and
Report No. 294-502 of the Technical Services Department of the National
Bureau of Investigation showing that the signatures in the Deed dated 11
August 2000 were forgeries. Accordingly, Poblete also filed a case for
estafa through falsification of public document against Maniego and
sought injunction of the impending foreclosure proceeding.
Counterclaim and Cross-claim. Land Bank claimed that it is a mortgagee
in good faith and it observed due diligence prior to approving the loan by
verifying Maniego’s title with the Office of the Register of Deeds. Land
Bank likewise interposed a cross-claim against Maniego for the payment
of the loan, with interest, penalties and other charges. Maniego, on the
other hand, separately filed his Answer. Maniego denied the allegations
of Poblete and claimed that it was Poblete who forged the Deed dated 11
August 2000. He also alleged that he paid the consideration of the sale to
Poblete and even her loans from Kapantay and Land Bank.
The Ruling of the Regional Trial Court
On 28 December 2007, the RTC of San Jose, Occidental Mindoro, Branch
46, rendered a Decision in favor of Poblete, the dispositive portion of
which reads:
WHEREFORE, by preponderance of evidence, judgment is hereby
rendered in favor of the plaintiff and against the defendants, as follows:
1. Declaring the Deed of Sale dated August 11, 2000 over O.C.T. No. P-
12026, as null and void;
2. Declaring Transfer of Certificate of Title No. T-20151 as null and void, it
having been issued on the basis of a spurious and forged document;
3. The preliminary [i]njunction issued directing the defendants to refrain
from proceedings [sic] with the auction sale of the plaintiff’s properties,
dated February 10, 2002, is hereby made permanent;
4. Ordering defendant Angelito Joseph Maniego to return to the plaintiff
O.C.T. No. P-12026; and
5. Ordering defendant Angelito Joseph Maniego to pay plaintiff the
amount of ₱50,000.00, as and for reasonable attorney’s fees.
Judgment is furthermore rendered on the cross-claim of defendant Land
Bank of the Philippines against defendant Angelito Joseph Maniego, as
follows:
A. Ordering defendant Angelito Joseph Maniego to pay his co-defendant
[L]and Bank of the Philippines his loan with a principal of ₱1,000,000.00,
plus interests, penalties and other charges thereon; and
B. Ordering defendant Angelito Joseph Maniego to pay the costs of this
suit.
SO ORDERED.9
The RTC ruled that the sale between Poblete and Maniego was a nullity.
The RTC found that the agreed consideration was ₱900,000.00 and
Maniego failed to pay the consideration. Furthermore, the signatures of
Poblete and her deceased husband were proven to be forgeries. The RTC
also ruled that Land Bank was not a mortgagee in good faith because it
failed to exercise the diligence required of banking institutions. The RTC
explained that had Land Bank exercised due diligence, it would have
known before approving the loan that the sale between Poblete and
Maniego had not been consummated. Nevertheless, the RTC granted
Land Bank’s cross-claim against Maniego.
In an Order dated 17 March 2008, the RTC denied the Motion for
Reconsideration filed by Land Bank for want of merit. Thereafter, Land
Bank and Maniego separately challenged the RTC’s Decision before the
CA.
The Ruling of the Court of Appeals
On 28 September 2010, the CA promulgated its Decision affirming in
toto  the Decision of the RTC.10 Both Land Bank and Maniego filed their
Motions for Reconsideration but the CA denied both motions on 19 April
2011.11
In a Resolution dated 13 July 2011,12 the Second Division of this Court
denied the Petition for Review on Certiorari filed by Maniego. This
Resolution became final and executory on 19 January 2012.
On the other hand, Land Bank filed this petition.
The Issues
Land Bank seeks a reversal and raises the following issues for resolution:
1. THE COURT OF APPEALS (FORMER SPECIAL ELEVENTH DIVISION)
ERRED IN UPHOLDING THE FINDING OF THE TRIAL COURT DECLARING
TCT NO. T-20151 AS NULL AND VOID. THE COURT OF APPEALS
MISCONSTRUED AND MISAPPRECIATED THE EVIDENCE AND THE LAW IN
NOT FINDING TCT NO. T-20151 REGISTERED IN THE NAME OF ANGELITO
JOSEPH MANIEGO AS VALID.
2. THE COURT OF APPEALS (FORMER SPECIAL ELEVENTH DIVISION)
MISCONSTRUED THE EVIDENCE AND THE LAW IN NOT FINDING LAND
BANK A MORTGAGEE IN GOOD FAITH.
3. THE COURT OF APPEALS (FORMER SPECIAL ELEVENTH DIVISION)
MISCONSTRUED THE EVIDENCE AND THE LAW IN NOT FINDING THE
RESPONDENT AND ANGELITO JOSEPH MANIEGO AS IN PARI DELICTO.
4. THE COURT OF APPEALS (FORMER SPECIAL ELEVENTH DIVISION)
ERRED IN NOT APPLYING THE PRINCIPLE OF ESTOPPEL OR LACHES ON
RESPONDENT IN THAT THE PROXIMATE CAUSE OF HER LOSS WAS HER
NEGLIGENCE TO SAFEGUARD HER RIGHTS OVER THE SUBJECT PROPERTY,
THEREBY ENABLING ANGELITO JOSEPH MANIEGO TO MORTGAGE THE
SAME WITH LAND BANK.13
The Ruling of the Court
We do not find merit in the petition.
A petition for review under Rule 45 of the Rules of Court specifically
provides that only questions of law may be raised, subject to exceptional
circumstances14 which are not present in this case. Hence, factual
findings of the trial court, especially if affirmed by the CA, are binding on
us.15 In this case, both the RTC and the CA found that the signatures of
Poblete and her deceased husband in the Deed dated 11 August 2000
were forged by Maniego. In addition, the evidence is preponderant that
Maniego did not pay the consideration for the sale. Since the issue on
the genuineness of the Deed dated 11 August 2000 is essentially a
question of fact, we are not dutybound to analyze and weigh the
evidence again.16
It is a well-entrenched rule, as aptly applied by the CA, that a forged or
fraudulent deed is a nullity and conveys no title.17 Moreover, where the
deed of sale states that the purchase price has been paid but in fact has
never been paid, the deed of sale is void ab initio  for lack of
consideration.18 Since the Deed dated 11 August 2000 is void, the
corresponding TCT No. T-20151 issued pursuant to the same deed is
likewise void. In Yu Bun Guan v. Ong,19 the Court ruled that there was no
legal basis for the issuance of the certificate of title and the CA correctly
cancelled the same when the deed of absolute sale was completely
simulated, void and without effect. In Ereña v. Querrer-Kauffman,20 the
Court held that when the instrument presented for registration is forged,
even if accompanied by the owner’s duplicate certificate of title, the
registered owner does not thereby lose his title, and neither does the
mortgagee acquire any right or title to the property. In such a case, the
mortgagee under the forged instrument is not a mortgagee protected by
law.21
The issue on the nullity of Maniego’s title had already been foreclosed
when this Court denied Maniego’s petition for review in the Resolution
dated 13 July 2011, which became final and executory on 19 January
2012.22 It is settled that a decision that has acquired finality becomes
immutable and unalterable and may no longer be modified in any
respect, even if the modification is meant to correct erroneous
conclusions of fact or law and whether it will be made by the court that
rendered it or by the highest court of the land.23 This is without
prejudice, however, to the right of Maniego to recover from Poblete
what he paid to Kapantay for the account of Poblete, otherwise there
will be unjust enrichment by Poblete.
Since TCT No. T-20151 has been declared void by final judgment, the Real
Estate Mortgage constituted over it is also void. In a real estate mortgage
contract, it is essential that the mortgagor be the absolute owner of the
property to be mortgaged; otherwise, the mortgage is void. 24
Land Bank insists that it is a mortgagee in good faith since it verified
Maniego’s title, did a credit investigation, and inspected Lot No. 29. The
issue of being a mortgagee in good faith is a factual matter, which cannot
be raised in this petition.25 However, to settle the issue, we carefully
examined the records to determine whether or not Land Bank is a
mortgagee in good faith.1âwphi1
There is indeed a situation where, despite the fact that the mortgagor is
not the owner of the mortgaged property, his title being fraudulent, the
mortgage contract and any foreclosure sale arising therefrom are given
effect by reason of public policy.26 This is the doctrine of "the mortgagee
in good faith" based on the rule that buyers or mortgagees dealing with
property covered by a Torrens Certificate of Title are not required to go
beyond what appears on the face of the title.27 However, it has been
consistently held that this rule does not apply to banks, which are
required to observe a higher standard of diligence.28 A bank whose
business is impressed with public interest is expected to exercise more
care and prudence in its dealings than a private individual, even in cases
involving registered lands.29 A bank cannot assume that, simply because
the title offered as security is on its face free of any encumbrances or
lien, it is relieved of the responsibility of taking further steps to verify the
title and inspect the properties to be mortgaged.30
Applying the same principles, we do not find Land Bank to be a
mortgagee in good faith.
Good faith, or the lack of it, is a question of intention.31 In ascertaining
intention, courts are necessarily controlled by the evidence as to the
conduct and outward acts by which alone the inward motive may, with
safety, be determined.32
Based on the evidence, Land Bank processed Maniego’s loan application
upon his presentation of OCT No. P-12026, which was still under the
name of Poblete. Land Bank even ignored the fact that Kapantay
previously used Poblete’s title as collateral in its loan account with Land
Bank.33 In Bank of Commerce v. San Pablo, Jr.,34 we held that when "the
person applying for the loan is other than the registered owner of the
real property being mortgaged, [such fact] should have already raised a
red flag and which should have induced the Bank x x x to make inquiries
into and confirm x x x [the] authority to mortgage x x x. A person who
deliberately ignores a significant fact that could create suspicion in an
otherwise reasonable person is not an innocent purchaser for value."
The records do not even show that Land Bank investigated and inspected WHEREFORE, we DENY the petition. We AFFIRM the 28 September 2010
the property to ascertain its actual occupants. Land Bank merely Decision and the 19 April 2011 Resolution of the Court of Appeals in CA-
mentioned that it inspected Lot No. 29 to appraise the value of the Ci.R. CV No. 91666. The injunction against the foreclosure proceeding,
property. We take judicial notice of the standard practice of banks, issued by the Regional Trial Court of San Jose, Occidental Mindoro,
before approving a loan, to send representatives to the premises of the Branch 46, is made permanent. Costs against Land Bank.
land offered as collateral to investigate its real owners.35 In Prudential
Bank v. Kim Hyeun Soon,36 the Court held that the bank failed to exercise SO ORDERED.
due diligence although its representative conducted an ocular inspection,
because the representative concentrated only on the appraisal of the
property and failed to inquire as to who were the then occupants of the
property.

Land Bank claims that it conditioned the approval of the loan upon the
transfer of title to Maniego, but admits processing the loan based on
Maniego’s assurances that title would soon be his.37 Thus, only one day
after Maniego obtained TCT No. T-20151 under his name, Land Bank and
Maniego executed a Credit Line Agreement and a Real Estate Mortgage.
Because of Land Bank’s haste in granting the loan, it appears that
Maniego’s loan was already completely processed while the collateral
was still in the name of Poblete. This is also supported by the testimony
of Land Bank Customer Assistant Andresito Osano.38

Where the mortgagee acted with haste in granting the mortgage loan
and did not ascertain the ownership of the land being mortgaged, as well
as the authority of the supposed agent executing the mortgage, it cannot
be considered an innocent mortgagee.39

Since Land Bank is not a mortgagee in good faith, it is not entitled to

protection. The injunction against the foreclosure proceeding in the
present case should be made permanent. Since Lot No. 29 has not been
transferred to a third person who is an innocent purchaser for value,
ownership of the lot remains with Poblete. This is without prejudice to
the right of either party to proceed against Maniego.

On the allegation that Poblete is in pari delicto  with Maniego, we find the
principle inapplicable. The pari delicto  rule provides that "when two
parties are equally at fault, the law leaves them as they are and denies
recovery by either one of them."40 We adopt the factual finding of the
RTC and the CA  that only Maniego is at fault.

Finally, on the issues of estoppel and laches, such were not raised before
the trial court.1âwphi1 I fence, we cannot rule upon the same. It is
settled that an issue which was neither alleged in the complaint nor
raised during the trial cannot be raised for the tirst time on appeal, as
such a recourse would be offensive to the basic rules of t}1ir play, justice
and due process, since the opposing party would be deprived of the
opp01iunity to introduce evidence rebutting such new issue.41
EN BANC judgment with prayer for the issuance of a writ of preliminary mandatory because the subject property had already been sold by its owner,
injunction before the Court of Appeals.[3] Cabrera, even prior to the promulgation of said decision.
[G.R. No. 94457. October 16, 1997]
On November 29, 1989, the appellate court rendered a decision affirming By virtue of the Gancayco decision, Cathay was duty bound to return the
VICTORIA LEGARDA, petitioner, vs.  THE HONORABLE COURT OF the March 25, 1985, decision of the trial court, dismissing the petition for subject property to Legarda. The impossibility of this directive is
APPEALS, NEW CATHAY HOUSE, INC., THE HONORABLE REGIONAL annulment of judgment, and holding Legarda bound by the negligence of immediately apparent, for two reasons: First, Cathay neither possessed
TRIAL COURT OF QUEZON CITY, BRANCH 94, respondents. her counsel. It considered her allegation of fraud by Cathay to be nor owned the property so it is in no position to reconvey the same;
improbable, and added that there was pure and simple negligence on the second, even if it did, ownership over the property had already been
RESOLUTION part of petitioners counsel who failed to file an answer and, later, a validly transferred to innocent third parties at the time of promulgation
petition for relief from judgment by default. Upon notice of the Court of of said judgment.
ROMERO, J.:
Appeals decision, Atty. Coronel again neglected to protect his clients
interest by failing to file a motion for reconsideration or to appeal There is no question that the highest bidder at the public auction was
For our resolution is the motion for reconsideration of the March 18,
therefrom until said decision became final on December 21, 1989. Cathays manager. It has not been shown nor even alleged, however, that
1991, decision of the Courts's First Division, filed by private respondents
Roberto Cabrera had all the time been acting for or in behalf of
New Cathay House, Inc. (Cathay). A brief narration of facts is in order.
Sometime in March 1990, Legarda learned of the adverse decision of the Cathay. For all intents and purposes, Cabrera was simply a vendee whose
Court of Appeals dated November 29, 1989, not from Atty. Coronel but payment effectively extinguished Legardas liability to Cathay as the
The parties hereto entered into a lease agreement over a certain Quezon
from his secretary. She then hired a new counsel for the purpose of judgment creditor. No proof was ever presented which would reveal that
City property owned by petitioner Victoria Legarda. For some reason or
elevating her case to this Court. The new lawyer filed a petition the sale occurred only on paper, with Cabrera acting as a mere conduit
another, she refused to sign the contract although respondent lessee,
for certiorari praying for the annulment of the decision of the trial and for Cathay. What is clear from the records is that the auction sale was
Cathay, made a deposit and a down payment of rentals, prompting the
appellate courts and of the sheriffs sale, alleging, among other things, conducted regularly, that a certificate of sale and, subsequently, a final
latter to file before the Regional Trial Court of Quezon City, Branch 94 a
that Legarda lost in the courts below because her previous lawyer was deed of sale were issued to Cabrera which allowed him to consolidate his
complaint[1] against the former for specific performance with preliminary
grossly negligent and inefficient, whose omissions cannot possibly bind ownership over the subject property, register it and obtain a title in his
injunction and damages. The court a quo issued the injunction. In the
her because this amounted to a violation of her right to due process of own name, and sell it to Nancy Saw, an innocent purchaser for value, at a
meantime, Legardas counsel, noted lawyer Dean Antonio Coronel,
law. She, therefore, asked Cathay (not Cabrera) to reconvey the subject premium price. Nothing on record would demonstrate that Cathay was
requested a 10-day extension of time to file an answer which the court
property to her. the beneficiary of the sale between Cabrera and Saw.Cabrera himself
granted. Atty. Coronel, however, failed to file an answer within the
maintained that he was acting in his private (as distinct from his
extended period. His client was eventually declared in default, Cathay
On March 18, 1991, a decision[4] was rendered in this case by Mr. Justice corporate) capacity[5] when he participated in the bidding.
was allowed to present evidence ex-parte, and on March 25, 1985, a
Gancayco, ruling, inter alia, as follows: (a) granting the petition; (b)
judgment by default was reached by the trial court ordering Legarda to
nullifying the trial courts decision dated March 25, 1985, the Court of Since the decision of the Court of Appeals gained finality on December
execute the lease contract in favor of, and to pay damages to, Cathay.
Appeals decision dated November 29, 1989, the Sheriffs Certificate of 21, 1989, the subject property has been sold and ownership thereof
Sale dated June 27, 1985, of the property in question, and the transferred no less than three times, viz.: (a) from Cabrera to Nancy Saw
On April 9, 1985, a copy of said decision was served on Atty. Coronel but
subsequent final deed of sale covering the same property; and on March 21, 1990, four months after the decision of the Court of
he took no action until the judgment became final and executory. A
(c) ordering Cathay to reconvey said property to Legarda, and the Appeals became final and executory and one year before the
month later, the trial court issued a writ of execution and a public
Register of Deeds to cancel the registration of said property in the name promulgation of the March 18, 1991, decision under reconsideration; (b)
auction was held where Cathays manager, Roberto V. Cabrera, Jr., as
of Cathay (not Cabrera) and to issue a new one in Legardas name. from Nancy Saw to Lily Tanlo Sy Chua on August 7, 1990, more than one
highest bidder, was awarded the property for P376,500.00 in satisfaction
year before the Court issued a temporary restraining order in connection
of the judgment debt. Consequently, a Certificate of Sale was issued by
The Court then declared that Atty. Coronel committed, not just ordinary with this case; and (c) from the spouses Victor and Lily Sy Chua to Janet
the sheriff on June 27, 1985. Upon failure of Legarda to redeem her
or simple negligence, but reckless, inexcusable and gross negligence, Chong Luminlun on April 3, 1992. With these transfers, Cabreras TCT No.
property within the one-year redemption period, a Final Deed of Sale
which deprived his client of her property without due process of law. His 350892 gave way to Saws TCT No. 31672, then to Chuas TCT No. 31673,
was issued by the sheriff on July 8, 1986, which was registered by
acts, or the lack of it, should not be allowed to bind Legarda who has and finally to Luminluns TCT No. 99143, all issued by the Register of
Cabrera with the Register of Deeds three days later. Hence, Legardas
been consigned to penury because her lawyer appeared to have Deeds of Quezon City on April 3, 1990, August 8, 1990, and November
Transfer Certificate of Title (TCT) No. 270814 was cancelled with the
abandoned her case not once but repeatedly. Thus, the Court ruled 24, 1993, respectively.
issuance of TCT No. 350892 in the name of Cabrera.
against tolerating such unjust enrichment of Cathay at Legardas expense,
and noted that counsels lack of devotion to duty is so gross and palpable We do not have to belabor the fact that all the successors-in-interest of
Despite the lapse of over a year since the judgment by default became
that this Court must come to the aid of his distraught client. Cabrera to the subject lot were transferees for value and in good faith,
final and executory, Atty. Coronel made no move on behalf of his
having relied as they did on the clean titles of their predecessors. The
client. He did not even inform her of all these developments. When
Aggrieved by this development, Cathay filed the instant motion for successive owners were each armed with their own indefeasible titles
Legarda did learn of the adverse decision, she nevertheless did not lose
reconsideration, alleging, inter alia, that reconveyance is not possible which automatically brought them under the aegis of the Torrens
faith in her counsel[2] and prevailed upon him to seek appropriate
System. As the Court declared in Sandoval v. Court of Appeals,[6] (i)t is
relief. Thus, on October 23, 1986, he filed a petition for annulment of
settled doctrine that one who deals with property registered under the
Torrens system need not go beyond the same, but only has to rely on the
title. He is charged with notice only of such burdens and claims as are
annotated on the title.[7] In the case at bar, it is not disputed that no
notice of lis pendens was ever annotated on any of the titles of the
subsequent owners. And even if there were such a notice, it would not
have created a lien over the property because the main office of a lien is
to warn prospective buyers that the property they intend to purchase is
the subject of a pending litigation. Therefore, since the property is
already in the hands of Luminlun, an innocent purchaser for value, it can
no longer be returned to its original owner by Cabrera, much less by
Cathay itself.
Another point to consider, though not raised as an issue in this case, is
the fact that Cabrera was impleaded as a party-respondent only on
August 12, 1991, after the promulgation of the Gancayco decision.[8] The
dispositive portion itself ordered Cathay, instead of Cabrera to reconvey
the property to Legarda. Cabrera was never a party to this case, either as
plaintiff-appellee below or as respondent in the present action. Neither
did he ever act as Cathays representative. As we held in the recent case
of National Power Corporation v. NLRC, et al.,[9] (j)urisdiction over a party
is acquired by his voluntary appearance or submission to the court or by
the coercive process issued by the court to him, generally by service of
summons.[10] In other words, until Cabrera was impleaded as party
respondent and ordered to file a comment in the August 12, 1991,
resolution, the Court never obtained jurisdiction over him, and to
command his principal to reconvey a piece of property which used to be
HIS would not only be inappropriate but would also constitute a real
deprivation of ones property without due process of law.
Assuming arguendo that reconveyance is possible, that Cathay and
Cabrera are one and the same and that Cabreras payment redounded to
the benefit of his principal, reconveyance, under the facts and evidence
obtaining in this case, would still not address the issues raised herein
The application of the sale price to Legardas judgment debt constituted a
payment which extinguished her liability to Cathay as the party in whose
favor the obligation to pay damages was established.[11] It was a payment
in the sense that Cathay had to resort to a court-supervised auction sale
in order to execute the judgment.[12] With the fulfillment of the judgment
debtors obligation, nothing else was required to be done.
Under the Gancayco ruling, the order of reconveyance was premised on
the alleged gross negligence of Legardas counsel which should not be
allowed to bind her as she was deprived of her property without due
process of law.
It is, however, basic that as long as a party was given the opportunity to
defend her interests in due course, she cannot be said to have been
denied due process of law, for this opportunity to be heard is the very
essence of due process. The chronology of events shows that the case
took its regular course in the trial and appellate courts but Legardas
counsel failed to act as any ordinary counsel should have acted, his
negligence every step of the way amounting to abandonment, in the
words of the Gancayco decision. Yet, it cannot be denied that the
proceedings which led to the filing of this case were not attended by any
irregularity. The judgment by default was valid, so was the ensuing sale
at public auction. If Cabrera was adjudged highest bidder in said auction
sale, it was not through any machination on his part. All of his actuations
that led to the final registration of the title in his name were aboveboard,
untainted by any irregularity.
The fact that Cabrera is an officer of Cathay does not make him a
purchaser in bad faith. His act in representing the company was never
questioned nor disputed by Legarda. And while it is true that he won in
the bidding, it is likewise true that said bidding was conducted by the
book. There is no call to be alarmed that an official of the company
emerges as the winning bidder since in some cases, the judgment
creditor himself personally participates in the bidding.
There is no gainsaying that Legarda is the judgment debtor here. Her
property was sold at public auction to satisfy the judgment debt. She
cannot claim that she was illegally deprived of her property because such
deprivation was done in accordance with the rules on execution of
judgments. Whether the money used to pay for said property came from
the judgment creditor or its representative is not relevant. What is
important is that it was purchased for value. Cabrera parted with real
money at the auction. In his Sheriffs Certificate of Sale dated June 27,
1985,[13] Deputy Sheriff Angelito R. Mendoza certified, inter alia, that the
highest bidder paid to the Deputy Sheriff the said amount
of P376,500.00, the sale price of the levied property. If this does not
constitute payment, what then is it? Had there been no real purchase
and payment below, the subject property would never have been
awarded to Cabrera and registered in his name, and the judgment debt
would never have been satisfied. Thus, to require either Cathay or
Cabrera to reconvey the property would be an unlawful intrusion into
the lawful exercise of his proprietary rights over the land in question, an
act which would constitute an actual denial of property without due
process of law.
It may be true that the subject lot could have fetched a higher price
during the public auction, as Legarda claims, but the fail to betray any
hint of a bid higher than Cabreras which was bypassed in his
favor. Certainly, he could not help it if his bid of only P376,500.00 was
the highest. Moreover, in spite of this allegedly low selling price, Legarda
still failed to redeem her property within the one-year redemption
period. She could not feign ignorance of said sale on account of her
counsels failure to so inform her, because such auction sales comply with
requirements of notice and publication under the Rules of Court. In the
absence of any clear and convincing proof that such requirements were
not followed, the presumption of regularity stands. Legarda also claims
that she was in the United States during the redemption period, but she
admits that she left the Philippines only on July 13, 1985, or sixteen days
after the auction sale of June 27, 1985. Finally, she admits that her
mother Ligaya represented her during her absence.[14] In short, she was
not totally in the dark as to the fate of her property and she could have
exercised her right of redemption if she chose to, but she did not.
Neither Cathay nor Cabrera should be made to suffer for the gross
negligence of Legardas counsel. If she may be said to be innocent
because she was ignorant of the acts of negligence of her counsel, with
more reason are respondents truly innocent. As between two parties
who may lose due to the negligence or incompetence of the counsel of
one, the party who was responsible for making it happen should suffer
the consequences. This reflects the basic common law maxim, so
succinctly stated by Justice J.B.L. Reyes, that . . . (B)etween two innocent
parties, the one who made it possible for the wrong to be done should
be the one to bear the resulting loss. [15] In this case, it was not
respondents, Legarda, who misjudged and hired the services of the
lawyer who practically abandoned her case and who continued to retain
him even after his proven apathy and negligence.
The Gancayco decision makes much of the fact that Legarda is now
consigned to penury and, therefore, this Court must come to the aid of
the distraught client. It must be remembered that this Court renders
decisions, not on the basis of emotions but on its sound judgment,
applying the relevant, appropriate law. Much as it may pity Legarda, or
any losing litigant for that matter, it cannot play the role of a knight in
shining armor coming to the aid of someone, who through her weakness,
ignorance or misjudgment may have been bested in a legal joust which
complied with all the rules of legal proceedings.
In Vales v. Villa,[16] this Court warned against the danger of jumping to the
aid of a litigant who commits serious error of judgment resulting in his
own loss:
x x x Courts operate not because one person has been defeated or
overcome by another, but because he has been defeated or overcome
illegally.  Men may do foolish things, make ridiculous contracts, use
miserable judgment, and lose money by them - indeed, all they have in
the world; but not for that alone can the law intervene and
restore. There must be, in addition, a violation of law, the commission of
what the law knows as an actionable wrong, before the courts are
authorized to lay hold of the situation and remedy it."
Respondents should not be penalized for Legardas mistake. If the subject
property was at all sold, it was only after the decisions of the trial and
appellate courts had gained finality. These twin judgments, which were
nullified by the Gancayco decision, should be respected and allowed to
stand by this Court for having become final and executory.
A judgment may be broadly defined as the decision or sentence of the
law given by a court or other tribunal as the result of proceedings
instituted therein.[17] It is a judicial act which settles the issues, fixes the
rights and liabilities of the parties, and determines the proceeding, and it
is regarded as the sentence of the law pronounced by the court on the
action or question before it.[18]
In the case at bar, the trial courts judgment was based on Cathays
evidence after Legarda was declared in default. Damages were duly
awarded to Cathay, not whimsically, but upon proof of its entitlement
thereto. The issue of whether the plaintiff (Cathay) deserved to recover
damages because of the defendants (Legardas) refusal to honor their
lease agreement was resolved.Consequently, the right of Cathay to be
vindicated for such breach and the liability incurred by Legarda in the
process were determined.
This judgment became final when she failed to avail of remedies
available to her, such as filing a motion for reconsideration or appealing
the case. At the time, the issues raised in the complaint had already been
determined and disposed of by the trial court. [19] This is the stage of
finality which judgments must at one point or another reach. In our
jurisdiction, a judgment becomes ipso factofinal when no appeal is
perfected or the reglementary period to appeal therefrom expires. The
necessity of giving finality to judgments that are not void is self-
evident. The interests of society impose it. The opposite view might
make litigations more unendurable than the wrongs (they are) intended
to redress. It would create doubt, real or imaginary, and controversy
would constantly arise as to what the judgment or order was. Public
policy and sound practice demand that, at the risk of occasional errors,
judgments of courts should become final at some definite date fixed by
law. The very object for which courts were instituted was to put an end
to controversies.[20] When judgments of lower courts gain finality, they,
too, become inviolable, impervious to modification. They may, then, no
longer be reviewed, or in any way modified directly or indirectly, by a
higher court, not even by the Supreme Court.[21] In other words, once a
judgment becomes final, the only errors that may be corrected are those
which are clerical.[22]
From the foregoing precedents, it is readily apparent that the real issue
that must be resolved in this motion for reconsideration is the alleged
illegality of the final judgments of the trial and appellate courts.
Void judgments may be classified into two groups: those rendered by a
court without jurisdiction to do so and those obtained by fraud or
collusion.[23] This case must be tested in light of the guidelines governing
the latter class of judgments. In this regard, an action to annul a
judgment on the ground of fraud will not lie unless the fraud is extrinsic
or collateral and facts upon which it is based (have) not been
controverted or resolved in the case where (the) judgment was
rendered.[24] Where is the fraud in the case at bar? Was Legarda
unlawfully barred from the proceedings below?Did her counsel sell her
out to the opponent?
It must be noted that, aside from the fact that no extrinsic fraud
attended the trial and resolution of this case, the jurisdiction of the
court a quo over the parties and the subject matter was never raised as
an issue by Legarda. Such being the case, the decision of the trial court
cannot be nullified. Errors of judgment, if any, can only be reviewed on
appeal, failing which the decision becomes final and executory, valid and
binding upon the parties in the case and their successors in interest. [25]
At this juncture, it must be pointed out that while Legarda went to the
Court of Appeals claiming precisely that the trial courts decision was
fraudulently obtained, she grounded her petition before the Supreme
Court upon her estranged counsels negligence. This could only imply that
at the time she filed her petition for annulment of judgment, she
entertained no notion that Atty. Coronel was being remiss in his duties. It
was only after the appellate courts decision had become final and
executory, a writ of execution issued, the property auctioned off then
sold to an innocent purchasers for value, that she began to protest the
alleged negligence of her attorney. In most cases, this would have been
dismissed outright for being dilatory and appearing as an act of
desperation on the part of a vanquished litigant. The Gancayco ruling,
unfortunately, ruled otherwise.
Fortunately, we now have an opportunity to rectify a grave error of the
past.
WHEREFORE, the Motion for Reconsideration of respondent New Cathay
House, Inc. is hereby GRANTED. Consequently, the decision dated March
18, 1991, of the Courts First Division is VACATED and SET ASIDE. A new
judgment is hereby entered DISMISSING the instant petition for review
and AFFIRMING the November 29, 1989, decision of the Court of Appeals
in CA-G.R. No. SP-10487. Costs against petitioner Victoria Legarda.
SO ORDERED.
G.R. Nos. 185857-58, June 29, 2016
TRIFONIA D. GABUTAN, DECEASED, HEREIN REPRESENTED BY HER
HEIRS, NAMELY: ERLINDA LLAMES, ELISA ASOK, PRIMITIVO GABUTAN,
VALENTINA YANE; BUNA D. ACTUB, FELISIA TROCIO, CRISANTA D.
UBAUB, AND TIRSO DALONDONAN, DECEASED, HEREIN REPRESENTED
BY HIS HEIRS, NAMELY: MADELYN D. REPOSAR AND JERRY
DALONDONAN, MARY JANE GILIG, ALLAN UBAUB, AND SPOUSES
NICOLAS & EVELYN DAILO, Petitioners, v. DANTE D. NACALABAN, HELEN
N. MAANDIG, SUSAN N. SIAO, AND CAGAYAN CAPITOL
COLLEGE, Respondents.
G.R. NOS. 194314-15
DANTE D. NACALABAN, HELEN N. MAANDIG, AND SUSAN N. SIAO, AS
HEIRS OF BALDOMERA D. VDA. DE
NACALABAN, Petitioners, v. TRIFONIA D. GABUTAN, BUNA D. ACTUB,
FELISIA D. TROCIO, CRISANTA D. UBAUB, AND TIRSO DALONDONAN,
DECEASED, HEREIN REPRESENTED BY HIS HEIRS, NAMELY: MADELYN D.
REPOSAR AND JERRY DALONDONAN, MARY JANE GILIG, ALLAN UBAUB,
AND SPOUSES NICOLAS & EVELYN DAILO, CAGAYAN CAPITOL COLLEGE,
REPRESENTED BY ITS PRESIDENT, ATTY. CASIMIRO B. SUAREZ, JR.,
PRIVATE Respondent;
HON. LEONCIA R. DIMAGIBA (ASSOCIATE JUSTICE), HON. PAUL L.
HERNANDO (ASSOCIATE JUSTICE), HON. NINA G. ANTONIO-
VALENZUELA (ASSOCIATE JUSTICE), HON. EDGARDO T. LLOREN
(ASSOCIATE JUSTICE), HON. MICHAEL P. ELBINIAS (ASSOCIATE JUSTICE),
AND HON. JANE AURORA C. LANTION (ASSOCIATE JUSTICE, ACTING
CHAIRMAN), COURT OF APPEALS, CAGAYAN DE ORO CITY (FORMER
SPECIAL TWENTY-SECOND DIVISION), PUBLIC Respondents.
DECISION
JARDELEZA, J.:
Before us are consolidated petitions questioning the Court of Appeals'
(CA) Decision1 dated December 11, 2008 and Resolution2 dated August
17, 2010 in CA-G.R. CV No. 68960-MIN and CA-G.R. SP No. 53598-
MIN.3 In G.R. Nos. 185857-58, the heirs of Trifonia D. Gabutan and Tirso
Dalondonan, Buna D. Actub, Felisia Trocio and Crisanta D. Ubaub
(Gabutan, et al.) filed a partial appeal by way of a petition for review
on certiorari,4 seeking to reverse the portion of the CA Decision declaring
Cagayan Capital College (the College) as a buyer in good faith. The other
petition, G.R. Nos. 194314-15, is one for certiorari5 filed by Dante D.
Nacalaban, Helen N. Maandig, and Susan N. Siao as heirs of Baldomera D.
Vda. De Nacalaban (Nacalaban, et al.). It seeks to annul the CA Decision
and Resolution which sustained the action for reconveyance filed by
Gabutan, et al.
The Antecedents
On January 25, 1957, Godofredo Nacalaban (Godofredo) purchased an
800-square meter parcel of prime land (property) in Poblacion, Cagayan
de Oro City from Petra, Fortunata, Francisco and Dolores, all surnamed
Daamo.6 Pursuant to the sale, Transfer Certificate of Title (TCT) No. T-
22597 covering the property was issued in the name of Godofredo. He
thereafter built a house on it.8chanrobleslaw
Godofredo died on January 7, 1974. 9 ITe was survived by his wife,
Baldomera, and their children, Dante, Helen, and Susan. On March 19,
1979, Baldomera issued a Certification10 in favor of her mother, Melecia.
It provided, in effect, that Baldomera was allowing her mother to build
and occupy a house on the portion of the property.11 Accordingly, the
house was declared for taxation purposes. The tax
declaration12 presented in evidence showed that Melecia owned the
building on the land owned by Godofredo.13chanrobleslaw
Baldomera died on September 11, 1994. 14 On July 3, 1996, her children
executed an Extrajudicial Settlement of Estate of Deceased Person with
Sale15 (Extrajudicial Settlement with Sale) where they adjudicated unto
themselves the property and sold it to the College. On August 22, 1996,
TCT No. T-2259 was cancelled and TCT No. T-11184616 covering the
property was issued in the name of the College.17chanrobleslaw
Melecia died on April 20, 1997 18 and was survived by her children,
Trifonia, Buna, Felisia, Crisanta, and Tirso.
In a letter19 dated May 5, 1997, the College demanded Trifonia D.
Gabutan, Mary Jane Gilig, Allan Ubaub, and Evelyn Dailo, the heirs of
Melecia who were occupying the house on the property, to vacate the
premises.20chanrobleslaw
On July 7, 1997, Gabutan, et al. filed a Complaint for Reconveyance of
Real Property, Declaration of Nullity of Contracts, Partition and Damages
with Writ of Preliminary Attachment and Injunction21 against
Nacalaban, et al. and the College. They alleged that: (1) Melecia bought
the property using her own money but Godofredo had the Deed of
Absolute Sale executed in his name instead of his mother-in-law;22 (2)
Godofredo and Baldomera were only trustees of the property in favor of
the real owner and beneficiary, Melecia;23 (3) they only knew about the
Extrajudicial Settlement with Sale upon verification with the Registry of
Deeds;24 and (4) the College was a buyer in bad faith, being aware they
were co-owners of the property.25cralawredchanrobleslaw
In its Answer with Affirmative Defenses,26 the College claimed that it is a
buyer in good faith and for value, having "made exhaustive investigations
and verifications from all reliable sources" that Melecia and her heirs
were staying in the property by mere tolerance.27 It alleged that: (1) in
the tax declaration28 of the residential house, Melecia admitted that the
lot owner is Godofredo;29 (2) the occupancy permit of Melecia was issued
only after Godofredo issued a certification30 to the effect that Melecia
was allowed to occupy a portion of the property;31 and (3) the
Extrajudicial Settlement with Sale was published in three consecutive
issues of Mindanao Post, a newspaper of general
circulation.32chanrobleslaw
In their Answer with Counterclaim,33 Nacalaban,  et al. denied the
allegations of Gabutan, et al. They claimed to have acquired the property
by intestate succession from their parents, who in their lifetime,
exercised unequivocal and absolute ownership over the
property.34 Nacalaban, et al. also set up the defenses of laches and
prescription, and asserted that the action for reconveyance was
improper because the property had already been sold to an innocent
purchaser for value.35chanrobleslaw
On September 10, 1997, the College filed a separate Complaint for
Unlawful Detainer and Damages36with the Municipal Trial Court in Cities
(MTCC) against Trifonia, Mary Jane, Allan, Evelyn and Nicolas Dailo (Heirs
of Melecia). In their Answer with Affirmative and/or Negative Defenses
with Compulsory Counterclaim,37 the Heirs of Melecia claimed that they
own and possess the property in co-ownership with Nacalaban,  et al. and
Gabutan, et al. because it was purchased by Melecia, their common
predecessor.38 They also claimed that the house in which they reside was
constructed at her expense.39The College had prior knowledge of this co-
ownership, and hence, was a purchaser in bad faith.40 The Heirs of
Melecia also raised the defense of forum-shopping in view of the
pendency of the action for reconveyance.41 They then concluded that in
view of the issues and the value of the property, as well, the MTCC had
no jurisdiction over the case.42chanrobleslaw
The MTCC found it had jurisdiction to hear the case and ruled in favor of
the College:43chanrobleslaw
WHEREFORE, JUDGMENT is hereby rendered ordering each of the
defendants to:
chanRoblesvirtualLawlibrarya.) Immediately vacate the property of the
plaintiff;
b.) Pay the plaintiff the monthly use compensation for the continued use
of the property at the rate of P500.00 per month from MAY 5, 1997 until
the property is actually vacated; 
c.) Pay the plaintiff Attorney's fees amounting to P5,000.00 per
defendant; 
d.) Pay for litigation expenses at the rate of P1,000.00 per defendant.
SO ORDERED.44chanroblesvirtuallawlibrary
On appeal, the Regional Trial Court (RTC) affirmed the MTCC's
Decision46 in all respects, except that the Heirs of Melecia were given 30
days from notice to vacate the property.47 They filed a motion for
reconsideration, but it was denied.49 Thus, the Heirs of Melecia filed a
petition for review50 before the CA, docketed as CA-G.R. SP No.
53598.51chanrobleslaw
Meanwhile, in the reconveyance case, the RTC rendered a Decision 52 in
favor of Gabutan, et al. The RTC found 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 Godofredo lived in Cagayan de Oro City while Melecia lived in
Bornay, Gitagum, Misamis Oriental.53 Thus, the RTC held that a trust was
established by operation of law pursuant to Article 1448 of the Civil
Code.54 The dispositive portion of the RTC's Decision reads:
chanRoblesvirtualLawlibrary
WHEREFORE, judgment is hereby rendered, and this Court hereby:
1. Declares that the Spouses Godofredo and Baldomera
Nacalaban held the land covered by Transfer Certificate of
Title No. T-2259 issued in the name of Godofredo Nacalaban
married to Baldomera Dalondonan issued on January 13,
1959 in trust for Melecia Vda. de Dalondonan with the
Spouses as the trustees and Melecia Vda. de Dalondonan as
the cestui que trust;
2. Declares that upon the death of Melecia Vda. de
Dalondonan on August 20, 1997, the ownership and
beneficial interest of the foregoing Land passed to the
plaintiffs and individual defendants by operation of law as
legal heirs of Melecia Vda. de Dalondonan;
3. Nullifies the Extrajudicial Settlement of Estate of Deceased
Person with Sale executed by the individual defendants on
July 30, 1996 and known as Doc. No. 326; Page No. 67; Book
No. XX; Series of 1996 in the Notarial Register of Notary
Public Victoriano M. Jacot with respect to the Extrajudicial
settlement by the individual defendants of the land referred
to above;
4. Declares that defendant Cagayan Capitol College was a
buyer in good faith and for value of the land referred to
above, and, accordingly, declares that said defendant now
owns the land;
5. Orders defendant Cagayan Capitol College to inform this
Court in writing within thirty (30) days from receipt of this
decision the amount of the purchase price of the land
referred to above bought by it from the individual
defendants the amount of which should approximate the
prevailing market value of the land at the time of the
purchase;
6. Orders the individual defendants namely, Dante D.
Nacalaban, Helen N. Maandig, and Susan N. Siao, jointly and
severally, to deliver and turn over to the plaintiffs, within
thirty (30) days from receipt of this decision, plaintiffs'
shares of the proceeds of the sale of the land referred to
above the amount of which is equivalent to live-sixth (5/6)
of said proceeds with the remaining one-sixth (1/6) to be
retained by the individual defendants as their share by
virtue of their being the legal heirs of Baldomera D.
Nacalaban;
SO ORDERED.55chanroblesvirtuallawlibrary
Both parties filed separate appeals from this Decision before the CA.57 In
a Resolution58 dated October 7, 2004, the CA consolidated both appeals.
The C A rendered its Decision59 on December 11, 2008 dismissing the
consolidated appeals and affirming in toto the RTC Decisions in the
unlawful detainer case and the action for reconveyance. The CA held
that: (1) the defense of co-ownership based on an implied trust by a
defendant in an unlawful detainer case shall not divest the MTCC of
jurisdiction over the case;60 (2) the dead man's statute does not apply
because Gabutan, et al.'s counsel did not interpose any objection when
the testimony of Crisanta Ubaub was offered and Gabutan, et al.'s
counsel even examined her;61 (3) Nacalaban, et al.'s claim that
Gabutan, et al.'s witnesses are not competent to testify on matters which
took place before the death of Godofredo and Melecia is without merit
because Gabutan, et al. have not specified these witnesses and such
hearsay evidence alluded to;62 (4) the parole evidence rule does not
apply because Melecia and Nacalaban, et al. were not parties to the
Deed of Conditional Sale;63 (5) the action for reconveyance has not yet
prescribed because Gabutan, et al. are in possession of the
property;64 and (6) the College is a buyer in good faith.65chanrobleslaw
Nacalaban, et al. filed their motion for reconsideration of the CA
Decision, but it was denied in a Resolution66 dated August 17, 2010.
Hence, they filed the present petition for certiorari67 under Rule 65,
where they allege that: (1) the action for reconveyance already
expired;68 (2) for an action for reconveyance to prosper, the property
should not have passed into the hands of another who bought the
property in good faith and for value;69 and (3) the title of Godofredo
under TCT No. T-2259 which was issued on January 13, 1959 could not be
attacked collaterally.70chanrobleslaw
On the other hand, Gabutan, et al. filed the present petition for review
on certiorari71 under Rule 45, seeking a partial appeal of the CA Decision.
In their petition, Gabutan, et al. allege that the College is not a buyer in
good faith because it did not buy the property from the registered
owner.72 Since Godofredo was the registered owner of the property and
not Nacalaban,  et al., the College should have exercised a higher degree
of prudence in establishing their capacity to sell it.73 Further, despite
knowing that other persons possessed the property, the College did not
inquire with Gabutan, et al. the nature of their stay on the
property.74 Under Section 1, paragraph 2, Rule 74 of the Rules of Court,
the publication of the Extrajudicial Settlement with Sale was also without
prejudice to claims of other persons who had no notice or participation
thereof.75 Finally, Gabutan, et al. argue that they cannot be ejected from
the property because there is no evidence to show that their stay was by
mere tolerance, and that Melecia was a builder in good
faith.76chanrobleslaw
Considering that the petitions assail the same CA Decision and involve
the same parties, we issued a Resolution77 dated December 13, 2010
consolidating them.
The Issues
The issues for resolution are:
chanRoblesvirtualLawlibrary
1. Whether the petition for certiorari of Nacalaban, et al. shall
prosper;
2. Whether the action for reconveyance was proper; and
3. Whether the College is a buyer in good faith.
Our Ruling
I. The petition for certiorari of
Nacalaban, et al. is a wrong
remedy
Pursuant to Section 1, Rule 45 of the Rules of Court,78 the proper remedy
to obtain a reversal of judgment on the merits, final order or resolution is
an appeal. The Resolution dated August 17, 2010 of the CA, which
affirmed its Decision dated December 11, 2008, was a final resolution
that disposed of the appeal by Nacalaban, et al. and left nothing more to
be done by the CA in respect to the said case. Thus, Nacalaban, et al.
should have filed an appeal in the form of a petition for review
on certiorari  and not a petition for certiorari under Rule 65, which is a
special civil action.
Rule 65 is a limited form of review and is a remedy of last recourse. This
extraordinary action lies only where there is no appeal nor plain, speedy
and adequate remedy in the ordinary course of law.79 InMalayang
Manggagawa ng Stayfast Phils., Inc. v. National Labor Relations
Comission,80 we held that appeal would still be the proper remedy from a
judgment on the merits, final order or resolution even if the error
ascribed to the court rendering the judgment is its lack of jurisdiction
over the subject matter, or the exercise of power in excess thereof, or
grave abuse of discretion in the findings of fact or of law set out in the
decision, order or resolution. The existence and availability of the right of
appeal prohibits the resort to certiorari because one of the requirements
for the latter remedy is that there should be no appeal.81 We have always
declared that a petition for  certiorari  is not a substitute for an appeal
where the latter remedy is available but was lost through fault or
negligence.82chanrobleslaw
Here, Nacalaban, et al. received the assailed Resolution dated August 17,
2010 on September 7, 2010. 83Under the Rules of Court, they had 15 days
or until September 22, 2010 to file an appeal before us. Nacalaban, et
al. allowed this period to lapse without doing so and, instead, filed a
petition for certiorari on November 5, 2010. 84 Being the wrong remedy,
the petition of Nacalaban,  et al. is, therefore, dismissible. Although there
are exceptions85 to this general rule, none applies in this case.
In spite of the consolidation we have ordered, we cannot treat the
petition of Nacalaban, et al. as one under Rule 45. We have the
discretion to treat a Rule 65 petition for certiorari  as a Rule 45 petition
for review on certiorari if (1) the petition is filed within the reglementary
period for filing a petition for review; (2) when errors of judgment are
averred; and (3) when there is sufficient reason to justify the relaxation
of the rules.86 The first and third requisites are absent in this case. To
reiterate, the petition was filed beyond the 15-day reglementary period
of filing a petition for review on certiorari. As will be discussed, we also
find no compelling reason to relax the rules.
II. The action for reconveyance  there were family discussions to transfer the title in Melecia's name so
filed by Gabutan, et al.
is proper
a. An implied resulting trust was  testimonies will not violate the parol evidence rule, as Nacalaban, et al.
created between Melecia and
Godofredo
We stress at the outset that the question of existence of an implied trust
is factual, hence, ordinarily outside the purview of Rule 45. 87 The
resolution of factual issues is the function of the lower courts whose
findings, when aptly supported by evidence, bind us. This is especially
true when the CA affirms the lower court's findings, as in this case. While
we, under established exceptional circumstances, had deviated from this
rule, we do not find this case to be under any of the exceptions. 88 Even if
we were to disregard these established doctrinal rules, we would still
affirm the assailed CA rulings.
Article 1448 of the Civil Code provides in part that there is an implied
trust when property is sold, and the legal estate is granted to one party
but the price is paid by another for the purpose of having the beneficial
interest of the property. The former is the trustee, while the latter is the
beneficiary. The trust created here, which is also referred to as a
purchase money resulting trust, 89 occurs when there is (1) an actual
payment of money, property or services, or an equivalent, constituting
valuable consideration; (2) and such consideration must be furnished by
the alleged beneficiary of a resulting trust. 90 These two elements are
present here.
Gabutan,  et al., through the testimonies of Felisia, Crisanta, and Trifonia,
established that Melecia's money was used in buying the property, but
its title was placed in Godofredo's name. She purchased the property
because Felisia wanted to build a pharmacy on it.91 On one occasion in
Melecia's house, and when the entire family was present, Melecia gave
Godofredo the money to purchase the property. 92Melecia entrusted the
money to Godofredo because he was in Cagayan de Oro, and per
Melecia's instruction, the deed of sale covering the property was placed
in his name.93 It was allegedly her practice to buy properties and place
them in her children's name, but it was understood that she and her
children co-own the properties.94chanrobleslaw
Melecia built a residential building on the property, where her daughter
Crisanta and some of her grandchildren resided.95 Godofredo also
thereafter built a house on the property. Twice, he also mortgaged the
property to secure loans. Melecia allowed him to do so because she
trusted him.96 After Godofredo's death, and when Baldomera fell ill,
Melecia's children can divide it together with the rest of Melecia's
properties. The plans, however, always fell through.97chanrobleslaw
Both the RTC and CA found credence on these pieces of testimonial
evidence that an implied resulting trust exists. Reliance on these
once raised. In Tong v. Go Tiat Kun,98 we ruled that since an implied trust
is neither dependent upon an express agreement nor required to be
evidenced by writing, Article 1457 of our Civil Code authorizes the
admission of parol evidence to prove their existence. What is crucial is
the intention to create a trust.99We cautioned, however, that the parol
evidence that is required to establish the existence of an implied trust
necessarily has to be trustworthy and it cannot rest on loose, equivocal
or indefinite declarations.100 The testimonies of Felisia, Crisanta, and
Trifonia satisfy these requirements. They are consistent and agree in all
material points in reference to the circumstances behind the
arrangement between Melecia and Godofredo. We agree with the RTC
when it said that this arrangement among family members is not
unusual, especially in the 1950s. 101chanrobleslaw
Nacalaban, et al., on the other hand, denied the arrangement between
Melecia and Godofredo, and maintained that it was really the latter who
purchased the property from its original owners, as evidenced by their
possession of the Deed of Conditional Sale and the title being in
Godofredo's name.102It is telling, however, that Nacalaban, et al. failed to
provide the details of the sale, specifically with regard to how Godofredo
could have been able to afford the purchase price himself, which would
have directly refuted the allegation that Melecia's money was used in the
purchase. As the RTC aptly observed, if Godofredo really bought the
property with his own money, it was surprising that Baldomera did not
transfer the title of the property to her name when Godofredo died in
1974. Baldomera did not do so until her death in 1994 despite being
pressed by her siblings to partition the property. The RTC correctly
deduced that this only meant that Baldomera acknowledged that the
property belongs to Melecia.103chanrobleslaw
Having established the creation of an implied resulting trust, the action
for reconveyance filed by Gabutan, et al., the heirs of Melecia in whose
benefit the trust was created, is proper. An action for reconveyance is a
legal and equitable remedy granted to the rightful landowner, whose
land was wrongfully or erroneously registered in the name of another, to
compel the registered owner to transfer or reconvey the land to him. 104 It
will not amount to a collateral attack on the title, contrary to the
allegation of Nacalaban, et al.105 We explained in Hortiznela v.
Tagufa:106chanrobleslaw
x x x As a matter of fact, an action for reconveyance is a recognized
remedy, an action in personam, available to a person whose property has
been wrongfully registered under the Torrens system in another's name.
In an action for reconveyance, the decree is not sought to be set aside. It
does not seek to set aside the decree but, respecting it as
incontrovertible and no longer open to review, seeks to transfer or
reconvey the land from the registered owner to the rightful owner.
Reconveyance is always available as long as the property has not passed
to an innocent third person for value.
There is no quibble that a certificate of title, like in the case at bench, can
only be questioned through a direct proceeding. The MCTC and the CA,
however, failed to take into account that in a complaint for
reconveyance, the decree of registration is respected as incontrovertible
and is not being questioned. What is being sought is the transfer of the
property wrongfully or erroneously registered in another's name to its
rightful owner or to the one with a better right. If the registration of the
land is fraudulent, the person in whose name the land is registered holds
it as a mere trustee, and the real owner is entitled to file an action for
reconveyance of the property.107chanroblesvirtuallawlibrary
The fact that the property was already titled in Godofredo's name, and
later transferred to the College, is not a hindrance to an action for
reconveyance based on an implied trust. The title did not operate to vest
ownership upon the property in favor of the College. As held in Naval v.
Court of Appeals:108chanrobleslaw
xxx Registration of a piece of land under the Torrens System does not
create or vest title, because it is not a mode of acquiring ownership. A
certificate of title is merely an evidence of ownership or title over the
particular property described therein. It cannot be used to protect a
usurper from the true owner; nor can it be used as a shield for the
commission of fraud; neither does it permit one to enrich himself at the
expense of others. Its issuance in favor of a particular person does not
foreclose the possibility that the real property may be co-owned with
persons not named in the certificate, or that it may be held in trust for
another person by the registered owner.109
Moreover, the body of the Complaint filed by Gabutan, et al. shows that
it is not only for the reconveyance of the property but also for the
annulment of TCT No. T-111846 issued in the name of the
College.110 Gabutan,  et al.  questioned the validity of the sale to the
College and claimed co-ownership over the property. Thus, we can rule
on the validity of TCT No. T-111846 since the Complaint is a direct attack
on the title of the College.
b. The action for reconveyance is imprescriptible 
because the plaintiffs are in possession of
the property
An action for reconveyance based on an implied or a constructive trust
prescribes 10 years from the alleged fraudulent registration or date of
issuance of the certificate of title over the property. However, an action
for reconveyance based on implied or constructive trust is
imprescriptible if the plaintiff or the person enforcing the trust is in
possession of the property. In effect, the action for reconveyance is an
action to quiet the property title, which does not prescribe.111 The reason
is that the one who is in actual possession of the land claiming to be its
owner may wait until his possession is disturbed or his title is attacked
before taking steps to vindicate his right. His undisturbed possession
gives him a continuing right to seek the aid of a court of equity to
ascertain and determine the nature of the adverse claim of a third party
and its effect on his own title, which right can be claimed only by one
who is in possession.112chanrobleslaw
The fact of actual possession of Gabutan, et al. of the property, during
the lifetime of Melecia and even after her death, is an undisputed and
established fact. The College has even filed an ejectment case against the
Heirs of Melecia for this reason.113 Thus, their complaint for
reconveyance is imprescriptible. It follows, with more reason, that
Gabutan, et al. cannot be held guilty of laches as the said doctrine, which
is one in equity, cannot be set up to resist the enforcement of an
imprescriptible legal right.114chanrobleslaw
III.The property shall be reconveyed to the estate of Melecia
The Extrajudicial Settlement with Sale executed
between Nacalaban, et al. and the College is void
Having established the creation of an implied resulting trust between
Melecia and Godofredo, the law thereby creates the obligation of the
trustee to reconvey the property and its title in favor of the true
owner.115 The true owner, Melecia, died in 1997 and was succeeded by
her children and grandchildren. The property, therefore, must be
reconveyed to her estate.
The execution of the Extrajudicial Settlement with Sale between
Godofredo's heirs and the College will not defeat the legal obligation to
reconvey the property because at the time of its execution in 1996,
Melecia was still alive. Hence, Nacalaban, et al. did not have the right or
authority to sell the property. Nemo dat quod non habet. One can sell
only what one owns or is authorized to sell, and the buyer can acquire no
more right than what the seller can transfer legally.116 Nacalaban, et al.
cannot find refuge in their argument that the property was registered in
their father's name and that after his death, his rights passed to them as
his legal heirs. To repeat, title to property does not vest ownership but is
a mere proof that such property has been registered. 117chanrobleslaw
The College is a buyer in bad faith
Despite the finding that the property was owned by Melecia and upon
her death, by her heirs, the lower courts still sustained the ownership of
the College of the property on the ground that it is an innocent
purchaser for value.118 The lower courts' findings are grounded on the
following: (i) Gabutan, et al.'s claim was never annotated on Godofredo's
title; (ii) the Extrajudicial Settlement with Sale was duly published and
the College was able to effect the transfer of the title in its name; (iii)
Baldomera issued a certification in favor of Melecia allowing her to
occupy a portion of the lot; and (iv) the tax declaration showed that
Melecia owned only the building on the land owned by
Godofredo.119chanrobleslaw
The RTC 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.120 The CA, on the other hand, held that when
taken together, 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.121chanrobleslaw
Gabutan, et al. alleged that the lower courts erred in ruling that the
College is a buyer in good faith, raising the following: (1) Nacalaban, et al.
are not the registered owners of the property; Godofredo is the
registered owner who died on January 7, 1974; 122 (2) not being the
registered owners, the College, as buyer, is expected to examine not only
the certificate of title but all 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;123 and (3) 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.124chanrobleslaw
Whether one is a buyer in good faith and whether due diligence and
prudence were exercised are questions of fact.125 As we have already
mentioned, only questions of law may be raised in a petition for review
on certiorari under Rule 45 of the Rules of Court. We see an exception,
however, to this general rule relative to the finding that the College is a
buyer in good faith. We hold that the RTC's finding that the College is a
buyer in good faith, which finding was upheld by the CA, was based on an
obvious misapprehension of facts and was clearly not supported by law
and jurisprudence.
In Bautista v. Silva,126 we reiterated the requisites for one to be
considered a purchaser in good faith:
chanRoblesvirtualLawlibrary
A buyer for value in good Faith is one who buys property of another,
without notice that some other person has a right to, or interest in, such
property and pays full and fair price for the same, at the time of such
purchase, or before he has notice of the claim or interest of some other
persons in the property. He buys the property with the welt-founded
belief that the person from whom he receives the thing had title to the
property and capacity to convey it.

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. He need not prove
that he made further inquiry for he is not obliged to explore beyond the
four corners of the title. Such degree of proof of good faith, however, is
sufficient only when the following  well.132chanrobleslaw
conditions concur: first, the seller is the registered owner of the
land; second, the latter is in possession thereof; and third, 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 foregoing conditions, then the law itself puts
the buyer on notice and obliges the latter to exercise a higher degree of
diligence by scrutinizing the certificate of title and examining all factual
circumstances in order to determine the seller's title and capacity to
transfer any interest in the property. Under such circumstance, it is no
longer sufficient for said buyer to merely show that he relied on the face
of the title; he must now also show that he exercised reasonable
precaution by inquiring beyond the title. Failure to exercise such degree
of precaution makes him a buyer in bad faith.127 (Emphasis supplied.)
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. This onus probandi cannot be discharged by mere
invocation of the legal presumption of good faith.128 We find that the
College failed to discharge this burden.
Firstly, as correctly pointed out by Gabutan, et al., Nacalaban, et al. are
not the registered owners of the property, but Godofredo. In Bautista v.
Court of Appeals,129 we held:
chanRoblesvirtualLawlibrary
However, it is important to note that petitioners did not buy the land
from the registered owner, Dionisio Santiago. They bought it from his
heirs, Maria dcla Cruz and Jose Santiago.
Where 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. One who buys from one who is
not the registered owner is expected to examine not only the certificate
of title but all 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 land.130
Secondly, the College was aware that aside from Nacalaban, et al., the
Heirs of Melecia, were also in possession of the property. The College
cited the tax declaration which bore an annotation that Melecia owned a
residential building and Godofredo owned the lot.131 Also, apart from
filing an ejectment case against the Heirs of Melecia, the College retained
part of the purchase price for the demolition of Melecia's building as
In  Occeña v. Esponilla,133 we held that petitioner-spouses 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:
chanRoblesvirtualLawlibrary
In the case at bar, we find that petitioner-spouses failed to prove good
faith in their purchase and registration of the land, x x x At the trial,
Tomas Occena admitted that he found houses built 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, x x x134 (Emphasis supplied.)
Although the College in its Answer alleged that it made an exhaustive
investigation and verification from all reliable sources and found that the
possession of Melecia and her heirs was merely tolerated, 135 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. It is
not far-fetched to conclude, therefore, that the 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.136 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. 137 Without such inquiry, the
purchaser cannot be said to be in good faith and cannot have any right
over the property.138chanrobleslaw
We are aware that in the ejectment case, the MTCC and RTC ruled in
favor of the College. We emphasize, though, that the ruling on the
College's better right of possession was without prejudice to the eventual
outcome of the reconveyance case where the issue of ownership was
fully threshed out. We have held that the sole issue for resolution in an
unlawful detainer case is physical or material possession of the property
involved, independent of any claim of ownership by any of the parties.
When the defendant, however, raises the defense of ownership in his
pleadings and the question of possession cannot be resolved without
deciding the issue of ownership, the issue of ownership shall be resolved
only to determine the issue of possession. 139 Thus, the ruling on the
ejectment case is not conclusive as to the issue of
ownership. 140chanrobleslaw
WHEREFORE, in view of the foregoing, the petition for certiorari in G.R.
Nos. 194314-14 is DENIED and the petition for review on certiorari in
G.R. Nos. 185857-58 is GRANTED. The Decision of the Court of Appeals
dated December 11, 2008 and its Resolution dated August 17, 2010
are AFFIRMED with the following MODIFICATIONS:
1. Cagayan Capitol College is hereby declared a buyer in bad
faith, who has no right to possession and ownership of the
property;
2. Nacalaban, et al. are ordered to return the purchase price
paid on the property to the College, plus interest at the rate
of six percent (6%) per annum computed from July 23,
1997141 until the date of finality of this judgment. The total
amount shall thereafter earn interest at the rate of six
percent (6%) per annum from the finality of judgment until
its satisfaction;142 and
3. The Register of Deeds is ordered to cancel TCT No. T-l 11846
in the name of the College.
4. The property should be reconveyed to the Estate of the late
Melecia Dalondonan with the institution of the proper
proceedings for its partition and titling.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 195825               February 27, 2013
SPOUSES ALFONSO AND MARIA ANGELES CUSI, Petitioners,  (c) lifting the writ of preliminary injunction;
vs.
LILIA V. DOMINGO, Respondent.
x-----------------------x
G.R. No. 195871
RAMONA LIZA L. DE VERA, Petitioner,  way of contract to sell to Spouses Edgardo and Ramona Liza De Vera and
vs
LILIA V. DOMINGO AND SPOUSES RADELIA AND ALFRED
SY, Respondents.
DECISION
BERSAMIN, J.:
Under the Torrens system of land registration, the registered owner of
realty cannot be deprived of her property through fraud, unless a
transferee acquires the property as an innocent purchaser for value. A
transferee who acquires the property covered by a reissued owner's
copy of the certificate of title without taking the ordinary precautions of
honest persons in doing business and examining the records of the
proper Registry of Deeds, or who fails to pay the full market value of the
property is not considered an innocent purchaser for value.
Under review in these consolidated appeals is the Decision promulgated
on July 16, 2010,1 whereby the Court of Appeals (CA) in CA-G.R. CV No.
90452 affirmed the revised decision rendered on March 1, 2007 by the
Regional Trial Court in Quezon City (RTC) against the petitioners and their
seller.2
Antecedents
The property in dispute was a vacant unfenced lot situated in White
Plains, Quezon City and covered by Transfer Certificate of Title (TCT) No.
N-165606 issued in the name of respondent Lilia V. Domingo by the
Registry of Deeds of Quezon City. It had an area of 658 square meters. 3 In
July 1999, Domingo learned that construction activities were being
undertaken on her property without her consent. She soon unearthed
the series of anomalous transactions affecting her property.
On July 18, 1997, one Radelia Sy (Sy),4 representing herself as the owner WHEREFORE, in view of all the foregoing judgment is hereby rendered:
of the property, petitioned the RTC for the issuance of a new owner’s
copy of Domingo’s TCT No. N-165606, appending to her petition a deed (a) declaring the sale between Lilia V. Domingo and Radella Sy void and
of absolute sale dated July 14, 1997 purportedly executed in her favor by of (sic) effect;
Domingo;5 and an affidavit of loss dated July 17, 1997, 6 whereby she
claimed that her bag containing the owner’s copy of TCT No. N-165606 (b) declaring the Sps. Edgardo and Ramona Liza De Vera and Sps. Alfonso
had been snatched from her on July 13, 1997 while she was at the SM and Maria Angeles Cusi to be purchasers in good faith and for value;
City in North EDSA, Quezon City. The RTC granted Sy’s petition on August
26, 1997.7 The Registry of Deeds of Quezon City then issued a new
owner’s duplicate copy of TCT No. N-165606, which was later cancelled
(d) finding defendant Radella Sy liable to the plaintiff Lilia Domingo liable
by virtue of the deed of absolute sale dated July 14, 1997, and in its stead
(sic) for damages, as follows:
the Registry of Deeds of Quezon City issued TCT No. 186142 in Sy’s
name.8 1. Fourteen Million Pesos (₱14,000,000.00) representing the value of the
property covered by TCT No. 165606 plus legal rate of interest until fully
Sy subsequently subdivided the property into two, and sold each half by
paid;
to Spouses Alfonso and Maria Angeles Cusi. The existence of the 2. One Million Pesos (₱1,000,000.00) representing moral damages;
individual contracts to sell was annotated on the dorsal portion of Sy’s
TCT No. 186142 as Entry No. PE-8907/N-186142,9stating that the 3. Five Hundred Thousand Pesos (₱500,000.00) representing exemplary
consideration of the sale was ₱1,000,000.00 for each set of buyers, or for damages;
a total of ₱2,000,000.00 for the entire property that had an actual worth
of not less than ₱14,000,000.00. TCT No. 186142 in the name of Sy was 4. Five Hundred Thousand Pesos (₱500,000.00) representing attorney’s
then cancelled by virtue of the deeds of sale executed between Sy and fees;
Spouses De Vera, and between Sy and Spouses Cusi, to whom were
respectively issued TCT No. 18956810 and TCT No. 189569.11 All the while, 5. Two Hundred Thousand Pesos (₱200,000.00) representing litigation
the transactions between Sy and the De Veras, and between Sy and the expenses; and
Cusis were unknown to Domingo, whose TCT No. N-165606 remained in
her undisturbed possession.12 6. Costs of Suit.
It turned out that the construction activities taking place on the property IT IS SO ORDERED.
that Domingo learned about were upon the initiative of the De Veras in
the exercise of their dominical and possessory rights. Acting on the motions for reconsideration separately filed by Sy and
Domingo,15 the RTC reconsidered and set aside its September 30, 2003
Domingo commenced this action against Sy and her spouse, the De Veras decision, and allowed the presentation of rebuttal and sur-rebuttal
and the Cusis in the RTC, the complaint being docketed as Civil Case No. evidence.
Q-99-39312 and entitled Lilia V. Domingo v. Spouses Radelia and Alfred
Sy, Spouses Alfonso G. and Maria Angeles S. Cusi, Spouses Edgardo M. On March 1, 2007, the RTC rendered a new decision,16 ruling:
and Ramona Liza L. De Vera, BPI Family Savings Bank and The Register of
WHEREFORE, in view of the foregoing, Judgment is hereby rendered:
Deeds of Quezon City, seeking the annulment or cancellation of titles,
injunction and damages. Domingo applied for the issuance of a writ of
(a) Declaring the sale between Lilia Domingo and Radelia Sy void and of
preliminary prohibitory and mandatory injunction, and a temporary
no effect;
restraining order (TRO).13 The RTC granted Domingo’s application for the
TRO enjoining the defendants from proceeding with the construction (b) Declaring the Sps. Edgardo and Ramona Liza De Vera and Sps. Alfonso
activities on the property. The RTC later granted her application for the and Maria Angeles Cusi not purchasers in good faith and for value;
writ of preliminary injunction.
(c) TCT Nos. 189568 and 189569 are hereby cancelled and declared Null
Ruling of the RTC and Void Ab Initio;
On September 30, 2003, the RTC rendered a decision,14 disposing:
(d) Directing the Register of Deeds of Quezon City to annotate this Order
on TCT No. 189568 and 189569;
(e) TCT No. 165606 in the name of Lilia Domingo is hereby revalidated;
and,
(f) Finding defendant Radelia Sy liable to the plaintiff Lilia V. Domingo
liable (sic) for damages, as follows:
1. One Million Pesos (₱1,000,000.00) representing moral damages;
2. Five Hundred Thousand Pesos (₱500,000.00) representing exemplary
damages;
3. Five Hundred Thousand Pesos (₱500,000.00) representing attorney’s
fees;
4. Two Hundred Thousand Pesos (₱200,000.00) representing litigation
expenses; and,
5. Costs of suit.
This Decision is without prejudice to whatever civil action for recovery
and damages, the defendants Sps. De Vera and Sps. Cusi may have
against defendant Spouses Radelia and Alfred Sy.
SO ORDERED.
Ruling of the CA
On appeal, the assignment of errors each set of appellants made was as
follows:
Spouses Cusi
a) THE REGIONAL TRIAL COURT GRAVELY ERRED IN FINDING THAT
DEFENDANTS SPOUSES ALFONSO AND MARIA ANGELES CUSI ARE NOT
PURCHASERS IN GOOD FAITH AND FOR VALUE.
b) THE REGIONAL TRIAL COURT GRAVELY ERRED IN FAILING TO RESOLVE
THE ISSUE OF WHETHER OR NOT CODEFENDANTS SPOUSES RADELIA SY
AND ALFRED SY ARE LIABLE FOR SPOUSES CUSI’S CROSS-CLAIM.
c) THE REGIONAL TRIAL COURT ERRED IN FAILING TO AWARD DAMAGES
AND ATTORNEY’S FEES TO DEFENDANTS SPOUSES CUSI.17
Spouses Sy
a) THE TRIAL COURT A QUO ERRED IN HOLDING THAT THE SALE
BETWEEN LILIA DOMINGO AND RADELIA SY VOID AND OF NO EFFECT
AND WAS PROCURRED (sic) THROUGH FRAUDULENT MEANS.
b) THAT THE HONORABLE COURT ERRED IN AWARDING ACTUAL MORAL
DAMAGES, EXEMPLARY DAMAGES AND ATTORNEY’S FEES AND
LITIGATION EXPENSES THE SAME BEING NULL AND VOID FOR BEING
CONTRARY TO LAW.
c) THAT THE SAID DECISION IS CONTRARY TO LAW AND JURISPRUDENCE
AND IS NOT SUPPORTED BY EVIDENCE, AS THE SAME CONTAIN SERIOUS
REVERSIBLE ERRORS WHEN THE COURT A QUO DECLARED THAT TCT
NOS. 189568 AND 189569 CANCELLED AND DECLARED NULL AND VOID
AB INITIO.
d) THE INSTANT ASSAILED DECISION OF THE HONORABLE COURT HAVE
(sic) DEPRIVED DEFENDANT[S] SPOUSES SY OF THEIR BASIC
CONSTITUTIONAL RIGHT TO DUE PROCESS OF LAW.18
Spouses De Vera
a) THE LOWER COURT ERRED IN HOLDING THAT THE DE VERA SPOUSES
ARE NOT PURCHASERS IN GOOD FAITH AND NOT ENTITLED TO THE
POSSESSION OF THE PROPERTY COVERED BY TCT NO. N-189568.
b) THE LOWER COURT ALSO ERRED IN NOT AWARDING DEFENDANT-
APPELLANT DE VERA HER COUNTERCLAIMS AGAINST PLAINTIFF-
APPELLEE.19
As stated, the CA promulgated its decision on July 16, 2010, affirming the
RTC with modification of the damages to be paid by the Sys to
Domingo, viz:
WHEREFORE, premises considered, the instant appeal
is denied. Accordingly, the Decision dated March 1, 2007 of the Regional
Trial Court is hereby AFFIRMED  with the modification on the award of
damages to be paid by defendants-appellants Spouses Radelia and Alfred
Sy in favor of the plaintiff-appellee Lilia V. Domingo, to wit;
1. ₱500,000.00 by way of moral damages;
2. ₱200,000.00 by way of exemplary damages;
3. ₱100,000.00 as attorney’s fees and litigation expenses.
SO ORDERED.20
The CA held that the sale of the property from Domingo to Sy was null
and void and conveyed no title to the latter for being effected by forging
the signature of Domingo; that Sy thereby acquired no right in the
property that she could convey to the Cusis and De Veras as her buyers;
that although acknowledging that a purchaser could rely on what
appeared on the face of the certificate of title, the Cusis and De Veras did
not have the status of purchasers in good faith and for value by reason of
their being aware of Sy’s TCT No. 186142 being a reconstituted owner’s
copy, thereby requiring them to conduct an inquiry or investigation into
the status of the title of Sy in the property, and not simply rely on the
face of Sy’s TCT No. 186142; and that the Cusis and De Veras were also
aware of other facts that should further put them on guard, particularly
the several nearly simultaneous transactions respecting the property,
and the undervaluation of the purchase price from ₱7,000,000.00/half to
only ₱1,000,000.00/half to enable Sy to pay a lesser capital gains tax.
The CA later on denied the motions for reconsideration.21
Issues
Hence, this appeal via  petitions for review on certiorari  by the Cusis (G.R.
No. 195825) and Ramona Liza L. De Vera22 (G.R. No. 195871).
In G.R. No. 195825, the Cusis submit the following issues: 23
I
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN
FINDING THAT TRANSFER CERTIFICATE OF TITLE NO. 186142 REGISTERED
IN THE NAME OF RADELIA SY IS A RECONSTITUTED TITLE.
II
WHETHER OR NOT THE PETITIONERS ARE BUYERS IN GOOD FAITH AND
FOR VALUE.
III
GRANTING, WITHOUT ADMITTING, THAT THE DECISION OF THE
HONORABLE COURT OF APPEALS IS CORRECT WITH RESPECT TO THE
SECOND ISSUE, WHETHER OR NOT PETITIONERS ARE ENTITLED TO
REIMBURSEMENT OF ALL THE PAYMENTS MADE BY PETITIONERS TO
THEIR CODEFENDANTS SPOUSES ALFRED AND RADELIA SY IN ADDITION
TO DAMAGES AND ATTORNEY’S FEES.
In G.R. No. 195871, De Vera asserts that the primordial issue is whether
or not she was an innocent purchaser for value and in good faith.
Ruling of the Court
The petitions for review are bereft of merit.
Firstly, now beyond dispute is the nullity of the transfer of Domingo’s
property to Sy because both lower courts united in so finding. The
unanimity in findings of both the RTC and the CA on this all-important
aspect of the case is now conclusive on the Court in view of their
consistency thereon as well as by reason of such findings being fully
supported by preponderant evidence. We consider to be significant that
the Sys no longer came to the Court for further review, thereby
rendering the judgment of the CA on the issue of nullity final and
immutable as to them.
Secondly, the Cusis and De Vera commonly contend that the CA gravely
erred in not considering them to be purchasers in good faith and for
value. They argue that Sy’s TCT No. 186142 was free of any liens or
encumbrances that could have excited their suspicion; and that they
nonetheless even went beyond the task of examining the face of Sy’s TCT
No. 186142, recounting every single detail of their quest to ascertain the
validity of Sy’s title, but did not find anything by which to doubt her title.
The Court concurs with the finding by the CA that the Cusis and De Vera
were not purchasers for value and in good faith. The records simply do
not support their common contention in that respect.
Under the Torrens system of land registration,24 the State is required to
maintain a register of landholdings that guarantees indefeasible title to
those included in the register. The system has been instituted to combat
the problems of uncertainty, complexity and cost associated with old title
systems that depended upon proof of an unbroken chain of title back to
a good root of title. The State issues an official certificate of title to attest
to the fact that the person named is the owner of the property described
therein, subject to such liens and encumbrances as thereon noted or
what the law warrants or reserves. 25
One of the guiding tenets underlying the Torrens system is the curtain
principle, in that one does not need to go behind the certificate of title
because it contains all the information about the title of its holder. This
principle dispenses with the need of proving ownership by long
complicated documents kept by the registered owner, which may be
necessary under a private conveyancing system, and assures that all the
necessary information regarding ownership is on the certificate of title.
Consequently, the avowed objective of the Torrens system is to obviate
possible conflicts of title by giving the public the right to rely upon the
face of the Torrens certificate and, as a rule, to dispense with the
necessity of inquiring further; on the part of the registered owner, the
system gives him complete peace of mind that he would be secured in
his ownership as long as he has not voluntarily disposed of any right over
the covered land.26
The Philippines adopted the Torrens system through Act No. 496, 27 also
known as the Land Registration Act, which was approved on November
6, 1902 and took effect on February 1, 1903. In this jurisdiction,
therefore, "a person dealing in registered land has the right to rely on the
Torrens certificate of title and to dispense with the need of inquiring
further, except  when the party has actual knowledge of facts and
circumstances that would impel a reasonably cautious man to make such
inquiry".28
To obtain a grasp of whether a person has actual knowledge of facts and
circumstances that would impel a reasonably cautious man to make such
inquiry, an internal matter, necessitates an analysis of evidence of a
person’s conduct.29 That renders the determination of intent as a factual
issue,30 something that the Court does not normally involve itself in
because of its not being a trier of facts. Indeed, as a rule, the review
function of the Court is limited to a review of the law involved.
But the Court now delves into the facts relating to the issue of innocence
of the petitioners in their purchase of the property, considering that the
RTC, through its original decision, at first regarded them to have been
innocent purchasers who were not aware of any flaw or defect in Sy’s
title based on the fact that the property had been unfenced and vacant.
The RTC also regarded the petitioners’ making of reasonable verifications
as their exercise of the due diligence required of an ordinary buyer. 31 The
RTC later completely turned around through another decision, however,
and it was such decision that the CA affirmed subject to the
modifications of the damages granted to Domingo.
There is no question that the petitioners exerted some effort as buyers
to determine whether the property did rightfully belong to Sy. For one,
they did not find any encumbrance, like a notice of lis pendens, being
annotated on the TCT of Sy. Nonetheless, their observance of a certain
degree of diligence within the context of the principles underlying the
Torrens system
was not their only barometer under the law and jurisprudence by which
to gauge the validity of their acquisition of title. As the purchasers of the
property, they also came under the clear obligation to purchase the
property not only in good faith but also for value.
Therein lay the problem. The petitioners were shown to have been
deficient in their vigilance as buyers of the property. It was not enough
for them to show that the property was unfenced and vacant; otherwise,
it would be too easy for any registered owner to lose her property,
including its possession, through illegal occupation. Nor was it safe for
them to simply rely on the face of Sy’s TCT No. 186142 in view of the fact
that they were aware that her TCT was derived from a duplicate owner’s
copy reissued by virtue of the loss of the original duplicate owner’s copy.
That circumstance should have already alerted them to the need to
inquire beyond the face of Sy’s TCT No. 186142. There were other
circumstances, like the almost simultaneous transactions affecting the
property within a short span of time, as well as the gross undervaluation
of the property in the deeds of sale, ostensibly at the behest of Sy to
minimize her liabilities for the capital gains tax, that also excited
suspicion, and required them to be extra-cautious in dealing with Sy on
the property.
To the Court, the CA’s treatment of Sy’s TCT No. 186142 as similar to a
reconstituted copy of a Torrens certificate of title was not unwarranted.
In doing so, the CA cited the ruling in Barstowe Philippines Corporation v.
Republic,32where the Court, quoting from precedents, opined that "the
nature of a reconstituted Transfer Certificate of Title of registered land is
similar to that of a second Owner’s Duplicate Transfer Certificate of
Title," in that "both are issued, after the proper proceedings, on the
representation of the registered owner that the original of the said TCT
or the original of the Owner’s Duplicate TCT, respectively, was lost and
could not be located or found despite diligent efforts exerted for that
purpose;"33 and that both were "subsequent copies of the originals
thereof," a fact that a "cursory examination of these subsequent copies
would show" and "put on notice of such fact [anyone dealing with such
copies who is] thus warned to be extracareful." 34
Verily, the Court has treated a reissued duplicate owner’s copy of a TCT
as merely a reconstituted certificate of title. In Garcia v. Court of
Appeals,35 a case with striking similarities to this one, an impostor
succeeded in tricking a court of law into granting his petition for the
issuance of a duplicate owner’s copy of the supposedly lost TCT. The
impostor then had the TCT cancelled by presenting a purported deed of
sale between him and the registered owners, both of whom had already
been dead for some time, and another TCT was then issued in the
impostor’s own name. This issuance in the impostor’s own name was
followed by the issuance of yet another TCT in favor of a third party,
supposedly the buyer of the impostor. In turn, the impostor’s transferee
(already the registered owner in his own name) mortgaged the property
to Spouses Miguel and Adela Lazaro, who then caused the annotation of
the mortgage on the TCT. All the while, the original  duplicate owner’s
copy of the TCT remained in the hands of an heir of the deceased
registered owners with his co-heirs’ knowledge and consent.
The inevitable litigation ensued, and ultimately ended up with the
Court.1âwphi1 The Lazaros, as the mortgagees, claimed good faith, and
urged the Court to find in their favor. But the Court rebuffed their urging,
holding instead that they did not deal on the property in good faith
because: (a) "the title of the property mortgaged to the Lazaros was a
second owner’s duplicate TCT, which is, in effect a reconstituted title.
This circumstance should have alerted them to make the necessary
investigation, but they did not;" and (b) their argument, that "because
the TCT of the property on which their mortgage lien was annotated did
not contain the annotation: "Reconstituted title," the treatment of the
reissued duplicate owner’s copy of the TCT as akin to a reconstituted title
did not apply, had no merit considering that: "The nature of a
reconstituted Transfer Certificate of Title of registered land is similar to
that of a second Owner's Duplicate Transfer Certificate of Title. Both are
issued, after the proper proceedings, on the representation of the
registered owner that the original of the said TCT or the original of the
Owner's Duplicate TCT, respectively, was lost and could not be located or
found despite diligent efforts exerted for that purpose. Both, therefore,
are subsequent  copies of the originals thereof. A cursory examination of
these subsequent copies would show that they are not the originals.
Anyone dealing with such copies are put on notice of such fact and thus
warned to be extra-careful. This warning the mortgagees Lazaros did not
heed, or they just ignored it."36
The fraud committed in Garcia  paralleled the fraud committed
here.1âwphi1 The registered owner of the property was Domingo, who
remained in the custody of her TCT all along; the impostor was Sy, who
succeeded in obtaining a duplicate owner’s copy; and the Cusis and the
De Veras were similarly situated as the Spouses Lazaro, the mortgagees
in Garcia. The Cusis and the De Veras did not investigate beyond the face
of Sy’s TCT No. 186142, despite the certificate derived from the reissued
duplicate owner’s copy being akin to a reconstituted TCT. Thereby, they
denied themselves the innocence and good faith they supposedly
clothed themselves with when they dealt with Sy on the property.
The records also show that the forged deed of sale from Domingo to Sy
appeared to be executed on July 14, 1997; that the affidavit of loss by
which Sy would later on support her petition for the issuance of the
duplicate owner’s copy of Domingo’s TCT No. 165606 was executed on
July 17, 1997, the very same day in which Sy registered the affidavit of
loss in the Registry of Deeds of Quezon City; that Sy filed the petition for
the issuance of the duplicate owner’s copy of Domingo’s TCT No. 165606;
that the RTC granted her petition on August 26, 1997; and that on
October 31, 1997, a real estate mortgage was executed in favor of one
Emma Turingan, with the mortgage being annotated on TCT No. 165606
on November 10, 1997.
Being the buyers of the registered realty, the Cusis and the De Veras
were aware of the aforementioned several almost simultaneous
transactions affecting the property. Their awareness, if it was not actual,
was at least presumed, and ought to have put them on their guard, for,
as the CA pointed out, the RTC observed that "[t]hese almost
simultaneous transactions, particularly the date of the alleged loss of the
TCT No. 165606 and the purported Deed of Sale, suffice[d] to arouse
suspicion on [the part of] any person dealing with the subject
property."37 Simple prudence would then have impelled them as honest
persons to make deeper inquiries to clear the suspiciousness haunting
Sy’s title. But they still went on with their respective purchase of the
property without making the deeper inquiries. In that regard, they were
not acting in good faith.
Another circumstance indicating that the Cusis and the De Veras were
not innocent purchasers for value was the gross undervaluation of the
property in the deeds of sale at the measly price of ₱1,000,000.00 for Resultantly, the Court affirms the lower courts, and restores to Domingo
each half when the true market value was then in the aggregate of at her rights of dominion over the propetiy.
least ₱14,000,000.00 for the entire property. Even if the undervaluation
was to accommodate the request of Sy to enable her to minimize her WHEREFORE, the Court AFFIRMS the decision of the Court of Appeals
liabilities for the capital gains tax, their acquiescence to the fraud promulgated on July 16, 201 0; and ORDERS the petitioners to pay the
perpetrated against the Government, no less, still rendered them as costs of suit.
parties to the wrongdoing. They were not any less guilty at all. In the
ultimate analysis, their supposed passivity respecting the arrangement to SO ORDERED.
perpetrate the fraud was not even plausible, because they knew as the
buyers that they were not personally liable for the capital gains taxes and
thus had nothing to gain by their acquiescence. There was simply no
acceptable reason for them to have acquiesced to the fraud, or for them
not to have rightfully insisted on the declaration of the full value of the
realty in their deeds of sale. By letting their respective deeds of sale
reflect the grossly inadequate price, they should suffer the
consequences, including the inference of their bad faith in transacting
the sales in their favor.
De Vera particularly insists that she and her late husband did not have
any hand in the undervaluation; and that Sy, having prepared the deed of
sale, should alone be held responsible for the undervaluation that had
inured only to her benefit as the seller. However, such insistence was
rendered of no consequence herein by the fact that neither she nor her
late husband had seen fit to rectify the undervaluation. It is notable that
the De Veras were contracting parties who appeared to have transacted
with full freedom from undue influence from Sy or anyone else.
Although the petitioners argue that the actual consideration of the sale
was nearly ₱7,000,000.00 for each half of the property, the Court rejects
their argument as devoid of factual basis, for they did not adduce
evidence of the actual payment of that amount to Sy. Accordingly, the
recitals of the deeds of sale were controlling on the consideration of the
sales.
Good faith is the honest intention to abstain from taking unconscientious
advantage of another. It means the "freedom from knowledge and
circumstances which ought to put a person on inquiry."38
Given this notion of good faith, therefore, a purchaser in good faith is
one who buys the property of another without notice that some other
person has a right to, or interest in, such property and pays full and fair
price for the same.38As an examination of the records shows, the
petitioners were not innocent purchasers in good faith and for value.
Their failure to investigate Sy's title despite the nearly simultaneous
transactions on the property that ought to have put them on inquiry
manifested their awareness of the flaw in Sy's title. That they did not also
appear to have paid the full price for their share of the property evinced
their not having paid true value.39
Republic of the Philippines
SUPREME COURT
Baguio City
THIRD DIVISION
G.R. No. 192669               April 21, 2014
RAUL SABERON, JOAN F. SABERON and JACQUELINE
SABERON, Petitioners,  and remitted to MRCI as payments of Crisostomo. The Ventanillas
vs.
OSCAR VENTANILLA, JR., and CARMEN GLORIA D.
VENTANILLA, Respondents.
RESOLUTION
MENDOZA, J.:
For resolution of the Court is a motion for reconsideration of the Court's
January 19, 2011 Resolution1 which denied the petition of Raul F.
Saberon, Jr., Joan F. Saberon and Jacqueline F. Saberon (Saberons). In
effect, it affirmed the March 12, 2010 Decision2 and the June 18, 2010
Resolution3 of the Court of Appeals (CA) in CA-G.R. CV No. 85520, holding
that the June 21, 2005 Decision of the Regional Trial Court, Branch 80,
Quezon City (RTC) in Civil Case No. 96-26486, was correct in, among
others, ordering the cancellation of Transfer Certificate of Title (TCT) Nos.
55396 and 55397 in the name of the Saberons and Samuel Marquez
(Marquez).
This case is an offshoot of two (2) cases involving the same property,
docketed as G.R. No. 82978 and G.R. No. 107282, which had been
decided by the Court with finality on November 22, 1990 and March 16,
1994, respectively.
Antecedent Facts
In the earlier cases, Manila Remnant Co., Inc. (MRCI) was the petitioner,
being the owner of several parcels of land situated in Quezon City,
constituting the subdivision known as Capitol Homes Subdivision Nos. I
and II. On July 25, 1972, MRCI entered into a contract with A.U. Valencia
& Co. Inc. (AUVC) entitled "Confirmation of Land Development and Sales
Contract," whereby for a consideration, including sales commission and
management fee, the latter was to develop the aforesaid subdivision
with authority to manage the sales thereof; execute contracts to sell to
lot buyers; and issue official receipts. At that time, the president of
AUVC, was Artemio U. Valencia (Valencia).
On March 3, 1970, MRCI and AUVC executed two (2) contracts to sell
covering Lots 1 and 2 of Block 17, in favor of Oscar C. Ventanilla, Jr. and
Carmen Gloria D. Ventanilla (Ventanillas), for the combined contract
price of ₱66,571.00 payable monthly for ten (10) years. The Ventanillas
paid the down payment as stipulated in the two (2) contracts.
On March 13, 1970, Valencia, holding out himself as president of MRCI,
and without the knowledge of the Ventanillas, resold the same property
to Carlos Crisostomo (Crisostomo), without any consideration. Valencia
transmitted the fictitious contract with Crisostomo to MRCI while he kept
the contracts to sell with the Ventanillas in his private office files. All the
amounts paid by the latter were deposited in Valencia’s bank account
continued to pay the monthly installment.        plus the decreed damages and attorney's fees. Valencia was also held
Thereafter, MRCI terminated its business relationship with AUVC on
account of irregularities discovered in its collection and remittances.
Consequently, Valencia was removed as president by the Board of
Directors of MRCI. He then stopped transmitting the Ventanillas’ monthly
installments which at that time, already amounted to ₱17,925.40 for Lot
1 and ₱18,141.95 for Lot 2 (appearing in MRCI’s records as credited
under the name of Crisostomo).
On June 8, 1973, AUVC sued MRCI to impugn the abrogation of their
agency agreement before the Court of First Instance, Branch 19, Manila
(CFI Manila), which eventually ordered all lot buyers to deposit their
monthly amortizations with the court. On July 17, 1973, AUVC informed
the Ventanillas that it was still authorized by the trial court to collect the
monthly amortizations and requested them to continue remitting their
payment, with the assurance that said payments would be deposited
later in court.
For AUVC’s failure to forward its collections to the trial court as ordered,
MRCI caused the publication of a notice cancelling the contracts to sell of
some lot buyers including those of Crisostomo in whose name the
payments of the Ventanillas had been credited.
It was not until March 1978 when the Ventanillas discovered Valencia’s
deception. Believing that they had already remitted the total amount of
₱73,122.35 for the two lots, the Ventanillas offered to pay the balance to
MRCI. To their shock, their names as lot buyers did not appear in MRCI’s
records. Instead, MRCI showed them a copy of the contract to sell signed
by Valencia, in favor of Crisostomo. MRCI refused the Ventanillas’ offer
to pay for the remainder of the contract price.
Aggrieved, the Ventanillas commenced an action for specific
performance, annulment of deeds and damages against MRCI, AUVC,
and Crisostomo with the Court of First Instance, Branch 17-B, Quezon
City (CFI Quezon City) docketed as Civil Case No. 26411, where
Crisostomo was declared in default for his failure to file an answer.
On November 17, 1980, the CFI Quezon City 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. Damages and
attorney's fees in the total amount of ₱210,000.00 were also awarded to
the Ventanillas for which the MRCI, AUVC, and Crisostomo were held
solidarily liable. The CFI Quezon City 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 of the sum of ₱73,122.35, representing the amount they
paid for the two (2) lots, and the legal interest thereon from March 1970,
liable to MRCI for moral and exemplary damages and attorney's fees.
On separate appeals filed by AUVC and MRCI, the CA sustained the CFI
Quezon City’s decision in toto.
The 1990 Case
MRCI then filed before this Court a petition for certiorari docketed as
G.R. No. 82978, to review the decision of the CA upholding the solidary
liability of MRCI, AUVC and Crisostomo for the payment of moral and
exemplary damages and attorney's fees to the Ventanillas.
On November 22, 1990, this Court affirmed the decision of the CA and
declared the judgment of the CFI Quezon City immediately executory.
Encouraged by the seeming triumph of their cause, the Ventanillas
moved for the issuance of a writ of execution in Civil Case No. 26411. The
writ was issued on May 3, 1991, and served upon MRCI on May 9, 1991.
A notice of levy was annotated in the titles of MRCI on May 31, 1991.
In a manifestation and motion, however, MRCI alleged that the subject
properties could not longer be delivered to the Ventanillas because they
had already been sold to Samuel Marquez (Marquez) on February 7,
1990, while its petition was pending before this Court. Nevertheless,
MRCI offered to reimburse the amount paid by the Ventanillas, including
legal interest plus damages. MRCI also prayed that its tender of payment
be accepted and that all garnishments on their accounts lifted.
The Ventanillas accepted the amount of ₱210,000.00 as damages and
attorney’s fees but rejected the reimbursement offered by MRCI in lieu
of the execution of the absolute deed of sale. They contended that the
alleged sale to Marquez was void, fraudulent, and in contempt of court
and that no claim of ownership over the properties in question had ever
been made by Marquez.
On July 19, 1991, the CFI Quezon City ordered that the garnishment
made by the Sheriff upon the bank account of MRCI could be lifted only
upon the deposit to the Court of the amount of ₱500,000.00 in cash.
MRCI then moved for reconsideration praying that it be ordered to
reimburse the Ventanillas in the amount of ₱263,074.10 and that the
garnishment of its bank deposit be lifted. This plea was denied twice by
the trial court prompting MRCI to file another petition for certiorari with
the CA, which ruled that the contract to sell in favor of Marquez did not
constitute a legal impediment to the immediate execution of the
judgment. Furthermore, it held that the cash bond fixed by the trial court
for the lifting of the garnishment was fair and reasonable because the
value of the lot in question had considerably increased.
The 1994 Case
From the CA, the case was elevated to this Court as G.R. No. 107282
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. Further, there was no specific
injunction against it re-selling the property. As a buyer in good faith,
Marquez had a right to rely on the recitals in the certificate of title. The
subject matter of the controversy having been passed to an innocent
purchaser for value, the execution of the absolute deed of sale in favor of
the Ventanillas could not be ordered by the trial court.
The Ventanillas countered that the validity of the sale to them had
already been established even while the previous petition was still
awaiting resolution. The petition only questioned the solidary liability of
MRCI to the Ventanillas. Hence, the portion of the decision ordering
MRCI to execute an absolute deed of sale in their favor had already
become final and executory when MRCI failed to appeal it to the Court.
Thus, an order enjoining MRCI from reselling the property in litigation
was unnecessary. Besides, the unusual lack of interest, on the part of
Marquez, to protect and assert his right over the disputed property was,
to the Ventanillas, a clear indication that the alleged sale to him was
merely a ploy of MRCI to evade the execution of the absolute deed of
sale in their favor.
On March 16, 1994, the Court settled the controversy in this wise:
The validity of the contract to sell in favor of the Ventanilla spouses is not
disputed by the parties. Even in the previous petition, the recognition of
that contract was not assigned as error of either the trial court or
appellate court. The fact that the MRCI did not question the legality of
the award for damages to the Ventanillas also shows that it even then
already acknowledged the validity of the contract to sell in favor of the
private respondents.
On top of all this, there are other circumstances that cast suspicion on
the validity, not to say the very existence, of the contract with Marquez.
First, the contract to sell in favor of Marquez was entered into after the
lapse of almost ten years from the rendition of the judgment of the trial
court upholding the sale to the Ventanillas.
Second, the petitioner did not invoke the contract with Marquez during
the hearing on the motion for the issuance of the writ of execution filed
by the private respondents. It disclosed the contract only after the writ of
execution had been served upon it.
Third, in its manifestation and motion dated December 21, 1990, the
petitioner said it was ready to deliver the titles to the Ventanillas
provided that their counterclaims against private respondents were paid
or offset first. There was no mention of the contract to sell with Marquez
on February 7, 1990.
Fourth, Marquez has not intervened in any of these proceedings to assert
and protect his rights to the subject property as an alleged purchaser in
good faith.
At any rate, even if it be assumed that the contract to sell in favor of
Marquez is valid, it cannot prevail over the final and executory judgment
ordering MRCI to execute an absolute deed of sale in favor of the
Ventanillas. No less importantly, the records do not show that Marquez
has already paid the supposed balance amounting to ₱616,000.00 of the
original price of over ₱800,000.00. (Emphasis supplied)
As it turned out, the execution of the judgment in favor of the
Ventanillas was yet far from fruition. Samuel Cleofe, Register of Deeds
for Quezon City (ROD Cleofe) revealed to them, that on March 11, 1992,
MRCI registered a deed of absolute sale to Marquez who eventually sold
the same property to the Saberons, which conveyance was registered in
July 1992. ROD Cleofe opined that a judicial order for the cancellation of
the titles in the name of the Saberons was essential before he complied
with the writ of execution in Civil Case No. 26411. Apparently, the notice
of levy, through inadvertence, was not carried over to the title issued to
Marquez, the same being a junior encumbrance which was entered after
the contract to sell to Marquez had already been annotated.
Civil Case No. Q-96-26486
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 fruits
of void conveyances. The case was docketed as Civil Case No. Q-96-
26486 with the Regional Trial Court, Branch 80, Quezon City (RTC).
During the trial, all the defendants, including Edgar Krohn Jr. (Krohn) as
President of MRCI, and Bede Tabalingcos (Tabalingcos) as its legal
counsel, filed their respective answers, except Marquez who was
declared in default.
On June 21, 2005, the RTC rendered its decision, the dispositive portion
of which reads:
Wherefore, premises considered, judgment is hereby rendered in favour
of plaintiffs, the spouses Oscar and Carmen Ventanilla, and against
defendants MRCI, Krohn, Tabalingcos, Marquez and Saberon, as follows:
(1) Declaring the Transfer Certificated of Title Nos. 55396 and 55397 in
the name of Samuel Marquez, and Transfer Certificates of Title Nos.
63140 and 63141 in the names of Raul, Jr., Joan and Jacqueline Saberon
as null and void;
(2) Ordering defendant MRCI to receive payment of the balance of the
purchase price to be paid by the plaintiffs and to execute a Deed of
Absolute Sale in favour of the plaintiffs, and in case of failure thereof,
ordering plaintiffs to consign the amount with this Court;
(3) Ordering the Register of Deeds to cancel the titles in the name of
Marquez and the Saberons, and to issue new certificates of title in the
name of the spouses Ventanillas upon registration of the Deed of
Absolute Sale in favour of the plaintiffs or proof of their consignment;
(4) Ordering defendant MRCI, Krohn, Tabalingcos and Marquez to pay
plaintiffs, jointly and severally, the sums of:
a. ₱100,000.00, as moral damages; and
b. ₱50,000.00, as attorney’s fees.
(5) Ordering defendant MRCI, Krohn, Tabalingcos and Marquez to pay
defendants Saberon, jointly and severally, the sum of ₱7,118,155.88
representing the value of the properties in dispute and the value of the
improvements introduced by defendants Saberon; and
(6) Ordering the defendants to pay the costs of the suit.
Defendants’ counterclaims are hereby dismissed for lack of merit.
Separate appeals were instituted by MRCI and Tabalingcos, on one hand,
and the Saberons, on the other. The former contended that no
fraudulent act could be attributed to them for the sale of the property to
the title of Marquez, considering that ROD Cleofe was the one who
inadvertently omitted the carrying over of the notice of levy to Marquez
who consequently secured a clean title to the lot. MRCI Tabalingcos
further claimed that the sale to Marquez was effected while the previous
case was still pending, at a time when they had every liberty to believe in
the legality of their position.
Meanwhile, the Saberons relied 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.
In the assailed decision, the CA made its conclusion hinged on the
following findings:
When MRCI executed a Contract to Sell in favor of Marquez in February
1990, it was in the throes of an appeal from the Decision in Civil Case No.
26411 where its very first Contracts to Sell to the Ventanillas were
upheld over those of Crisostomo. The Marquez Contract to Sell was in
fact the third in a row, and registered a year later, on May 21, 1991,
appears as the first recorded entry in MRCI’s titles. The notice of levy in
Civil Case No. 26411 came ten days later, on May 31, 1991. Then, in
February 1992, MRCI executed a deed of absolute sale to Marquez and
when the new titles were issued in Marquez’ name, the notice of levy
was not carried over. A few months later, these titles were cancelled by
virtue of a deed of sale to the Saberons and, on the same day, TCT 63140
and 63141 were issued clean to them.
According to the CA, the arguments espoused by MRCI and Tabalingcos
were untenable. The said parties were found guilty of bad faith for selling
the lots to Marquez at a time when litigation as to the validity of the first
sale to the Ventanillas was still pending. In other words, MRCI was
sufficiently aware of the Court decision confirming its failure to supervise
and control the affairs of its authorized agent, AUVC, which led to the
explicit pronouncement that the first sale to the Ventanillas was valid.
This should have served as a warning to MRCI that it could no longer deal
with the property in deference to the Court’s ruling and affirmation of
the trial court’s order to execute the deed of sale in favor of the
Ventanillas. Obviously, MRCI took no heed of this caveat. The titles had
been transferred yet again to the Saberons, who claimed to be
purchasers in good faith. Unfortunately, there was an exception to the
general rule. The CA cited AFP Mutual Benefit Association Inc. v.
Santiago,4 where the Court ruled that with respect to involuntary liens,
an entry of a notice of levy and attachment in the primary entry or day
book of the Registry of Deeds was considered as sufficient notice to all
persons that the land was already subject to attachment. Resultantly,
attachment was duly perfected and bound the land.
The Present Petition
Aggrieved by this CA ruling, the Saberons filed the present petition. They
claimed that in 1992, a certain Tiks Bautista offered the lots to Raul
Saberon, who, after being given photocopies of the titles to the land,
inquired with the Registry of Deeds for Quezon City (ROD-QC) to verify
the authenticity of the same. He found no encumbrances or annotations
on the said titles, other than restrictions for construction and
negotiation. As agreed upon, he paid Marquez the amount of Two
Million One Hundred Thousand Pesos (₱2,100,000.00) as purchase price
for the lots. Upon payment of the real property taxes, a certification was
issued by the Office of the City Treasurer for the purpose of transferring
the title over the property.
Thereafter, Marquez executed the Deed of Absolute Sale in favor of the
Saberons. The ROD-QC then issued TCT Nos. 63140 and 63141 in their
names.
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 the summons in the case filed by the
Ventanillas with the RTC that they learned of the present controversy.
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.
According to the Saberons, the CA likewise erred in ruling that there was
no constructive notice of the levy made upon the subject lands. They
claimed that the appellate court could not solely rely on AFP Mutual
Benefit Association Inc. v. Santiago.5 Instead, they urged the Court to
interpret
Sections 52 and 42 of Presidential Decree (P.D.) No. 1529 which cover
the effects of registration and the manner thereof; and to examine
Section 54 which shows that, in addition to the filing of the instrument
creating, transferring or claiming interest in registered land less than
ownership, a brief memorandum of such shall be made by the Register of
Deeds on the certificate of title and signed by him. Hence, the ruling in
AFP, that an entry of a notice of levy and attachment in the primary entry
or day book of the Registry of Deeds was sufficient notice to all persons
that the land was already subject to such attachment, would be rendered
as a superfluity in light of the mandatory character of the said provision.
The Saberons further pointed that the claim of the Ventanillas over the
subject properties never ripened into ownership as they failed to consign
the balance on the purchase price stipulated on the contracts to sell,
thus preventing the obligatory force of the contract from taking effect.
On October 4, 2010, the Court required the Ventanillas to file their
comment to the petition.6 On January 19, 2011, the Court resolved to
deny the Saberons’ petition for failure to sufficiently show any reversible
error in the assailed judgment by the CA.7 In its June 15, 2011
Resolution,8 the Court required the Ventanillas to comment on the
motion for reconsideration filed by the Saberons.
Resolution of the Court
At first glance, it would seem that the case involves convoluted issues
brought about by the number of times the Ventanillas were impelled by
circumstances to seek judicial action. Nonetheless, the antecedents
would readily reveal that the essential facts are not disputed: 1) that the
subject properties have indeed been the objects of various transfers
effected by MRCI leading to the current controversy between the
Saberons and the Ventanillas; and 2) that prior to the sale to the
Saberons, a notice of levy as an encumbrance was already in existence.
Sections 51 and 52 of P.D. No. 1529 explain the purpose and effects of
registering both voluntary and involuntary instruments, to wit:
Section 51. Conveyance and other dealings by registered owner. An
owner of registered land may convey, mortgage, lease, charge or
otherwise deal with the same in accordance with existing laws. He may
use such forms of deeds, mortgages, leases or other voluntary
instruments as are sufficient in law. But no deed, mortgage, lease, or
other voluntary instrument, except a will purporting to convey or affect
registered land shall take effect as a conveyance or bind the land, but
shall operate only as a contract between the parties and as evidence of
authority to the Register of Deeds to make registration.
The act of registration shall be the operative act to convey or affect the
land insofar as third persons are concerned, and in all cases under this
Decree, the registration shall be made in the office of the Register of
Deeds for the province or city where the land lies.
Section 52. Constructive notice upon registration. Every conveyance,
mortgage, lease, lien, attachment, order, judgment, instrument or entry
affecting registered land shall, if registered, filed or entered in the office
of the Register of Deeds for the province or city where the land to which
it relates lies, be constructive notice to all persons from the time of such
registering, filing or entering.
These provisions encapsulate the rule that documents, like the
certificates of title do not effect a conveyance of or encumbrances on a
parcel of land. Registration is the operative act that conveys ownership
or affects the land insofar as third persons are concerned. By virtue of
registration, a constructive notice to the whole world of such voluntary
or involuntary instrument or court writ or processes, is thereby created.
The question of utmost relevance to this case, then, is this: whether or
not the registration of the notice of levy had produced constructive
notice that would bind third persons despite the failure of the ROD-QC to
annotate the same in the certificates of title?
In answering these questions, the Court is beckoned to rule on two
conflicting rights over the subject properties: the right of the Ventanillas
to acquire the title to the registered land from the moment of inscription
of the notice of levy on the day book (or entry book), on one hand; and
the right of the Saberons to rely on what appears on the certificate of
title for purposes of voluntary dealings with the same parcel of land, on
the other.
The Saberons maintain that they had no notice of any defect, irregularity
or encumbrance in the titles of the property they purchased. In its
decision, however, the RTC pointed out that their suspicion should have
been aroused by the circumstance that Marquez, who was not engaged
in the buy-and-sell business and had the property for only a few months,
would offer the same for sale. Although the RTC found that the Saberons
may not be considered as innocent purchasers for value because of this
circumstance, it, nonetheless, ruled that they, who might well be
unwilling victims of the fraudulent scheme employed by MRCI and
Marquez, were entitled to actual and compensatory damages.
To this latter finding, the Court agrees. The Saberons could not be said to
have authored the entanglement they found themselves in. No fault can
be attributed to them for relying on the face of the title presented by
Marquez. This is bolstered by the fact that the RTC decision shows no
categorical finding that the Saberons’ purchase of the lots from Marquez
was tainted with bad faith. That the Saberons should have harbored
doubts against Marquez is too high a standard to impose on a buyer of
titled land. This is in consonance to the rule that the one who deals with
property registered under the Torrens system is charged with notice only
of such burdens and claims as are annotated on the title.9 "All persons
dealing with property covered by Torrens certificate of title are 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."10 These rules remain as essential
features of the Torrens system. The present case does not entail a
modification or overturning of these principles.
Be that as it may, no fault can likewise be imputed to the Ventanillas.
In ultimately ruling for the Ventanillas, the courts a quo focused on the
superiority of their notice of levy and the constructive notice against the
whole world which it had produced and which effectively bound third
persons including the Saberons.
It has already been established in the two previous cases decided by the
Court that the contracts to sell executed in favor of the Ventanillas are
valid and subsisting. Clearly, it has been acknowledged, even by MRCI, as
can be seen in the latter’s own choice to only question their solidary
liability in the 1990 case and its failure to assign the same as an error in
the 1994 case. In the same vein, the issue on Marquez’s title had already
been passed upon and settled in the 1994 case. That he purchased the
lots prior to the annotation of the notice of levy in MRCI’s title was of no
moment. In fact, the Court explicitly declared that MRCI’s transaction
with Marquez "cannot prevail over the final and executory judgment
ordering MRCI to execute an absolute deed of sale in favor of the
Ventanillas."
These favorable findings prompted the Ventanillas to register the notice
of levy on the properties. The records show that on the strength of a final
and executory decision by the Court, they successfully obtained a writ of
execution from the RTC and a notice of levy was then entered, albeit on
the primary entry book only. The contract to sell to Marquez was
registered on May 21, 1991, while the notice of levy was issued ten (10)
days later, or on May 31, 1991. In February 1992, MRCI executed the
Deed of Sale with Marquez, under whose name the clean titles, sans the
notice of levy, were issued. A year later, or on March 11, 1992, MRCI
registered the deed of sale to Marquez who later sold the same property
to the Saberons.
This complex situation could have been avoided if it were not for the
failure of ROD Cleofe to carry over the notice of levy to Marquez’s title,
serving as a senior encumbrance that might have dissuaded the Saberons
from purchasing the properties.
The Court agrees with the position of the RTC in rejecting ROD Cleofe’s
theory.
Distinctions between a contract to sell and a contract of sale are well-
established in urisprudence.1âwphi1 In a contract of sale, the title to the
property passes to the vendee upon the delivery of the thing sold; in a
contract to sell, ownership is, by agreement, reserved in the vendor and
is not to pass to the vendee until full payment of the purchase price.
Otherwise stated, in a contract of sale, the vendor loses ownership over
the property and cannot recover it until and unless the contract is
resolved or rescinded; whereas, in a contract to sell, title is retained by
the vendor until full payment of the price. In the latter contract, payment
of the price is a positive suspensive condition, failure of which is not a
breach but an event that prevents the obligation of the vendor to convey
title from becoming effective.11
It is undeniable, therefore, that no title was transferred to Marquez upon
the annotation of the contract to sell on MRCI’s title. As correctly found
by the trial court, the contract to sell cannot be substituted by the Deed
of Absolute Sale as a "mere conclusion" of the previous contract since
the owners of the properties under the two instruments are different. 12
Considering that the deed of sale in favor of Marquez was of later
registration, the notice of levy should have been carried over to the title
as a senior encumbrance.
Corollary to this is the rule that a levy of a judgment debtor creates a
lien, which nothing can subsequently destroy except the very dissolution
of the attachment of the levy itself.13 Prior registration of the lien creates
a preference, since the act of registration is the operative act to convey
and affect the land.14 Jurisprudence dictates that the said lien continues
until the debt is paid, or the sale is had under an execution issued on the
judgment or until the judgment is satisfied, or the attachment is
discharged or vacated in the same manner provided by law. Under no
law, not even P.D. No. 1529, is it stated that an attachment shall be
discharged upon sale of the property other than under execution. 15
Additionally, Section 59 of P.D. No. 1529 provides that, "[i]f, at the time
of the transfer, subsisting encumbrances or annotations appear in the
registration book, they shall be carried over and stated in the new
certificate or certificates, except so far as they may be simultaneously
released or discharged." This provision undoubtedly speaks of the
ministerial duty on the part of the Register of Deeds to carry over
existing encumbrances to the certificates of title.
From the foregoing, ROD Cleofe’s theory that a deed of sale, as a mere
conclusion of a contract to sell, turns into a senior encumbrance which
may surpass a notice of levy, has no leg to stand on. It was, in fact,
properly rejected by the courts a quo. Verily, the controversy at hand
arose not from the Ventanillas’ fault, but from ROD Cleofe’s misplaced
understanding of his duty under the law.
Surely, the Ventanillas had every right to presume that the Register of
Deeds would carry over the notice of levy to subsequent titles covering
the subject properties. The notice was registered precisely to bind the
properties and to serve as caution to third persons who might potentially
deal with the property under the custody of the law. In DBP v. Acting
Register of Deeds of Nueva Ecija,16 the Court ruled that entry alone
produced the effect of registration, whether the transaction entered was
a voluntary or involuntary one, so long as the registrant had complied
with all that was required of him for purposes of entry and annotation,
and nothing more remained to be done but a duty incumbent solely on
the Register of Deeds.
While the Court is not unmindful that a buyer is charged with notice only
of such burdens and claims as are annotated on the title, the RTC and the
CA are both correct in applying the rule as to the effects of involuntary
registration. In cases of voluntary registration of documents, an innocent
purchaser for value of registered land becomes the registered owner,
and, in contemplation of law the holder of a certificate of title, the
moment he presents and files a duly notarized and valid deed of sale and
the same is entered in the day book and at the same time he surrenders
or presents the owner's duplicate certificate of title covering the land
sold and pays the registration fees, because what remains to be done lies
not within his power to perform. The Register of Deeds is duty bound to
perform it.17 In cases of involuntary registration, an entry thereof in the
day book is a sufficient notice to all persons even if the owner's duplicate
certificate of title is not presented to the register of deeds. Therefore, in
the registration of an attachment, levy upon execution, notice of lis
pendens, and the like, the entry thereof in the day book is a sufficient
notice to all persons of such adverse claim.18
This rule was reiterated in the more recent case of Armed Forces and
Police Mutual Benefit Association, Inc., v. Santiago,19 as relied upon by
the CA. In AFP, the Notice of Levy was presented for registration in the
Registry of Deeds of Pasig City. The Notice was entered in the Primary
Entry Book, but was not annotated on the TCT because the original copy
of the said title on file in the Registry of Deeds was not available at that
time. Six (6) days after the presentation of the Notice of Levy, the Deed
of Absolute Sale involving the same parcel of land was presented for
registration and likewise entered. The deed of sale was examined by the
same employee who examined the notice of levy, but she failed to notice
that the title subject of the sale was the same title which was the subject
of the notice of levy earlier presented. Unaware of the previous
presentation of the notice of levy, the Register of Deeds issued a
certificate of title in the name of the vendee on the basis of the deed of
sale. The Register of Deeds in AFP immediately requested the vendee to
surrender the documents in light of the mistake discovered so that he
could take appropriate rectification or correction. Settling the issue on
whether the notice of levy could be annotated in the certificate of title,
the Court ruled in the affirmative on the ground that the preference
created by the levy on attachment was not diminished by the subsequent
registration of the prior sale. Superiority and preference in rights were
given to the registration of the levy on attachment; although the notice
of attachment had not been noted on the certificate of title, its notation
in the book of entry of the Register of Deeds produced all the effects
which the law gave to its registration or inscription, to wit:
…Under the rule of notice, it is presumed that the purchaser has
examined every instrument of record affecting the title. Such
presumption is irrebuttable. He is charged with notice of every fact
shown by the record and is presumed to know every fact shown by the
record and to know every fact which an examination of the record would
have disclosed. This presumption cannot be overcome by proof of
innocence or good faith. Otherwise, the very purpose and object of the
law requiring a record would be destroyed. Such presumption cannot be
defeated by proof of want of knowledge of what the record contains any
more than one may be permitted to show that he was ignorant of the
provisions of the law. The rule that all persons must take notice of the
facts which the public record contains is a rule of law. The rule must be
absolute; any variation would lead to endless confusion and useless
litigation. For these reasons, a declaration from the court that
respondent was in bad faith is not necessary in order that the notice of
levy on attachment may be annotated on TCT No. PT-94912.
The fact that the notice of levy on attachment was not annotated on the
original title on file in the Registry of Deeds, which resulted in its non-
annotation on the title TCT No. PT-94912, should not prejudice
petitioner. As long as the requisites required by law in order to effect
attachment are complied with and the appropriate fees duly paid,
attachment is duly perfected. The attachment already binds the land.
This is because what remains to be done lies not within the petitioner’s
power to perform but is a duty incumbent solely on the Register of
Deeds. (Emphasis supplied)
In the case at bench, the notice of levy covering the subject 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 the superiority and preference in
rights of the Ventanillas over the property as against the Saberons. In
AFP, the Court upheld the registration of the levy on attachment in the
primary entry book as a senior encumbrance despite the mistake of the
ROD, the Court must, a fortiori, sustain the notice of levy registered by
the Ventanillas notwithstanding the nonfeasance of ROD Cleofe. Again,
the prevailing rule is that there is effective registration once the
registrant has fulfilled all that is needed of him for purposes of entry and
annotation, so that what is left to be accomplished lies solely on the
Register of Deeds.20
Suffice it to say, no bad faith can be ascribed to the parties alike.
Nevertheless, the equal footing of the parties necessarily tilts in favor of
the superiority of the Ventanillas’ notice of levy, as discussed.
The Court also sees no reason to dwell in the contention that the rights
or interests of the Ventanillas in the subject properties never ripened
into ownership. It bears stressing that the previous decisions discussed
herein already sealed the validity of the contract to sell issued to the
Ventanillas decades ago. As found by the RTC, it was MRCI’s obstinate
refusal to accept their tender of payment, not to mention the devious
transfer of the property, which caused the decade-long delay of the
execution of the deed of sale in their favor. This is a finding that the
Court, which is not a trier of facts, will have to respect.
In the same vein, the attribution of laches against the Ventanillas is
flawed. Their failure to learn about the structures being built on the
subject lands and the payment of real property taxes by the Saberons is
not sufficient justification to withhold the declaration of their ownership
over it. Against a different factual milieu, laches may be said to have set
it but not so in this case. While the Ventanillas may have been unaware
that improvements were being erected over the lots, this obliviousness
can, by no means, be treated as a lack of vigilance on their part. It bears
stressing that the Ventanillas are now of advanced age and retired as
university professors. Considering the length of litigation which they had
to endure in order to assert their right over the property which they have
painstakingly paid for decades ago, to hold now that they have been
remiss in the protection of their rights would be the height of
impropriety, if not injustice. To exact from them an obligation to visit the
land in litigation every so often, lest they be held to have slept on their
rights, is iniquitous and unreasonable. All told, the Ventanillas remain as
innocent victims of deception.
The Court deems it significant to note that the amount of ₱7,118,115.88
awarded to the Saberons by the RTC is to be satisfied by MRCI, Krohn,
Tabalingcos, and Marquez, who have not been impleaded as parties to
the present petition, thus, rendering the said award final and executory.
The said amount, however, is separate and distinct from those provided
under Article 44821 in relation to Article 54622 of the Civil Code. In the
petition, the Saberons invoked the said provisions, claiming that they are
entitled to reimbursement of all the expenses incurred in the
introduction of improvements on the subject lands amounting to
₱23,058,822.79.
The Court finds the Saberons to be builders in good faith.
No less than 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
what was obvious was that "the Saberons dealt with clean certificates of
titles." Also quite telling on this point is the finding that MRCI, Krohn,
Tabalingcos, and Marquez are liable to the Saberons. The RTC reasoned
out in the following wise:
This Court is not convinced, however that defendants Saberon took part
in the fraudulent scheme employed by the other defendants against the
plaintiffs. Although they may not be considered as innocent purchasers
for value shown in the discussion above, this Court is not ready to
conclude that the Saberons joined the other defendants in their efforts
to frustrate plaintiffs’ rights over the disputed properties. On the
contrary, they may be considered victims of the same fraudulent
employed by defendants MRCI and Marquez, and thus can rightfully
claim damages from the same.23
Consequently, Article 448 in relation to Article 546 of the Civil Code will
apply.1âwphi1 The provisions respectively read:
Article 448. The owner of the land on which anything has been built, sow
or planted in good faith, shall have the right to appropriate, as his own
the works, sowing, or planting, after payment of the indemnity provided
for in Article 546 and 548, or to oblige the one who built or planted to
pay the price of the land, and the one who sowed, the proper rent.
However, the builder or planter cannot be obliged to buy the land and if
its value is considerably more than that of the building or trees. In such
case, he shall pay reasonable rent, if the owner of the land does not
choose to appropriate the building or trees after proper indemnity. The
parties shall agree upon the terms of the lease and in case disagreement,
the court shall fix the terms thereof.

Article 546. Necessary expenses shall be refunded to every possessor;

but only the possessor in good faith may retain the thing until he has
been reimbursed therefore.

Useful expenses shall be refunded only to the possessor in good faith

with the same right of retention, the person who has defeated him in the
possession having the option of refunding the amount of the expenses or
of paying the increase in value which the thing may have acquired by
reason thereof.

Thus, the two options available to the Ventanillas: 1) they may exercise
the right to appropriate after payment of indemnity representing the
value of the improvements introduced and the necessary and useful
expenses defrayed on the subject lots; or 2) they may forego payment of
the said indemnity and instead, oblige the Saberons to pay the price of
the land.

Should the Ventanillas elect to appropriate the improvements, the trial

court is ordered to determine the value of the improvements and the
necessary and useful expenses after hearing and reception of evidence.
Should the Ventanillas, however, pursue the option to oblige the
Saberons to pay the "price of the land," the trial court is ordered to
determine said price to be paid to the V entanillas.

WHEREFORE, the Motion for Reconsideration is PARTIALLY GRANTED.

The appealed March 12, 2010 Decision and the June 18, 2010 Resolution
of the Court of Appeals in CA-G.R. CV No. 85520 are AFFIRMED with
modification in that the Ventanillas are given a period of sixty ( 60) days
from finality of this Resolution to decide whether to pay the Saberons
the value of the improvements and the necessary and useful expenses
defrayed on the 2 lots or to oblige the Saberons to pay them the "price"
of said lots. Depending on the option exercised by the Ventanillas, the
case is hereby remanded to the court of origin for further proceedings as
to the determination of reimbursement due to the petitioners or of the
"price" of the subject lots due to the Ventanillas.

SO ORDERED.