The Mirror Doctrine

The general rule is that a purchaser may be considered a purchaser in good faith
when he has examined the latest certificate of title. An exception to this rule is
when there exist important facts that would create suspicion in an otherwise
reasonable man to go beyond the present title and to investigate those that preceded
it. Thus, it has been said that a person who deliberately ignores a significant fact
which would create suspicion in an otherwise reasonable man is not an innocent
purchaser for value. A purchaser cannot close his eyes to facts which should put a
reasonable man upon his guard, and then claim that he acted in good faith under
the belief that there was no defect in the title of the vendor as has been held in
other cases, if the buyer fails to take the ordinary precautions which a prudent man
would have taken under the circumstances, especially in buying a piece of land in
the actual, visible and public possession of another person, other than the vendor,
constitutes gross negligence amounting to bad faith.

In this connection, it has been held that where, the land sold is in the possession of
a person other than the vendor, the purchaser is required to go beyond the
certificate of title to make inquiries concerning the rights of the actual possessor.
Failure to do so would make him purchaser in bad faith.

One who purchases real property which is in the actual possession of another
should, at least make some inquiry concerning the right of those in possession. The
actual possession by a person other than the vendor should, at least put the
purchaser upon inquiry. He can scarcely, in the absence of such inquiry, be
regarded as a bona fide purchaser as against such possessors. (Lucena vs. CA, G.R.
No. 77468, August 25, 1999).

Being a corporation engaged in the business of buying and selling real estate, it
was gross negligence on its part to merely rely on the seller’s assurance that the
occupants of the property were mere squatters considering that it had the means
and the opportunity to investigate for itself the accuracy of such information.
(Amancio, et al. vs. CA, et al., G.R. No. 152627, September 16, 2005).
Mirror Doctrine echoes the doctrinal rule that every person dealing with registered
land may safely rely on the correctness of the certificate of title issued therefor and
is in no way obliged to go beyond the certificate to determine the condition of the
property. (Rufloe v. Burgos, G.R. No. 143573, January 30, 2009) The recognized
exceptions to this rule are stated as follows:

A person dealing with registered land has a 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 or when the purchaser has knowledge of a
defect or the lack of title in his vendor or of sufficient facts to induce a reasonably
prudent man to inquire into the status of the title of the property in litigation. The
presence of anything which excites or arouses suspicion should then prompt the
vendee to look beyond the certificate and investigate the title of the vendor
appearing on the face of said certificate. One who falls within the exception can
neither be denominated an innocent purchaser for value nor a purchaser in good
faith and, hence, does not merit the protection of the law. (Sandoval v. Court of
Appeals, G.R. No. 106657, August 1, 1996)

Thus, in Domingo Realty, Inc. v. CA (G.R. No. 126236, January 26, 2007), we
emphasized the need for prospective parties to a contract involving titled lands to
exercise the diligence of a reasonably prudent person in ensuring the legality of the
title, and the accuracy of the metes and bounds of the lot embraced therein, by
undertaking precautionary measures, such as:

1. Verifying the origin, history, authenticity, and validity of the title with the
Office of the Register of Deeds and the Land Registration Authority;
2. Engaging the services of a competent and reliable geodetic engineer to
verify the boundary,metes, and bounds of the lot subject of said title based
on the technical description in the said title and the approved survey plan in
the Land Management Bureau;
3. Conducting an actual ocular inspection of the lot;
4. Inquiring from the owners and possessors of adjoining lots with respect to
the true and legal ownership of the lot in question;
5. Putting up of signs that said lot is being purchased, leased, or encumbered;
and
6. Undertaking such other measures to make the general public aware that said
lot will be subject to alienation, lease, or encumbrance by the parties.
JURISPRUDENCE

Mirror Doctrine General Rule: every person dealing with registered land may
safely rely on the correctness of the certificate of title issued therefor and the law
will in no way oblige him to go beyond the certificate to determine the condition of
the property.

Exceptions:

1. When a person who deals with registered land through someone who is not the
registered owner, he is expected to look behind the certificate of title and examine
all the factual circumstances, in order to determine if the vendor has the capacity to
transfer any interest in the land. He has the duty to ascertain the identity of the
person with whom he is dealing and the latter’s legal authority to convey the law
“requires a higher degree of prudence from one who buys from a person who is not
the registered owner, although the land object of the transaction is registered.
While one who buys from the registered owner does not need to look behind the
certificate of title, 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.” The strength of buyer’s inquiry on the seller’s
capacity or legal authority to sell depends on the proof of capacity of the seller. If
the proof of capacity consists of a special power of attorney duly notarized, mere
inspection of the face of such public document already constitutes sufficient
inquiry. If no such special power of attorney is provided or there is one but there
appear flaws in its notarial acknowledgment, mere inspection of the document will
not do; the buyer must show that his investigation went beyond the document and
into the circumstances of its execution. (Chua vs. Soriano, G.R. NO. 150066,
2007)

2. This principle does not apply when the party has actual knowledge of facts and
circumstances that would impel a reasonably cautious man to make such inquiry or
when the purchaser has knowledge of a defect or the lack of title in his vendor or
of sufficient facts to induce a reasonably prudent man to inquire into the status of
the title of the property in litigation. One who falls within the exception can neither
be denominated an innocent purchaser for value nor a purchaser in good faith.
(Sps. Villamil vs. Velasco, G.R. No. 177187, 2009)

3. In case of Banking institutions, banks should to investigate, examine and assess

the real estate offered as security for the application of a loan. We cannot
overemphasize the fact that the Bank cannot barefacedly argue that simply because
the title or titles offered as security were clean of any encumbrances or lien, that it
was thereby relieved of taking any other step to verify the over-reaching
implications should the subdivision be auctioned on foreclosure. (Homebankers
Saving & Trust Co. vs. CA, G.R. No. 128354, 2005)

4. In case of Financing institutions, when the purchaser or mortgagee is a financing

institution, the general rule that a purchaser or mortgagee of land is not required to
look further than what appears on the face of the title does not apply. It is
presumed that it is experienced in its business. Ascertainment of the status and
condition of properties offered to it as security for the loans it extends must be a
standard and indispensable part of its operations. SORIANO v CHUA Soriano
owned a 1,600 square meter parcel of land located in Quezon City, covered by
Transfer Certificate of Title (TCT). Sometime in the early months of 1988,
Soriano’s first cousin and godson, Emmanuel C. Celestino, Sr. asked Soriano to
lend him TCT No. 363471 as a security for a loan to be used in the business
operation of Celestino. Acceding to Celestino’s request, Soriano executed on
March 29, 1988 a Special Power of Attorney (SPA) authorizing Celestino to
mortgage said property.

In June 1988 the Quezon City Hall was on fire and destroyed in the process the
original copies land titles on file with the Registry of Deeds of Quezon City,
including that of Soriano’s TCT. A Special Power of Attorney was executed that
reconstituted the title. Soriano eventually found out that the land property was sold
by Celestino to the Chua spouses. Claiming that his signature in the SPA is a
forgery, Soriano filed on August 20, 1990 a complaint against Celestino and the
Chuas for annulment of deed of sale and special power of attorney, cancellation of
title and reconveyance with damages. The defense of Celestino is that he was duly
authorized to sell the property while the Chuas contend that they are purchasers in
good faith since they bought the property from Celestino by virtue of a SPA which
was duly inscribed and annotated on the owner's duplicate of the TCT and the tax
declaration and that they have duly inspected the property before purchasing it.

ISSUE: Whether or not the Chua spouses are purchasers in good faith

HELD: The SC granted the petition and declared the Chua spouses as purchasers
in good faith. Being purchasers in good faith, the Chua spouses already acquired a
valid title to the property. The reliance by the Chuas on the notarial
acknowledgment found in the duly notarized SPA presented by Celestino is
sufficient evidence of good faith. The Chuas need not prove anything more for it is
already the function of the notarial acknowledgment to establish the appearance of
the parties to the document, its due execution and authenticity.

SAN LORENZO DEVELOPMENT CORPORATION VS. CA

FACTS:

The Spouses Lu allegedly sold the two parcels of land to respondent Babasanta.
Babasanta made a down payment of P50,000 as evidenced by a memorandum
receipt issued by Pacita Lu of the same date. Several other payments totaling two
hundred thousand pesos (P200,000.00) were made by Babasanta. Sometime in
May 1989, Babasanta wrote a letter to Pacita Lu to demand the execution of a final
deed of sale in his favor so that he could effect full payment of the purchase price.
In the same letter, Babasanta notified the spouses about having received
information that the spouses sold the same property to another without his
knowledge and consent. He demanded that the second sale be cancelled and that a
final deed of sale be issued in his favor. In response, Pacita Lu wrote a letter to
Babasanta wherein she acknowledged having agreed to sell the property to him at
P15.00 per square meter. She, however, reminded Babasanta that when the balance
of the purchase price became due, he requested for a reduction of the price and
when she refused, Babasanta backed out of the sale. Pacita added that she returned
the sum of fifty thousand pesos (P50,000.00) to Babasanta through Eugenio Oya.
Babasanta filed Complaint for Specific Performance and Damages. Petitioner San
SLDC filed a Motion for Intervention. SLDC alleged that it had legal interest in the
subject matter under litigation because the two parcels of land involved had been
sold to it in a Deed of Absolute Sale with Mortgage. It alleged that it was a buyer
in good faith and for value and therefore it had a better right over the property in
litigation.

Issues:

(1) Whether or not there was a transfer of ownership through the issuance of
memorandum receipt.

(2) Whether or not the petitioner has a better right over the parcels of land in the
case of double sale
Held:

(1) No. Respondent Babasanta did not acquire ownership by the mere execution
of the receipt by PacitaLu acknowledging receipt of partial payment for the
property. For one, the agreement between Babasanta and the Spouses Lu,
though valid, was not embodied in a public instrument. Hence, no
constructive delivery of the lands could have been affected. For another,
Babasanta had not taken possession of the property at any time after the
perfection of the sale in his favor or exercised acts of dominion over it
despite his assertions that he was the rightful owner of the lands. Simply
stated, there was no delivery to Babasanta, whether actual or constructive,
which is essential to transfer ownership of the property. Thus, even on the
assumption that the perfected contract between the parties was a sale,
ownership could not have passed to Babasanta in the absence of delivery,
since in a contract of sale ownership is transferred to the vendee only upon
the delivery of the thing sold.

(2) Yes. As stated in Article 1544, if the same thing should have been sold to
different vendees, the ownership shall belong to the person acquiring it who
in good faith first recorded it in the Registry of Property. The principle of
primus tempore, potior jure (first in time, stronger in right) gains greater
significance in case of double sale of immovable property. When the thing
sold twice is an immovable, the one who acquires it and first records it in the
Registry of Property, both made in good faith, shall be deemed the owner.
Verily, the act of registration must be coupled with good faith— that is, the
registrant must have no knowledge of the defect or lack of title of his vendor
or must not have been aware of facts which should have put him upon such
inquiry and investigation as might be necessary to acquaint him with the
defects in the title of his vendor. It must be stressed that as early as 11
February 1989, the Spouses Lu executed the Option to Buy in favor of
SLDC upon receiving P316,160.00 as option money from SLDC. After
SLDC had paid more than one half of the agreed purchase price of
P1,264,640.00, the Spouses Lu subsequently executed on 3 May 1989 a
Deed of Absolute Sale in favor or SLDC. At the time both deeds were
executed, SLDC had no the time of execution of the first deed up to the
moment of transfer and delivery of possession of the lands to SLDC, it had
acted in good faith and the subsequent annotation of lis pendens has no
effect at all on the consummated sale between SLDC and the Spouses Lu.
The law speaks not only of one criterion. The first criterion is priority of
entry in the registry of property; there being no priority of such entry, the
second is priority of possession; and, in the absence of the two priorities, the
third priority is of the date of title, with good faith as the common critical
element. Since SLDC acquired possession of the property in good faith in
contrast to Babasanta, who neither registered nor possessed the property at
any time, SLDC's right is definitely superior to that of Babasanta's. At any
rate, the above discussion on the rules on double sale would be purely
academic for as earlier stated in this decision, the contract between
Babasanta and the Spouses Lu is not a contract of sale but merely a contract
to sell.

SPOUSES VILLAMIL v VELASCO

Spouses Juanito and Lydia Villamil represented by their son and attorney-
infact, Winfred Villamil, filed a complaint for annulment of title, recovery of
possession, reconveyance, damages, and injunction against the Spouses
Mateo and Purificacion Tolentino (Spouses Tolentino), Lazaro Villarosa
(Villarosa) and the Register of Deeds of Quezon City before the RTC of
Quezon City. The complaint alleged that petitioners were the registered
owners of a parcel of land situated at Siska Subdivision, Tandang Sora,
Quezon City, covered by Transfer Certificate of Title (TCT) ; that Juanito
Villamil Jr. asked permission from his parents, petitioners herein, to
construct a residential house on the subject lot in April 1986; that in the first
week of May 1987, petitioners visited the lot and found that a residential
house was being constructed by a certain Villarosa; that petitioners
proceeded to the Office of the Register of Deeds to verify their title; that
they discovered a Deed of Sale dated 16 July 1979 which they purportedly
executed in favor of Cipriano Paterno (Paterno) as the vendee; that they later
found out that the TCT in their names was cancelled and a new one, TCT
No. 351553, was issued in the name of

Paterno; that a Deed of Assignment was likewise executed by Paterno in

favor of the Spouses Tolentino, and; that on the basis of said document, TCT
No. 351553 was cancelled and, in its place, TCT No. was issued in the name
of the Spouses Tolentino. Spouses Villamil asserted that the Deed of Sale in
favor of Paterno is a falsified document because they did not participate in
its execution and notarization. They also assailed the Deed of Assignment in
favor of the Spouses Tolentino as having been falsified because the alleged
assignor is a fictitious person. Finally, they averred that the Deed of Sale
between Spouses Tolentino and Villarosa is void considering that the former
did not have any right to sell the subject property.

In their Answer, the Spouses Tolentino alleged that Paterno had offered the
property for sale and presented to him TCT No. 351553 registered in his
(Paternos) name. Since they did not have sufficient funds then, the Spouses
Tolentino negotiated with and obtained from Express Credit Financing a
loan, the proceeds of which they used in paying the agreed consideration.
They paid Paterno P180,000.00, but upon the latters request, a deed of
assignment was issued, instead of a deed of sale, to avoid payment of capital
gains tax. Express Credit Financing held their title as security for the loan.
The Spouses Tolentino thereafter decided to sell the property to Villarosa to
pay their obligation to Express Credit Financing. Villarosa, for his part,
claimed in his Answer that he is a purchaser in good faith and for value,
having paid P276,000.00 as consideration for the purchase of the land and
the payment having been received and acknowledged by Mateo Tolentino.
In their Reply, petitioners insisted that the deed of absolute sale executed by
the Spouses Tolentino in favor of Villarosa is legally defective, having been
notarized by one Atty. Juanito Andrade, who was not a duly commissioned
notary public for the year 1987, as evidenced by a certification of the Clerk
of Court of the RTC of Quezon City.

Petitioner also alleged that Paterno is a fictitious person. During the pre-
trial, the parties agreed to limit the issues to the following:

1. whether the Deed of Absolute Sale executed by Villamil in favor of

Paterno is fake;

2 Whether Paterno is a fictitious person;

3.Whether the Spouses Tolentino are buyers in good faith;

4. Whether Villarosa, the present registered owner, is a buyer in good faith.

The trial court also found that the Deed of Absolute Sale executed by the
Spouses Villamil in favor of Paterno is fake; that Paterno is a fictitious
person; and that Spouses Tolentino and Villarosa are both buyers in bad
faith. On 12 September 2006, the Court of Appeals reversed the trial court
and declared void the title of the Spouses Tolentino and Paterno but upheld
the validity of the title of Villarosa. The dispositive portion of the appellate
court’s decision reads, thus:

WHEREFORE, the appeal is GRANTED and the trial courts June 12, 2003
Decision is REVERSED and SET ASIDE with respect to appellant. In lieu
thereof, another is entered as follows: (a) ordering the dissolution of the
injunction issued by the trial court; (b) declaring Transfer Certificate of Title
No. 354675 in the name of appellant valid; (c) affirming appellants
ownership of the subject parcel as well as all existing improvements thereon;
and (d) absolving appellant of liability for all monetary awards adjudicated
by the trial court.

The appellate court ruled that while the Spouses Tolentinos acquisition of
the subject land does not appear to be above board, the circumstances
surrounding Villarosas acquisition, on the other hand, indicate that he is a
purchaser for value and in good faith. On 23 March 2007, the appellate court
denied petitioners motion for reconsideration. Hence, this petition. It should
be noted that Paterno was not made a defendant in the complaint before the
trial court and that the decision of the Court of Appeals insofar as it nullified
the title in the name of the Spouses Tolentino was not appealed to this Court.
Thus, the petition before this Court centers on the validity of Villarosas title
only. The resolution of this issue devolves on whether Villarosa is a
purchaser in good faith. The Spouses Villamil maintains that Villarosa is not
a purchaser in good faith considering that he has knowledge of the
circumstances that should have forewarned him to make further inquiry
beyond the face of the title.

Villarosa counters that he is a purchaser in good faith because before buying

the property, he went to the Register of Deeds of Quezon City to verify the
authenticity of Spouses Tolentinos title, as well as to the Express Credit
Financing Corporation to check whether Spouses Tolentino had indeed
mortgaged the subject property. Having been assured of the authenticity and
genuineness of its title, he proceeded to purchase the property.

The determination of whether Villarosa is a purchaser in good faith is a

factual issue which is generally outside the province of this Court to
determine in a petition for review. Indeed, this Court is not a trier of facts,
and the factual findings of the Court of Appeals are binding and conclusive
upon this Court.

However, the rule has its recognized exceptions, one of which obtains in
this case, i.e., there is a conflict between the findings of fact of the Court of
Appeals and those of the trial court. ************* In the case at bar, the
courts below arrived at the same findings concerning the circumstances
related to the transfer of titles in favor of Paterno and the Spouses Tolentino
and on that basis declared both their titles spurious. But they differ with
respect to the title of Villarosa. The trial court held that Villarosa knew of
the circumstances of Spouses Tolentinos acquisition of the subject property,
thus making him (Villarosa) a purchaser in bad faith. To the contrary, the
Court of Appeals, upon review of the records, found that Villarosa is a
purchaser in good faith. The burden of proving the status of a purchaser in
good faith lies upon one who asserts that status.

An innocent purchaser for value is one who buys the property of another
without notice that some other person has a right to or interest in that same
property, and who pays a full and fair price at the time of the purchase or
before receiving any notice of another person’s claim. The honesty of
intention that constitutes good faith implies freedom from knowledge of
circumstances that ought to put a prudent person on inquiry. Good faith
consists in the belief of the possessors that the persons from whom they
received the thing are its rightful owners who could convey their title. Good
faith, while always presumed in the absence of proof to the contrary,
requires this wellfounded belief. Indeed, we found that Villarosa had
successfully discharged this burden. In the instant case, there were no traces
of bad faith on Villarosas part in acquiring the subject property by purchase.
Villarosa merely responded to a newspaper advertisement for the sale of a
parcel of land with an unfinished structure located in Tierra Pura, Tandang
Sora, Quezon City. He contacted the number specified in the advertisement
and was able to talk to a certain lady named Annabelle who introduced him
to the owner, Mateo Tolentino. When he visited the site, he inquired from
Mateo Tolentino about the unfinished structure and was informed that the
latter allegedly ran out of money and eventually lost interest in pursuing the
construction because of his old age. Villarosa was then given a copy of the
title.

He went to the Register of Deeds and was able to verify the authenticity of
the title. He also found out that the property was mortgaged under the name
of Mario Villamor, who turned out to be the employer of Tolentino. Upon
reaching an agreement on the price of P276,000.00, Villarosa redeemed the
title from Express Financing Company. Thereafter, the property was
released from mortgage and a deed of sale was executed. Villarosa then
secured the transfer of title in his name.

Well-settled is the rule that every person dealing with a registered land may
safely rely on the correctness of the certificate of title issued therefor and the
law will in no way oblige him to go beyond the certificate to determine the
condition of the property. Where there is nothing in the certificate of title to
indicate any cloud or vice in the ownership of the property, or any
encumbrance thereon, the purchaser is not required to explore further than
what the Torrens Title upon its face indicates in quest for any hidden defects
or inchoate right that may subsequently defeat his right thereto. This
principle does not apply when the party has actual knowledge of facts and
circumstances that would impel a reasonably cautious man to make such
inquiry or when the purchaser has knowledge of a defect or the lack of title
in his vendor or of sufficient facts to induce a reasonably prudent man to
inquire into the status of the title of the property in litigation. One who falls
within the exception can neither be denominated an innocent purchaser for
value nor a purchaser in good faith. We do not agree. A forged or fraudulent
document may become the root of a valid title if the property has already
been transferred from the name of the owner to that of the forger. This
doctrine serves to emphasize that a person who deals with registered
property in good faith will acquire good title from a forger and be absolutely
protected by a Torrens title. Having made the necessary inquiries and having
found the title to be authentic, Villarosa need not go beyond the certificate of
title. When dealing with land that is registered and titled, as in this case,
buyers are not required by the law to inquire further than what the Torrens
certificate of title indicates on its face. He examined the transferors title,
which was then under the name of Spouses Tolentino. He did not have to
scrutinize each and every title and previous owners of the property preceding
Tolentino.
In sum, Villarosa was able to establish good faith when he bought the
subject property. Therefore, TCT No. 354675 issued in his name is declared
valid. Homebankers Saving & Trust Co. vs. CA, G.R. No. 128354, 2005.

PURCHASER IN GOOD FAITH

In Chua v Soriano A purchaser in good faith is one who buys property

without notice that some other person has a right to or interest in such
property and pays its fair price before he has notice of the adverse claims
and interest of another person in the same property. The honesty of intention
which constitutes good faith implies a freedom from knowledge of
circumstances which ought to put a person on inquiry. As the Court
enunciated in Lim v. Chuatoco:31

x x x good faith consists in the possessor’s belief that the person from whom
he received the thing was the owner of the same and could convey his title.
Good faith, while it is always to be presumed in the absence of proof to the
contrary, requires a well-founded belief that the person from whom title was
received was himself the owner of the land, with the right to convey it.
There is good faith where there is an honest intention to abstain from taking
any unconscientious advantage from another. Otherwise stated, good faith is
the opposite of fraud and it refers to the state of mind which is manifested by
the acts of the individual concerned.