Cancellation of Title Cases

[ G.R. No.
208450, June 05, 2017 ]

SPS. ROBERTO ABOITIZ AND MARIA CRISTINA CABARRUS, PETITIONERS, VS. SPS. PETER L. PO AND VICTORIA L. PO,
RESPONDENTS.
[G.R. No. 208497]
SPS. PETER L. PO AND VICTORIA L. PO, PETITIONERS, VS. SPS. ROBERTO ABOITIZ AND MARIA CRISTINA CABARRUS,
JOSE MARIA MORAZA, AND ERNESTO ABOITIZ AND ISABEL ABOITIZ, RESPONDENTS.
DECISION
LEONEN, J.:
This resolves two (2) Petitions for Review on Certiorari[1] assailing the Court of Appeals' October 31, 2012 Decision[2] and its June
17, 2013 Resolution[3] in CA-G.R. CV No. 03803. The assailed decision affirmed the Regional Trial Court's Decision,[4] which
declared the spouses Peter Po and Victoria Po (Spouses Po) as the rightful owners of the parcel of land. However, the Court of
Appeals ruled that respondents Jose Maria Moraza (Jose), spouses Ernesto Aboitiz (Ernesto), and Isabel Aboitiz (Isabel) were
innocent buyers in good faith whose titles were entitled to protection.[5] The assailed resolution denied the Motion for Partial
Reconsideration of the spouses Roberto Aboitiz and Maria Cristina Cabarrus (Spouses Aboitiz).[6]
The Spouses Aboitiz filed the Petition[7] docketed as G.R. No. 208450. The Spouses Po filed the Petition[8] docketed as G.R. No.
208497. These cases are consolidated in the case at bar.
This case involves a parcel of land located in Cabancalan, Mandaue City,[9] initially registered as Original Certificate of Title No. 0-
887, and titled under the name of Roberto Aboitiz (Roberto).[10] The land is referred to as Lot No. 2835.[11]
This parcel of land originally belonged to the late Mariano Seno (Mariano).[12]
On July 31, 1973, Mariano executed a Deed of Absolute Sale in favor of his son, Ciriaco Seno (Ciriaco), over a 1.0120-hectare land
in Cebu covered by Tax Declaration No. 43358.[13] This property included two (2) lots: Lot No. 2807 and the land subject of this
case, Lot No. 2835.[14]
On May 5, 1978, Ciriaco sold the two (2) lots to Victoria Po (Victoria).[15] The parties executed a Deed of Absolute Sale.[16]
On July 15, 1982, Mariano died and was survived by his five (5) children (Mariano Heirs): Esperanza Seno Vda. De Kuizon, Ramon
Seno,[17] Benita Seno Vda. De Lim, Simeon Seno,[18] and Ciriaco.[19]
In 1990, Peter Po (Peter) discovered that Ciriaco "had executed a [q]uitclaim dated August 7, 1989 renouncing [his] interest over Lot
[No.] 2807 in favor of [petitioner] Roberto."[20] In the quitclaim, Ciriaco stated that he was "the declared owner of Lot [Nos.] 2835
and 2807."[21]
The Spouses Po confronted Ciriaco.[22] By way of remedy, Ciriaco and the Spouses Po executed a Memorandum of Agreement
dated June 28, 1990 in which Ciriaco agreed to pay Peter the difference between the amount paid by the Spouses Po as
consideration for the entire property and the value of the land the Spouses Po were left with after the quitclaim.[23]
However, also in 1990, Lot No. 2835 was also sold to Roberto.[24] The Mariano Heirs, including Ciriaco, executed separate deeds
of absolute sale in favor of Roberto.[25] Thereafter, Roberto immediately developed the lot as part of a subdivision called North
Town Homes.[26]
In 1991, the Spouses Po declared Lot No. 2835 for taxation purposes and was issued Tax. Declaration No. 0634-A.[27]
In 1992, Roberto also declared Lot No. 2835 for taxation purposes and was issued Tax Declaration No. 1100, annotated with: "This
tax declaration is also declared in the name of Mrs. VICTORIA LEE PO married to PETER PO under [T]ax [Declaration] [N]o. 0634-
A so that one may be considered a duplicate to the other."[28]
On April 19, 1993, Roberto filed an application for original registration of Lot No. 2835 with the Mandaue City Regional Trial Court,
acting as land registration court.[29] The case was raffled to Branch 28 and docketed as LRC Case No. N-208.[30]
In its Decision dated October 28, 1993, the trial court granted the issuance of Original Certificate of Title No. 0-887 in the name of
Roberto.[31] The lot was immediately subdivided with portions sold to Ernesto and Jose.[32]
On November 19, 1996, the Spouses Po filed a complaint to recover the land and to declare nullity of title with damages.[33]
The complaint was docketed in Branch 55, Regional Trial Court of Mandaue City.[34]
The trial court ruled in favor of the Spouses Po in its Decision dated November 23, 2009:
WHEREFORE, premises considered, judgment is rendered in favor of plaintiffs, and against defendants, declaring the plaintiffs as
owner of subject land and ordering the defendants reconvey and/or return to plaintiffs Lot No. 2835; declaring as absolute nullity all
the documents of sale involving Lot 2835 executed by the Heirs of Mariano Seno in favor of defendant Roberto Aboitiz and such
other documents used in the improvident issuance of titles in the name of defendants, and to cancel the said titles.[35]
The Spouses Aboitiz appealed to the Court of Appeals. The Court of Appeals, in its Decision dated October 31, 2012, partially
affirmed the trial court decision, declaring the Spouses Po as the rightful owner of the land. However, it ruled that the titles issued to
respondents Jose, Ernesto, and Isabel should be respected.[36]
The Court of Appeals discussed the inapplicability of the rules on double sale and the doctrine of buyer in good faith since the land
was not yet registered when it was sold to the Spouses Po.[37] However, it ruled in favor of the Spouses Po on the premise that
registered property may be reconveyed to the "rightful or legal owner or to the one with a better right if the title [was] wrongfully or
erroneously registered in another person's name."[38] The Court of Appeals held that the Mariano Heirs were no longer the owners
of the lot at the time they sold it to Roberto in 1990 because Mariano, during his lifetime, already sold this to Ciriaco in 1973.[39]
It found that the Deed of Absolute Sale between Ciriaco and the Spouses Po was duly notarized and was thus presumed regular on
its face.[40] Their Memorandum of Agreement did not cancel or rescind the Deed of Absolute Sale but rather strengthened their
claim that they "entered into a contract of [s]ale."[41]
It likewise ruled that, contrary to the assertion of the Spouses Aboitiz, there was no showing that Ciriaco merely held the property in
trust for the Mariano Heirs.[42]
It held that the action of the Spouses Po had not yet prescribed because their complaint in 1996 was within the 10-year prescriptive
period as the title in favor of the Spouses Aboitiz was issued in 1994.[43]
However, the Court of Appeals ruled that the certificates of title of Jose, Ernesto, and Isabel were valid as they were innocent buyers
in good faith.[44]
The Spouses Aboitiz thus filed their Petition for Review, which was docketed as GR. No. 208450.[45] They argue that the Decision
of Branch 55, Regional Trial Court of Mandaue City granting the complaint of the Spouses Po is void for lack of jurisdiction over the
matter.[46] They claim that a branch of the Regional Trial Court has no jurisdiction to nullify a final and executory decision of a co-
equal branch;[47] it is the Court of Appeals that has this jurisdiction.[48]
They likewise assert that the Spouses Po's cause of action has prescribed[49] and allegedly accrued when the Deed of Absolute
Sale between the Spouses Po and Ciriaco was executed on May 5, 1978.[50] They maintain that more than 10 years had elapsed
when the complaint was filed on November 12, 1996, thus barring the action through prescription.[51]
The Spouses Aboitiz further insist that "estoppel and laches have already set in."[52] They claim that they have been "in open,
public, continuous, uninterrupted, peaceful[,] and adverse possession" in the concept of owners over the property for "46 years as of
1993," without the Spouses Po acting on the Deed of Absolute Sale.[53] They attest that the development of North Town Homes
Subdivision "was covered by utmost publicity," but the Spouses Po did not immediately question the development or interpose any
objection during the registration proceedings.[54]
They posit that the Deed of Absolute Sale between Ciriaco and the Spouses Po is "clearly fake and fraudulent"[55] as evidenced by
certifications of its non-existence in the notarial books and the Spouses Po's failure to enforce their rights over the property until 18
years later.[56] They also affirm that the Deed of Absolute Sale between Ciriaco and the Spouses Po's inadmissible as no
documentary stamp was paid and affixed.[57]
Lastly, they contend that the Mariano Heirs should have been impleaded in the action as they are indispensable parties.[58]
The Spouses Po filed a Comment[59] where they argued that the Regional Trial Court had jurisdiction when it granted their
complaint because the case filed by the Spouses Aboitiz was for the registration of the land, while the case they filed was for
reconveyance.[60] They insisted that their action had not prescribed because an action for reconveyance prescribes in 10 years
from the "date of issuance of the certificate of title over the property."[61] They argued that "laches ha[d] not set in."[62] They
claimed that the notarized Deed of Absolute Sale between them and Ciriaco was not fake or fraudulent and was admissible in
evidence[63] whereas the Spouses Aboitiz failed "to overcome [its] presumption of regularity and due execution."[64] They asserted
that "the documentary stamps tax ha[d] been paid"[65] and that the Mariano Heirs were not indispensable parties.[66]
Spouses Aboitiz filed a Reply[67] reiterating their arguments in the Petition.
The Spouses Po also filed a Petition for Review, which was docketed as G.R. No. 208497. They claim that respondents Jose,
Ernesto, and Isabel are not "innocent purchasers for value."[68] They allegedly knew of the defective title of Roberto because his tax
declaration had the following annotation: "This tax declaration is also declared in the name of Mrs. VICTORIA LEE PO, married to
PETER PO under tax dec. No. 0634-A so that one may be considered a duplicate to the other. (Section 89 Paragraph H PD
464)."[69]
Spouses Aboitiz filed a Comment.[70] Aside from reiterating their assertions in their Petition for Review in G.R No. 208450, they
argued that there was no evidence that they acted in bad faith as "subdivision lot buyers [were] not obliged to go beyond the
[T]orrens title."[71]
Spouses Po filed a Reply.[72]
For resolution are the following issues:
First, whether the Regional Trial Court has jurisdiction over the Spouses Peter and Victoria Po's complaint;
Second, whether the action is barred by prescription,
Third, whether the doctrines of estoppel and laches apply;
Fourth, whether the land registration court's finding that Ciriaco Seno only held the property in trust for the Mariano Heirs is binding
as res judicata in this case;
Fifth, whether the Deed of Absolute Sale between Ciriaco Seno and the Spouses Peter and Victoria Po should be considered as
evidence of their entitlement to the property;
Sixth, whether the Mariano Heirs, as sellers in a deed of conveyance of realty, are indispensable parties; and
Finally, whether the respondents Jose Maria Moraza, Ernesto Aboitiz, and Isabel Aboitiz are innocent purchasers in good faith.
The Spouses Aboitiz argue that Branch 55, Regional Trial Court did not have jurisdiction to nullify the final and executory Decision of
Branch 28, Regional Trial Court in LRC Case No. N-208.[73] They claim that that it is the Court of Appeals that has jurisdiction to
annul judgments of the Regional Trial Court.[74]
However, the instant action is not for the annulment of judgment of a Regional Trial Court. It is a complaint for reconveyance,
cancellation of title, and damages.[75]
A complaint for reconveyance is an action which admits the registration of title of another party but claims that such registration was
erroneous or wrongful.[76] It seeks the transfer of the title to the rightful and legal owner, or to the party who has a superior right
over it, without prejudice to innocent purchasers in good faith.[77] It seeks the transfer of a title issued in a valid proceeding. The
relief prayed for may be granted on the basis of intrinsic fraud-fraud committed on the true owner instead of fraud committed on the
procedure amounting to lack of jurisdiction.
An action for annulment of title questions the validity of the title because of lack of due process of law. There is an allegation of
nullity in the procedure and thus the invalidity of the title that is issued.
The complaint of the Spouses Po asserted that they were the true owners of the parcel of land which was registered in the name of
the Spouses Aboitiz.[78] They alleged that they acquired the property from Ciriaco, who acquired it from Mariano.[79] They claimed
that the Spouses Aboitiz had the property registered without their knowledge and through fraud.[80] Thus, they sought to recover
the property and to cancel the title of the Spouses Aboitiz.[81] Thus the prayer in their Complaint stated:
WHEREFORE, premises considered, this Honorable Court is respectfully prayed to render judgment in favor of plaintiffs and against
defendants, ordering the latter as follows:
1. To reconvey and/or return to plaintiffs Lot No. 2835 which is the subject matter of this complaint;
2. To declare as absolute nullity all the documents of sale involving Lot 2835 in favor of defendants and such other documents used
in the improvident issuance of the Title in the name of defendants, and to cancel said Title;
3. To pay jointly and severally the amount of P1,000,000.00 as moral damages; P500,000.00 as actual damages; P100,000.00 as
attorneys fees and P20,000.00 as litigation expenses.
Plaintiffs further pray for such other reliefs and remedies just and equitable in the premises.[82]
Except for actions falling within the jurisdiction of the Municipal Trial Courts, the Regional Trial Courts have exclusive original
jurisdiction over actions involving "title to, or possession of, real property."[83] Section 19 of Batas Pambansa Blg. 129 provides:
Section 19. Jurisdiction in Civil Cases. - Regional Trial Courts shall exercise exclusive original jurisdiction:
....
(2) In all civil actions which involve the title to, or possession of, real property, or any interest therein, except actions for forcible entry
into and unlawful detainer of lands or buildings, original jurisdiction over which is conferred upon Metropolitan Trial Courts, Municipal
Trial Courts, and Municipal Circuit Trial Courts[.]
An action for reconveyance and annulment of title is an action involving the title to real property.[84]
The complaint of the Spouses Po is clearly an action for reconveyance and annulment of title. Thus, the Regional Trial Court has
jurisdiction to hear the case.
The Spouses Aboitiz claim that it is the Court of Appeals that has jurisdiction over the annulment of Regional Trial Court judgments.
[85]
The jurisdiction of the Court of Appeals is provided in Section 9 of Batas Pambansa Blg. 129:
Section 9. Jurisdiction. - The Intermediate Appellate Court shall exercise:
....
(2) Exclusive original jurisdiction over actions for annulment of judgments of Regional Trial Courts[.]
While the Court of Appeals has jurisdiction to annul judgments of the Regional Trial Courts, the case at bar is not for the annulment
of a judgment of a Regional Trial Court. It is for reconveyance and the annulment of title.
The difference between these two (2) actions was discussed in Toledo v. Court of Appeals:[86]
An action for annulment of judgment is a remedy in equity so exceptional in nature that it may be availed of only when other
remedies are wanting, and only if the judgment, final order or final resolution sought to be annulled was rendered by a court lacking
jurisdiction or through extrinsic fraud. An action for reconveyance, on the other hand, is a legal and equitable remedy granted to the
rightful owner of land which has been wrongfully or erroneously registered in the name of another for the purpose of compelling the
latter to transfer or reconvey the land to him. The Court of Appeals has exclusive original jurisdiction over actions for annulment of
judgments of Regional Trial Courts whereas actions for reconveyance of real property may be filed before the Regional Trial Courts
or the Municipal Trial Courts, depending on the assessed value of the property involved.
....
Petitioners allege that: first, they are the owners of the land by virtue of a sale between their and respondents' predecessors-in-
interest; and second, that respondents Ramoses and ARC Marketing illegally dispossessed them by having the same property
registered in respondents' names. Thus, far from establishing a case for annulment of judgment, the foregoing allegations clearly
show a case for reconveyance.[87] (Citations omitted)
As stated, a complaint for reconveyance is a remedy where the plaintiff argues for an order for the defendant to transfer its title
issued in a proceeding not otherwise invalid. The relief prayed for may be granted on the basis of intrinsic rather than extrinsic fraud;
that is, fraud committed on the real owner rather than fraud committed on the procedure amounting to lack of jurisdiction.
An action for annulment of title, on the other hand, questions the validity of the grant of title on grounds which amount to lack of due
process of law. The remedy is premised in the nullity of the procedure and thus the invalidity of the title that is issued. Title that is
invalidated as a result of a successful action for annulment against the decision of a Regional Trial Court acting as a land
registration court may still however be granted on the merits in another proceeding not infected by lack of jurisdiction or extrinsic
fraud if its legal basis on the merits is properly alleged and proven.
Considering the Spouses Aboitiz's fraudulent registration without the Spouses Po's knowledge and the latter's assertion of their
ownership of the land, their right to recover the property and to cancel the Spouses Aboitiz's[88] title, the action is for reconveyance
and annulment of title and not for annulment of judgment.
Thus, the Regional Trial Court has jurisdiction to hear this case.
II
The Spouses Aboitiz argue that the Spouses Po's cause of action has prescribed.[89] They claim that prescription has set in
because the original complaint was filed only on November 12, 1996, after more than 10 years after the Deed of Absolute Sale
between Ciriaco and Spouses Po was executed on May 5, 1978.[90]
The Spouses Po's action has not prescribed.
"[A]n action for reconveyance ... prescribes in [10] years from the issuance of the Torrens title over the property."[91] The basis for
this is Section 53, Paragraph 3[92] of Presidential Decree No. 1529[93] in relation to Articles 1456[94] and 1144(2)[95] of the Civil
Code.[96]
Under Presidential Decree No. 1529 (Property Registration Decree), the owner of a property may avail of legal remedies against a
registration procured by fraud:
SECTION 53. Presentation of Owner's Duplicate Upon Entry of New Certificate. - . . .
In all cases of registration procured by fraud, the owner may pursue all his legal and equitable remedies against the parties to such
fraud without prejudice, however, to the rights of any innocent holder for value of a certificate of title...
Article 1456 of the Civil Code provides that a person acquiring a property through fraud becomes an implied trustee of the property's
true and lawful owner.[97]
An implied trust is based on equity and is either (i) a constructive trust, or (ii) a resulting trust.[98] A resulting trust is created by
implication of law and is presumed as intended by the parties.[99] A constructive trust is created by force of law[100] such as when
a title is registered in favor of a person other than the true owner.[101]
The implied trustee only acquires the right "to the beneficial enjoyment of [the] property."[102] The legal title remains with the true
owner.[103] In Crisostomo v. Garcia, Jr.:[104]
Art. 1456 of the Civil Code provides:
Art. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an
implied trust for the benefit of the person from whom the property comes.
Thus, it was held that when a party uses fraud or concealment to obtain a certificate of title of property, a constructive trust is
created in favor of the defrauded party.
Constructive trusts are "created by the construction of equity in order to satisfy the demands of justice and prevent unjust
enrichment. They arise contrary to intention against one who, by fraud, duress or abuse of confidence, obtains or holds the legal
right to property which he ought not, in equity and good conscience, to hold."
When property is registered in another's name, an implied or constructive trust is created by law in favor of the true owner. The
action for reconveyance of the title to the rightful owner prescribes in 10 years from the issuance of the title.[105] (Citations omitted)
Thus, the law creates a trust in favor of the property's true owner.
The prescriptive period to enforce this trust is 10 years from the time the right of action accrues. Article 1144 of the Civil Code
provides:
Article 1144. The following actions must be brought within ten years from the time the right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.

In an action for reconveyance, the right of action accrues from the ti.me the property is registered.[106]
In Crisostomo,[107] the petitioners were able to transfer the property under their names without knowledge of the respondent.[108]
The respondent filed an action for reconveyance.[109] In arguing that the action for reconveyance had prescribed, the petitioners
claimed that the cause of action of the respondent should be based on the latter's Deed of Sale and thus the respondent's right of
action should have accrued from its execution.[110] This Court, however, ruled that the right of action accrued from the time the
property was registered because registration is the act that signifies that the adverse party repudiates the implied trust:
In the case at bar, respondent's action which is for Reconveyance and Cancellation of Title is based on an implied trust under Art.
1456 of the Civil Code since he averred in his complaint that through fraud petitioners were able to obtain a Certificate of Title over
the property. He does not seek the annulment of a voidable contract whereby Articles 1390 and 1391 of the Civil Code would find
application such that the cause of action would prescribe in four years.
....
An action for reconveyance based on implied or constructive trust prescribes in ten years from the alleged fraudulent registration or
date of issuance of the certificate of title over the property.
It is now well-settled that the prescriptive period to recover property obtained by fraud or mistake, giving rise to an implied trust
under Art. 1456 of the Civil Code, is 10 years pursuant to Art. 1144. This ten year prescriptive period begins to run from the date the
adverse party repudiates the implied trust, which repudiation takes place when the adverse party registers the land.[111] (Citations
omitted, emphasis supplied)
Likewise, in Duque v. Domingo:[112]
The registration of an instrument in the Office of the Register of Deeds constitutes constructive notice to the whole world, and,
therefore , discovery of the fraud is deemed to have taken place at the time of registration. Such registration is deemed to be a
constructive notice that the alleged fiduciary or trust relationship has been repudiated. It is now settled that an action on an implied
or constructive trust prescribes in ten (10) years from the date the right of action accrued. The issuance of Transfer Certificate of
Title No. 7501 in 1931 to Mariano Duque commenced the effective assertion of adverse title for the purpose of the statute of
limitations.[113] (Citations omitted)
Registration of the property is a "constructive notice to the whole world."[114] Thus, in registering the property, the adverse party
repudiates the implied trust.[115] Necessarily, the cause of action accrues upon registration.[116]
An action for reconveyance and annulment of title does not seek to question the contract which allowed the adverse party to obtain
the title to the property.[117] What is put on issue in an action for reconveyance and cancellation of title is the ownership of the
property and its registration.[118] It does not question any fraudulent contract[119] Should that be the case, the applicable
provisions are Articles 1390[120] and 1391[121] of the Civil Code.[122]
Thus, an action for reconveyance and cancellation of title prescribes in 10 years from the time of the issuance of the Torrens title
over the property.[123]
Considering that the Spouses Po's complaint was filed on November 19, 1996, less than three (3) years from the issuance of the
Torrens title over the property on April 6, 1994, it is well within the 10-year prescriptive period imposed on an action for
reconveyance.
III
The Spouses Aboitiz insist that estoppel and laches have already set in.[124] They claim that they have been in "open, continuous,
public, peaceful, [and] adverse" possession in the concept of owners over the property for "46 years as of 1993," without the
Spouses Po acting on their Deed of Absolute Sale.[125] Moreover, the development of North Town Homes Subdivision "was
covered by utmost publicity" but the Spouses Po did not promptly question the development.[126] In fact, they did not interpose any
objection during the registration proceedings.[127]
There is laches when a party was negligent or has failed "to assert a right within a reasonable time," thus giving rise to the
presumption that he or she has abandoned it.[128] Laches has set in when it is already inequitable or unfair to allow the party to
assert the right.[129] The elements of laches were enumerated in Ignacio v. Basilio:
There is laches when: (1) the conduct of the defendant or one under whom he claims, gave rise to the situation complained of; (2)
there was delay in asserting a right after knowledge of the defendant's conduct and after an opportunity to sue; (3) defendant had no
knowledge or notice that the complainant would assert his right; (4) there is injury or prejudice to the defendant in the event relief is
accorded to the complainant.[130] (Citation omitted)
"Laches is different from prescription."[131] Prescription deals with delay itself and thus is an issue of how much time has passed.
[132] The time period when prescription is deemed to have set in is fixed by law.[133] Laches, on the other hand, concerns itself
with the effect of delay and not the period of time that has lapsed.[134] It asks the question whether the delay has changed "the
condition of the property or the relation of the parties" such that it is no longer equitable to insist on the original right.[135] In Nielson
& Co., Inc. v. Lepanto Consolidated Mining Co.:[136]
Appellee is correct in its contention that the defense of laches applies independently of prescription. Laches is different from the
statute of limitations. Prescription is concerned with the fact of delay. Whereas laches is concerned with the effect of delay.
Prescription is a matter of time; laches is principally a question of inequity of permitting a claim to be enforced, this inequity being
founded on some change in the condition of the property or the relation of the parties. Prescription is statutory; laches is not. Laches
applies in equity, whereas prescription applies at law. Prescription is based on fixed time, laches is not.[137]
The defense of laches is based on equity.[138] It is not based on the title of the party invoking it, but on the right holder's "long
inaction or inexcusable neglect" to assert his claim.[139]
This Court rules that the Spouses Po is not barred by laches. There is no showing that they abandoned their right to the property.
The factual findings reveal that the Spouses Po had their rights over the property registered in the assessor's office.[140] They
testified that they introduced improvements by cultivating fruit trees after they purchased the lots.[141] When the Spouses Po
discovered that Ciriaco executed a quitclaim renouncing his interest over Lot No. 2807 in favor of Roberto, the Spouses Po
executed a Memorandum of Agreement with Ciriaco to protect their interest in Lot No. 2835.[142]
The Spouses Po also had the property declared for taxation purposes in their names and Tax Declaration No. 0634-A was issued.
[143] Thus, when the Spouses Aboitiz also had the property declared for taxation purposes, it had the annotation: "This tax
declaration is also declared in the name of Mrs. Victoria Lee Po, married to Peter Po under tax dec. no. 0634-A so that one may be
considered a duplicate to the other."[144]
The Spouses Aboitiz only acquired their alleged rights over the property in 1990, when the Mariano Heirs executed the Deeds of
Sale in their favor.[145] Assuming the Spouses Aboitiz immediately took possession and began construction in 1990, it cannot be
said that the Spouses Po were in delay in asserting their right. In the Spouses Po's complaint, they asserted that they made
demands upon the Spouses Aboitiz to reconvey to them the property.[146] They also referred the matter to the barangay for
conciliation:
11) That demands were made upon the defendants to reconvey to plaintiffs Lot 2835 unlawfully and feloniously acquired by
defendants, but to no avail, thereby compelling the plaintiffs to elevate the matter for barangay conciliation, and for failure of the
parties to effect a settlement, the proper Certification to file action was then issued, a copy of which is hereto attached as Annex
"L."[147]
In their Answer with Counterclaim, the Spouses Aboitiz did not deny that demands were made upon them and that the matter was
elevated for barangay conciliation:
8. Par. 11 is denied as regards the all[e]gation that Lot 2835 was feloniously and un[l]awfully acquired by defendants, for being
false. The truth is that defendants were in good faith in acquiring same property. Defendants refused to meet the demands of
settlement by plaintiffs because they are strangers to the property in question.[148]
When they discovered that the property was registered in the name of the Spouses Aboitiz in 1993, the Spouses Po then filed the
instant complaint to recover the property sold to them by Ciriaco, alleging that it was done without their knowledge, through evident
bad faith and fraud.[149] The Spouses Po filed this case in less than three (3) years from the time of registration.
Based on these circumstances, the elements of laches are clearly lacking in this case. There was no delay in asserting their right
over the property, and the Spouses Aboitiz had knowledge that the Spouses Po would assert their right.
Thus, it cannot be said that they are barred by laches.
IV
The Spouses Aboitiz insist that there is already a finding by the Regional Trial Court in LRC Case No. N-208 that Ciriaco merely
held the property "in trust for the [Mariano Heirs]."[150] Thus, Ciriaco could not have validly sold the property to the Spouses Po.
[151] They claim that these findings are binding on the whole world because land registration proceedings are actions in rem.[152]
In the Decision in LRC Case No. N-208, no one opposed the application for registration.[153] Moreover, the Spouses Aboitiz
presented only one (1) witness, Gregorio Espina (Espina), an employee of Roberto,[154] who testified:
That this parcel of land is covered by tax declarations, to wit:
1) Tax Dec. No. 43174 in the name of Ciriaco Seno for the year 1953 (Exh. "T");
....
11) Tax Dec. No. 2835 in the name of applicant, Roberto Aboitiz for the year 1991 (Exh. "DD").
That the tax declarations covering Lot No. 2835 are in the name of Ciriaco Seno because the heirs of Mariano Seno have agreed
that Lot No. 2835 be held in trust by Ciriaco Seno in favor of the heirs.[155]
This Court rules that this cannot be binding in this action for reconveyance.
Res judicata embraces two (2) concepts: (i) bar by prior judgment and (ii) conclusiveness of judgment, respectively covered under
Rule 39, Section 47 of the Rules of Court, paragraphs (b) and (c):[156]
Section 47. Effect of judgments or final orders. - The effect of a judgment or final order rendered by a court of the Philippines, having
jurisdiction to pronounce the judgment or final order, may be as follows:
....
(b) In other cases, the judgment or final order is, with respect to the matter directly adjudged or as to any other matter that could
have been raised in relation thereto, conclusive between the parties and their successors in interest by title subsequent to the
commencement of the action or special proceeding, litigating for the same thing and under the same title and in the same capacity;
and
(c) In any other litigation between the same parties or their successors in interest, that only is deemed to have been adjudged in a
former judgment or final order which appears upon its face to have been so adjudged, or which was actually and necessarily
included therein or necessary thereto.
Res judicata in the concept of bar by prior judgment proscribes the filing of another action based on "the same claim, demand, or
cause of action."[157] It applies when the following are present: (a) there is a final judgment or order; (b) it is a judgment or order on
the merits; (c) it was "rendered by a court having jurisdiction over the subject matter and parties"; and (d) there is "identity of parties,
of subject matter, and of causes of action" between the first and second actions.[158]
Res judicata in the concept of conclusiveness of judgment applies when there is an identity of issues in two (2) cases between the
same parties involving different causes of action.[159] Its effect is to bar "the relitigation of particular facts or issues" which have
already been adjudicated in the other case.[160] In Calalang v. Register of Deeds of Quezon City:[161]
The second concept - conclusiveness of judgment - states that a fact or question which was in issue in a former suit and was there
judicially passed upon and determined by a court of competent jurisdiction, is conclusively settled by the judgment therein as far as
the parties to that action and persons in privity with them are concerned and cannot be again litigated in any future action between
such parties or their privies, in the same court or any other court of concurrent jurisdiction on either the same or different cause of
action, while the judgment remains unreversed by proper authority. It has been held that in order that a judgment in one action can
be conclusive as to a particular matter in another action between the same parties or their privies, it is essential that the issue[s] be
identical. If a particular point or question is in issue in the second action, and the judgment will depend on the determination of that
particular point or question, a former judgment between the same parties or their privies will be final and conclusive in the second if
that same point or question was in issue and adjudicated in the first suit (Nabus vs. Court of Appeals, 193 SCRA 732 [1991]).
Identity of cause of action is not required but merely identity of issues.[162]
However, in Racoma v. Fortich,[163] this Court held that res judicata could not be a defense in an action for reconveyance based on
fraud where the complainant had no knowledge of the application for registration:
The other ground upon which the lower court dismissed the complaint is res judicata. It is stated in the order of dismissal that the
plaintiff had admitted that the property in controversy was applied for by defendant Maximina Fortich in a cadastral proceeding and
under Act 496; that the proceedings were in rem and, therefore, the whole world, including the plaintiff, were parties thereto and
bound by the judgment thereon... [I]t is obvious that the lower court was referring to the legal effect of the conclusiveness against all
persons of the in rem decision in the cadastral case rather than the actual fact that the plaintiff was a claimant who appeared in the
said case, for he alleged in his complaint that he "has no knowledge whatsoever of the application for registration filed by defendant
Maximina Fortich and the order of decree of registration issued in favor of the defendant Maximina Fortich by this Honorable Court
until on February 25, 1967..." (Record on Appeal, page 30). Such being the case, then an action for reconveyance is available to the
plaintiff, the decree of registration notwithstanding, for...
"..., it is now a well-settled doctrine in this jurisdiction that the existence of a decree of registration in favor of one party is no bar to
an action to compel reconveyance of the property to the true owner, which is an action in personam, even if such action be instituted
after the year fixed by Section 38 of the Land Registration Act as a limit to the review of the registration decree, provided it is shown
that the registration is wrongful and the property sought to be reconveyed has not passed to an innocent third party holder for value.
["][164] (Emphasis supplied)
The reason for this rule is to prevent the unjust deprivation of rights over real property. As discussed in People v. Cainglet:[165]
It is fundamental and well-settled that a final judgment in a cadastral proceeding - a proceeding in rem - is binding and conclusive
upon the whole world. Reason is that public policy and public order demand not only that litigations must terminate at some definite
point but also that titles over lands under the Torrens system should be given stability for on it greatly depends the stability of the
country's economy. Interest republicae ut sit finis litium. However, this conclusiveness of judgment in the registration of lands is not
absolute. It admits of exception. Public policy also dictates that those unjustly deprived of their rights over real property by reason of
the operation of our registration laws be afforded remedies. Thus, the aggrieved party may file a suit for reconveyance of property or
a personal action for recovery of damages against the party who registered his property through fraud, or in case of insolvency of
the party who procured the registration through fraud, an action against the Treasurer of the Philippines for recovery of damages
from the Assurance Fund. Through these remedial proceedings, the law, while holding registered titles indefoasible, allows redress
calculated to prevent one from enriching himself at the expense of other. Necessarily, without setting aside the decree of title, the
issues raised in the previous registration case are relitigated, for purposes of reconveyance of said title or recovery of damages.
[166] (Citations omitted, emphasis supplied)
In this case, the Spouses Po allege that the registration was done through fraud. They contend that they were unaware and were
thus unable to contest the registration and prove their claim over the property. Aside from several tax receipts, the Spouses Po
formally offered as evidence, among others, the Deed of Sale executed by Mariano in Ciriaco's favor, the Deed of Absolute Sale
executed by Ciriaco in their favor, and the Tax Declaration under Victoria's name. Additionally, they also submitted their
Memorandum of Agreement with Ciriaco and the Quitclaim executed by Ciriaco in favor of the Spouses Aboitiz.[167] These
documents were not considered by the land registration court when it issued the title in favor of the Spouses Aboitiz. The Spouses
Po also offered the Application of Original Registration of Title of the Spouses Aboitiz to prove that the Spouses Aboitiz only
submitted to the land registration court the cancelled tax declarations of Ciriaco, instead of the tax declaration of the Spouses Po.
[168]
Thus, the ruling of the land registration court cannot be so conclusive as to deny the Spouses Po the remedy afforded to them by
law. The action for reconveyance allows them to prove their ownership over the property. Hence, they are not precluded from
presenting evidence that is contrary to the findings in the land registration case.
The factual findings of the land registration court are not being questioned. An action for reconveyance based on an implied trust
seeks to compel the registered owner to transfer the property to its true owner.[169] In Hortizuela v. Tagufa:[170]
[A]n 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.[171] (Citations omitted, emphasis supplied)
Likewise in Naval v. Court of Appeals:[172]
Ownership is different from a certificate of title. The fact that petitioner was able to secure a title in her name did not operate to vest
ownership upon her of the subject land. 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 coowned with persons not named in the certificate, or that it may be
held in trust for another person by the registered owner.
As correctly held by the Court of Appeals, notwithstanding the indefeasibility of the Torrens title, the registered owner may still be
compelled to reconvey the registered property to its true owners. The rationale for the rule is that reconveyance does not set aside
or re-subject to review the findings of fact of the Bureau of Lands. In an action for reconveyance, the decree of registration is
respected as incontrovertible. What is sought instead is the transfer of the property or its title which has been wrongfully or
erroneously registered in another person's name, to its rightful or legal owner, or to the one with a better right.[173] (Citations
omitted, emphasis supplied)
The rationale for allowing reconveyance despite the finality of the registration is that the issuance of a certificate of title does not
create or vest ownership to a person over the property.[174] Registration under the Torrens system "is not a mode of acquiring
ownership."[175] A certificate is only a proof of ownership.[176] Thus, its issuance does not foreclose the possibility of having a
different owner, and it cannot be used against the true owner as a shield for fraud.[177]
In an action for reconveyance, the parties are obliged to prove their ownership over the property. Necessarily, the parties may
present evidence to support their claims. The court must weigh these pieces of evidence and decide who between the parties the
true owner is. Therefore, it cannot be bound simply by the factual findings of the land registration court alone.
An exception to this rule is if the party claiming ownership has alreadfs had the opportunity to prove his or her claim in the land
registration case.[178] In such a case, res judicata will then apply.[179] When an issue of ownership has been raised in the land
registration proceedings where the adverse party was given full opportunity to present his or her claim, the findings in the land
registration case will constitute a bar from any other claim of the adverse party on the property.[180]
However, this is not the circumstance in the case at bar. The Spouses Po were not able to prove their claim in the registration
proceedings. Thus, res judicata cannot apply to their action for reconveyance.
The Spouses Aboitiz posit that the Deed of Absolute Sale between Ciriaco and the Spouses Po is fake and fraudulent.[181] They
argue that this is evidenced by certifications of the document's non-existence in the notarial books and the Spouses Po's failure to
enforce their rights over the property until 18 years later.[182] They also claim that the Deed of Absolute Sale is inadmissible as no
documentary stamp was paid and affixed.[183]
This Court notes that the Spouses Aboitiz are raising questions of fact which are not within the scope of a review on certiorari under
Rule 45 of the Rules of Court.[184] An appeal under Rule 45 must raise only questions of law, unless the factual findings are not
supported by evidence or the judgment is based on a misapprehension of facts.[185] Absent these exceptions, the factual findings
of the lower courts are accorded respect and are beyond the review ofthis Court.[186]
The Spouses Aboitiz failed to prove that these exceptions exist in the case at bar. The Regional Trial Court lent credence to
documents presented by the Spouses Po, Peter's testimony about Mariano's sale of the property to Ciriaco,[187] Ciriaco's sale of
the property to the Spouses Po, and the issuance of a Tax Declaration in the name ofVictoria.[188]
During trial, Peter also testified that after they bought the land, they had a caretaker who cultivated the property by planting fruit
trees.[189] He claimed that when they subsequently discovered the quitclaim executed by Ciriaco in favor of the Spouses Aboitiz,
they executed a Memorandum of Agreement to protect their interests in the property.[190] He stated that they filed a complaint in
the barangay when the Spouses Aboitiz started cutting down their improvements and that they subsequently discovered that Ciriaco
was forced by the Mariano Heirs to sell the property to the Spouses Aboitiz.[191]
The Spouses Aboitiz presented as their first witness Armando Avenido, who testified according to the records only.[192] He claimed
that he was familiar with the land which was being developed by Aboitiz Land. He testified that Roberto acquired the land through
separate Deeds of Sale from the Mariano Heirs, had the tax declaration transferred in his name, paid the taxes on the property,
applied for the property's registration, and developed the property into a subdivision.[193] During cross-examination it was revealed
that the tax declaration of the Spouses Po was issued before the tax declaration of the Spouses Aboitiz and that the Spouses Po
acquired from Ciriaco the entire land, while the Spouses Aboitiz purchased only one-fifth (1/5) of the property.[194]
The Spouses Aboitiz's second witness, Bienvenido Escoton, testified that he was a mason working in the subdivision on the road lot
and that he knew no person claiming ownership of the land since 1989.[195]
The Regional Trial Court thus held:

Analyzing the adduced and admitted evidence of both parties, Art. 1544 of the Civil Code cannot be aptly applied in the case at bar,
for reason that only the sale of Ciriaco Seno (Exh. "A" Exh. A/1" Exh. 2"/ A, A-1 and A-2) has the validating elements of sale,
whereas the rest of the Deeds of Sale (Exhs 1 to 5) executed by the Heirs of Mariano Seno in favor of the Defendants are void, for
containing untruthful statements as pleaded and proven. They are no longer the owners of the subject property when they executed
the several Deeds of Conveyance to defendant Roberto Aboitiz.
On the first issue on the identity and location of the land, the sale of Ciriaco Seno to Plaintiffs (Exh. "A") reflected in the Tax
Declarations that the Defendants used in their titling proceeding is the very same lot as certified by the Barangay Captain dated July
28, 1999 under Plaintiff's Request for Admission.
Concerning the second formulated issue, only the Deed of Sale executed by Ciriaco Seno was valid with all the attending requisites
of sale. It was sold by the legitimate owner of the land, Ciriaco Seno to the Plaintiffs. The sale (Exh. A, Exhibit "X") enjoyed
preferential date of execution, being dated or executed in 1978 by the lawful owner Ciriaco Seno who was first to register the sale in
the Registry of Property office, and due to such registration, the Tax Declaration of Ciriaco Seno, was cancelled and a new Tax
Declaration was issued in the name of Victoria Po for as shown in Exh. E the said tax declaration succeeded in canceling the Tax
Declaration of Mariano Seno (Exh. C) and was issued thereafter a Tax Declaration in the name of C[i]riaco Seno (Exh. D). So, when
the latter sold the subject land to plaintiffs in 1978, the same was already owned by C[i]riaco Seno.
When Mariano Seno died in 1982, the subject land owned by C[i]riaco Seno, naturally, is not part of the estate of Mariano Seno, for
at that point in time, the subject land is now owned by plaintiffs Sps. Po, and the same was declared in their names (Exh. "D" "E" &
"E-1").
As to the issue whether defendant Roberto Aboitiz was a purchaser in good faith and for value, the Court holds that defendant
Roberto Aboitiz was not a purchaser in good faith and for value for he was already informed of the ownership of plaintiffs over the
subject land during the conciliation proceedings before the barangay official when plaintiffs filed a barangay case against him.
....
In this case, the Court believes that defendant Roberto Aboitiz is aware of the proprietary rights of the plaintiffs considering the land
was already declared for taxation purposes in plaintiffs' names after the tax declaration of said land, first in the name of Mariano
Seno was cancelled and another one issued in the name of C[i]riaco Seno when the latter bought the said land from his father
Mariano Seno, and after the said tax declaration in the name of C[i]riaco Seno was cancelled and another one issued in the name of
plaintiffs herein.
So, defendant Roberto Aboitiz purchased the subject land from the Heirs of Mariano Seno who are no longer the owners thereof
and the tax declaration of subject land was no longer in the name of Mariano Seno nor in the name of Heirs of Mariano Seno.
The City Assessor of Mandaue City even issued a Certification (Exh. X) to the effect that Tax Declaration No. 0634-A in the name of
Mrs. Victoria Lee Po married to Peter Po was issued prior to the issuance of T.D. No. 1100 in the name of Roberto Aboitiz married
to Maria Cristina Cabarruz.
Buyers of any untitled parcel of land for that matter, to protect their interest, will first verify from the Assessor's Office that status of
said land whether it has clean title or not.[196]
With the exception of its ruling regarding respondents Jose, Ernesto, and Isabel being purchasers in good faith, these factual
findings were affirmed by the Court of Appeals.
Thus, there is no showing that the factual findings are not supported by evidence or that the judgment seems to be based on a
misapprehension of facts. Therefore, the factual findings of the lower courts are binding.
Furthermore, this Court finds that the Spouses Aboitiz failed to prove their claim of fraud. The Spouses Aboitiz attempted to prove
that the Deed of Absolute Sale between Ciriaco and the Spouses Po was fake and fraudulent by presenting certifications of its non-
existence in the notarial books of the notary public who notarized the document.[197]
However, a review of the certifications does not even state that the document does not exist in the notarial books.
The Certification dated April 1, 1997 of the Records Management and Archives Office of the Department of Education, Culture and
Sports states:
This is to certify that per records of this Office, Deed of Sale executed by and between Ciriaco Seno and Victoria Lee known as Doc.
No. 66; Page No. 14; Book No. I; Series of 1978 entered in the Notarial Register of Notary Public Jesus Pono is not among the
documents transferred by the Regional Trial Court of Cebu for safekeeping.[198]
Likewise, the Certification dated April 4, 1997 of the Office of the Clerk of Court of the Regional Trial Court of Cebu, 7th Judicial
Region, Cebu City provides:
This is to certify that as per notarial records on file with this office, available and found as of this date, Atty. Jesus M. Pono had been
issued a Notarial Commission for the term 1978-1979.
It is further certifie[d] that said Notary Public has not submitted his notarial reports for the year 1978-1979 in this office wherein the
Deed of Sale as stated on the letter dated March 31, 1997 designated as Doc. no. 66; Page no. 14; Book No. I and Series of 1978 is
allegedly included.[199] (Emphasis supplied)
These Certifications do not declare that the Deed of Absolute Sale does not exist. They only state that at the time of their issuance,
the Notary Public had not submitted his notarial reports or that the document had not been transferred to the archives for
safekeeping. It cannot logically be concluded from these certifications that the document is inexistent, false, or fraudulent.
In any case, the Notary Public's failure to submit his or her notarial report does not auect the act of notarization.[200]
Rule 132, Section 30 of the Rules of Court provides that:

Section 30. Proof of notarial documents. - Every instrument duly acknowledged or proved and certified as provided by law, may be
presented in evidence without further proof, the certificate of acknowledgment being prima facie evidence of the execution of the
instrument or document involved.
When a private document is notarized, the document is converted to a public document which is presumed regular, admissible in
evidence without need for proof of its authenticity and due execution, and entitled to full faith and credit upon its face.[201]
To overturn the presumption in favor of a notarized document, the party questioning it must present "clear, convincing, and more
than merely preponderant evidence."[202]
Thus, parties who appear before a Notary Public should not be prejudiced by the failure of the Notary Public to follow rules imposed
by the Notarial Law.[203] They are not obliged to ensure that the Notary Public submits his or her notarial reports.[204]
The Spouses Aboitiz failed to present clear and convincing evidence to overturn the presumption. The notarized Deed of Absolute
Sale between Ciriaco and the Spouses Po is, thus, presumed regular and authentic.
Consequently, this Court can affirm the finding that the property was sold to Ciriaco in 1973, and that Ciriaco, as the owner of the
property, had the right to sell it to the Spouses Po. Hence, the lot did not form part of the estate of Mariano, and the Mariano Heirs
did not have the capacity to sell the property to the Spouses Aboitiz later on.
VI
The Spouses Aboitiz argue that the Mariano Heirs are indispensable parties who should have been impleaded in this case.[205]
The Mariano Heirs are not indispensable parties.
Rule 3, Section 7 of the Revised Rules of Court provides:

Section 7. Compulsory Joinder of Indispensable Parties. - Parties in interest without whom no final determination can be had of an
action shall be joined either as plaintiffs or defendants.
An indispensable party is the party whose legal presence in the proceeding is so necessary that "the action cannot be finally
determined" without him or her because his or her interests in the matter and in the relief "are so bound up with that of the other
parties."[206]
The property owners against whom the action for reconveyance is filed are indispensable parties.[207] No relief can be had, and the
court cannot render a valid judgment, without them.[208] The property has been sold to respondents Jose, Ernesto, and Isabel.[209]
Thus, they are indispensable parties.
However, the seller of the property is not an indispensable party.[210] In Spring Homes Subdivision Co., Inc. v. Spouses Tablada,
Jr.:[211]
Similarly, by virtue of the second Deed of Absolute Sale between Spring Homes and the Spouses Lumbres, the Spouses Lumbres
became the absolute and registered owner of the subject property herein. As such, they possess that certain interest in the property
without which, the courts cannot proceed for settled is the doctrine that registered owners of parcels of land whose title is sought to
be nullified should be impleaded as an indispensable party. Spring Homes, however, which has already sold its interests in the
subject land, is no longer regarded as an indispensable party, but is, at best, considered to be a necessary party whose presence is
necessary to acijudicate the whole controversy, but whose interests are so far separable that a final decree can be made in its
absence without affecting it. This is because when Spring Homes sold the property in question to the Spouses Lumbres, it
practically transferred all its interests therein to the said Spouses. In fact, a new title was already issued in the names of the
Spouses Lumbres. As such, Spring Homes no longer stands to be directly benefited or injured by the judgment in the instant suit
regardless of whether the new title registered in the names of the Spouses Lumbres is cancelled in favor of the Spouses Tablada or
not. Thus, contrary to the ruling of the RTC, the failure to summon Spring Homes does not deprive it of jurisdiction over the instant
case for Spring Homes is not an indispensable party.[212] (Citations omitted, emphasis supplied).
The Mariano Heirs, as the alleged sellers of the property, are not indispensable parties. They are at best necessary parties, which
are covered by Rule 3, Section 8 of the Rules of Court:
Section 8. Necessary Party. - A necessary party is one who is not indispensable but who ought to be joined as a party if complete
relief is to be accorded as to those already parties, or for a complete determination or settlement of the claim subject of the action.
Necessary parties may be joined in the case "to adjudicate the whole controversy," but the case may go on without them because a
judgment may be rendered without any effect on their rights and interests.[213]
The Mariano Heirs may likewise be considered material witnesses to the action. A material matter to which a witness can testify on
can be a "main fact which was the subject of the inquiry" or any circumstance or fact "which tends to prove" the fact subject of the
inquiry, "which tends to corroborate or strengthen the testimony relative to such inquiry," and "which legitimately affects the credit of
any witness who testifies."[214]
The validity of the Deeds of Sale allegedly executed by the parties in this case is a material matter in determining who the true
owner of the property is. Thus, the Mariano Heirs, including Ciriaco, may testify as to the Deeds of Sale they executed to prove
which sale is the valid one.
However, it is clear that the Mariano Heirs are not indispensable parties. They have already sold all their interests in the property to
the Spouses Aboitiz. They will no longer be affected, benefited, or injured by any ruling of this Court on the matter, whether it grants
or denies the complaint for reconveyance. The ruling of this Court as to whether the Spouses Po are entitled to reconveyance will
not affect their rights. Their interest has, thus, become separable from that of Jose, Ernesto, and Isabel.
Thus, the Court of Appeals correctly ruled that the Mariano Heirs are not indispensable parties.
VII
Despite these findings, the Spouses Po cannot recover the property. Respondents Jose, Ernesto, and Isabel are innocent
purchasers for value.
An innocent purchaser for value refers to the buyer of the property who pays for its full and fair price without or before
notice of another person's right or interest in it.[215] He or she buys the property believing that "the [seller] [i]s the owner
and could [transfer] the title to the property."[216]
The Spouses Po argue that respondents Jose, Ernesto, and Isabel are not innocent purchasers for value because the tax
declaration over the property has the following annotation:
This tax declaration is also declared in the name of Mrs. Victoria Lee Po, married to Peter Po under tax dec. no. 0634-A so
that one may be considered a duplicate to the other.
However, if a property is registered, the buyer of a parcel of land is not obliged to look beyond the transfer certificate of
title to be considered a purchaser in good faith for value.[217]
Section 44 of Presidential Decree No. 1529[218] states:

Section 44. Statutory liens affecting title. - Every registered owner receiving a certificate of title in pursuance of a decree of
registration, and every subsequent purchaser of registered land taking a certificate of title for value and in good faith, shall
hold the same free from all encumbrances except those noted in said certificate and any of the following encumbrances
which may be subsisting, namely:
First. Liens, claims or rights arising or existing under the laws and Constitution of the Philippines which are not by law
required to appear of record in the Registry of Deeds in order to be valid against subsequent purchasers or
encumbrancers of record.
Second. Unpaid real estate taxes levied and assessed within two years immediately preceding the acquisition of any right
over the land by an innocent purchaser for value, without prejudice to the right of the government to collect taxes payable
before that period from the delinquent taxpayer alone.
Third. Any public highway or private way established or recognized by law, or any government irrigation canal or lateral
thereof, if the certificate of title does not state that the boundaries of such highway or irrigation canal or lateral thereof
have been determined.
Fourth. Any disposition of the property or limitation on the use thereof by virtue of, or pursuant to, Presidential Decree No.
27 or any other law or regulations on agrarian reform. (Emphasis supplied)
In Cruz v. Court of Appeals:[219]
The real purpose of the Torrens system of registration is to quiet title to land and to put a stop to any question of legality
of the title except claims which have been recorded in the certificate of title at the time of registration or which may arise
subsequent thereto. Every registered owner and every subsequent purchaser for value in good faith holds the title to the
property free from all encumbrances except those noted in the certificate. Hence, a purchaser is not required to explore
further what the Torrens title on its face indicates in quest for any hidden defect or inchoate right that may subsequently
defeat his right thereto.
Where innocent third persons, relying on the correctness of the certificate of title thus issued, acquire rights over the
property the court cannot disregard such rights and order the total cancellation of the certificate. The effect of such an
outright cancellation would be to impair public confidence in the certificate of title, for everyone dealing with property
registered under the Torrens system would have to inquire in every instance whether the title has been regularly or
irregularly issued. This is contrary to the evident purpose of the law. 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 behind the
certificate to determine the condition of the property. Even if a decree in a registration proceeding is infected with nullity,
still an innocent purchaser for value relying on a Torrens title issued in pursuance thereof is protected.[220]
The rationale for this rule is the public's interest in sustaining "the indefeasibility of a certificate of title, as evidence of the
lawful ownership of the land or of any encumbrance" on it.[221] In Leong v. See:[222]
The Torrens system was adopted to "obviate possible conflicts of title by giving the public the right to rely upon the face
of the Torrens certificate and to dispense, as a rule, with the necessity of inquiring further."
One need not inquire beyond the four comers of the certificate of title when dealing with registered property...
....
The protection of innocent purchasers in good faith for value grounds on the social interest embedded in the legal concept
granting indefeasibility of titles. Between the third party and the owner, the latter would be more familiar with the history
and status of the titled property. Consequently, an owner would incur less costs to discover alleged invalidities relating to
the property compared to a third party. Such costs are, thus, better borne by the owner to mitigate costs for the economy,
lessen delays in transactions, and achieve a less optimal welfare level for the entire society.[223] (Citations omitted)
Thus, respondents were not obliged to look beyond the title before they purchased the property. They may rely solely on
the face of the title.
The only exception to the rule is when the purchaser has actual knowledge of any defect or other circumstance that would
cause "a reasonably cautious man" to inquire into the title of the seller.[224] If there is anything which arouses suspicion,
the vendee is obliged to investigate beyond the face of the title.[225] Otherwise, the vendee cannot be deemed a purchaser
in good faith entitled to protection under the law.[226]
In this case, there is no showing that respondents Jose, Ernesto, and Isabel had any knowledge of the defect in the title.
Considering that the annotation that the Spouses Po are invoking is found in the tax declaration and not in the title of the
property, respondents Jose, Ernesto, and Isabel cannot be deemed purchasers in bad faith.
WHEREFORE, the Court of Appeals' October 31, 2012 Decision[227] and its June 17, 2013 Resolution[228] in CA-G.R. CV No.
03803 is AFFIRMED.
SO ORDERED.
Carpio, (Chairperson), and Peralta, JJ., concur.
[1] The Petitions were filed under Rule 45 of the Rules of Court.
[2] Rollo (G.R. No. 208450), pp. 42-57-A. The Decision was penned by Associate Justice Edgardo L. Delos Santos and concurred in
by Associate Justices Gabriel T. Ingles and Maria Elisa Sempio Diy of the Special Nineteenth Division, Court of Appeals, Cebu City.
[3] Id. at 60-61. The Resolution was penned by Associate Justice Edgardo L. Delos Santos and concurred in by Associate Justices
Gabriel T. Ingles and Maria Elisa Sempio Diy of the Special Nineteenth Division, Court of Appeals, Cebu City.
[4] Rollo (G.R. No. 208497), pp. 60-71. The Decision, docketed as Civil Case No. MAN-2803, was penned by Presiding Judge Ulric
R. Cañete of Branch 55, Regional Trial Court, Mandaue City.
[5] Rollo (G.R. No. 208450), pp. 55-56.
[6] Id. at 60-61.
[7] Id. at 11-40-A.
[8] Rollo (G.R. No. 208497), pp. 10-27.
[9] Rollo (G.R. No. 208450), p. 43.
[10] Id. at 45.
[11] Id.
[12] Id. at 43.
[13] Id. at 43-44.
[14] Id.
[15] Id. at 44.
[16] Id.
[17] Deceased and survived by his spouse and seven (7) children.
[18] Deceased and survived by his spouse and six (6) children.
[19] Rollo (G.R. No. 208450), p. 43.
[20] Id. at 44.
[21] Id. at 87.
[22] Id. at 44.
[23] Id.
[24] Id.
[25] Id.
[26] Id. at 16, Petition for Review of Spouses Aboitiz.
[27] Id.
[28] Id. at 45.
[29] Id.
[30] Id.
[31] Id.
[32] Id. See rollo, p. 74. Ernesto is married to Maria Isabel Aboitiz.
[33] Id. In the CA Decision and in the Spouses Po's Brief for the Appellee filed with the Court of Appeals, the date of filing of the
complaint is November 19, 1996. See rollo, (G.R. No. 208450), pp. 45 and 193, respectively.
[34] Id. at 42.
[35] Id. at 175.
[36] Id. at 57.
[37] Id. at 48-49.
[38] Id. at 54.
[39] Id. at 49-50.
[40] Id. at 49.
[41] Id. at 51-52.
[42] Id. at 50.
[43] Id. at 55-56.
[44] Id.
[45] Id. at 11-40-A.
[46] Id. at 23.
[47] Id. at 21.
[48] Id. at 23.
[49] Id. at 27-28.
[50] Id.
complaint is November 19, 1996. See rollo, (G.R. No. 208450), pp. 45 and 193, respectively.
[52] Id. at 32.
[53] Id. at 25.
[54] Id. at 29.
[55] Id. at 32.
[56] Id.
[57] Id.
[58] Id. at 34.
[59] Id. at 275-288.
[60] Id. at 282.
[61] Id. at 283-284.
[62] Id. at 284.
[63] Id. at 285.
[64] Id.
[65] Id.
[66] Id. at 287-288.

[67] Id. at 293-307.
[68] Rollo (G.R. No. 208497), p. 18.
[69] Id.
[70] Id. at 86-106.
[71] Id. at 103.
[72] Id. at 134-142, Reply to Respondents' Comment.
[73] Rollo (G.R. No. 208450), p. 20.
[74] Id. at 23.
[75] Id. at 81-85.
[76] Toledo vs. Court of Appeals, G.R. No. 167838, August 5, 2015, 765 SCRA 104, 115 [Per J. Jardeleza, Third Division].
[77] Toledo vs. Court of Appeals, G.R. No. 167838, August 5, 2015, 765 SCRA 104, 115 [Per J. Jardeleza, Third Division].
[78] Rollo (G.R. No. 208450), pp. 81-85.
[79] Id.
[80] Id.
[81] Id.
[82] Id. at 83.
[83] Heirs of Concha, Sr. v. Spouses Lumocso, 564 Phil. 580, 595-597 (2007) [Per C.J. Puno, First Division].
[84] Id. at 596-597.
[85] Rollo (G.R No. 208450), p. 23, Petition.
[86] G.R. No. 167838, August 5, 2015, 765 SCRA 104 [Per J. Jardeleza, Third Division].
[87] Id. at 113-118.
[88] Rollo (G.R. No. 208450), pp. 81-85.
[89] Id. at 27-28.
complaint is November 19, 1996. See rollo, (GR. No. 208450), pp. 45 and 193, respectively.
[91] Amerol v. Bagumbaran, 238 Phil. 397, 409 (1987) [Per J. Sarmiento, Second Division]; Caro v. Court of Appeals, 259 Phil. 891,
898 (1989) [Per J. Medialdea, First Division].
[92] Pres. Decree No. 1529, sec. 53, par. 3 provides:
Section 53. Presentation of Owner's Duplicate Upon Entry ofNew Certificate. - . . .
In all cases of registration procured by fraud, the owner may pursue all his legal and equitable remedies against the parties to such
fraud without prejudice, however, to the rights of any innocent holder for value of a certificate of title. After the entry of the decree of
registration on the original petition or application, any subsequent registration procured by the presentation of a forged duplicate
certificate of title, or a forged deed or other instrument, shall be null and void.
[93] Property Registration Decree (1978).
[94] CIVIL CODE, art. 1456 provides:
Article 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an
[95] CIVIL CODE, art. 1144(2) provides:
Article 1144. The following actions must be brought within ten years from the time the right of action accrues:
....
(2) Upon an obligation created by law[.]
[96] Caro v. Court of Appeals, 259 Phil. 891, 898 (1989) [Per J. Medialdea, First Division].
[98] Salvatierra v. Court of Appeals, 329 Phil. 758, 775 (1996) [Per Hermosisima, Jr., Third Division].
[99] Id.
[100] Id.
[102] Salvatierra v. Court of Appeals, 329 Phil. 758, 775 (1996) [Per Hermosisima, Jr., Third Division].
[103] Id.
[104] Crisostomo v. Garcia, Jr., 516 Phil. 743 (2006) [Per J. Chico-Nazario, First Division].
[105] Id. at 752-753.
[106] Id. at 752.
[107] Crisostomo v. Garcia, Jr., 516 Phil. 743 (2006) [Per J. Chico-Nazario, First Division].
[108] Id. at 746.
[109] Id. at 747.
[110] Id. at 746.
[111] Id. at 752-753.
[112] 170 Phil. 676 (1977) [Per J. Fernandez, First Division].
[113] Id. at 686.
[114] Id.
[115] Id.
[116] Id.
[117] Crisostomo v. Garcia, Jr., 516 Phil. 743, 751-752 (2006) [Per J. Chico-Nazario, First Division].
[118] Id.
[119] Id.
Article 1390. The following contracts are voidable or annullable, even though there may have been no damage to the contracting
parties:
(1) Those where one of the parties is incapable of giving consent to a contract;
(2) Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud. These contracts are binding,
unless they are annulled by a proper action in court. They are susceptible of ratification.
Article 1391. The action for annulment shall be brought within four years. This period shall begin: In cases of intimidation, violence
or undue influence, from the time the defect of the consent ceases. In case of mistake or fraud, from the time of the discovery of the
same.
And when the action refers to contracts entered into by minors or other incapacitated persons, from the time the guardianship
ceases.
[122] Crisostomo v. Garcia, Jr., 516 Phil. 743, 751-752 (2006) [Per J. Chico-Nazario, First Division].
[123] Id. at 752-753.
[124] Rollo (G.R. No. 208450), pp. 29-31, Petition.
[125] Id. at 25.
[126] Id. at 29.
[127] Id. at 30-31.
[128] Ignacio v. Basilio, 418 Phil. 256, 265-266 (2001) [Per J. Quisimbing, Second Division].
[129] Id. at 266.
[130] Id. at 266.
[131] Nielson & Co., Inc. v. Lepanto Consolidated Mining Co., 125 Phil. 204, 219 (1966) [Per J. Zaldivar, En Banc].
[132] Id.
[133] Id.
[134] Id.
[135] Id.
[136] 125 Phil. 204 (1966) [Per J. Zaldivar, En Banc].
[137] Id. at 219.
[138] Pabalate v. Echarri, Jr., 147 Phil. 472, 475 (1971) [Per J. Makalintal, En Banc].
[139] Id.
[140] Rollo (G.R. No. 208450), pp. 48-49.
[141] Rollo (GR. No. 208497), p. 66.
[142] Rollo (GR. No. 208450), p. 44.
[143] Id. at 44.
[144] Id. at 45.
[145] Id. at 44.
[146] Id. at 84.
[147] Id.
[148] Id. at 95.
[149] Id. at 45.
[150] Id. at 25.
[151] Id.
[152] Id. at 26.
[153] Id. at 67.
[154] Id. at 68.
[155] Id. at 69.
[156] Dy v. Yu, G.R. No. 202632, July 8, 2015, 762 SCRA 357, 373 [Per J. Perlas-Bernabe, First Division].
[157] Id.
[158] Id.
[159] Id.
[160] Id.
[161] 301 Phil. 91 (1994) [Per J. Melo, En Banc].
[162] Id. at 103.
[163] 148-A Phil. 454 (1971) [Per J.J.B.L. Reyes, En Banc].
[164] Id. at 460-461. See also Cabanas vs. Register of Deeds, 40 Phil. 620 (1919) [Per J. Torres, First Division]; Dizon vs. Lacap, 50
Phil. 193 (1927) [Per J. Street, Second Division]; Escobar vs. Locsin, 74 Phil. 86 (1943) [Per J. Bocobo, First Division]; Sumira vs.
Vistan, 74 Phil. 138 (1943) [Per J. Moran, First Division]; Palma vs. Cristobal, 77 Phil. 712 (1946) [Per J. Perfecto, En Banc].
[165] 123 Phil. 568 (1966) [Per J.P. Bengzon, En Banc].
[166] Id. at 573-574.
[167] Rollo (G.R. No. 208450), pp. 99-100.
[168] Id. at 102.
[169] Hortizuela v. Tagufa, 754 Phil. 499, 512 (2015) [Per J. Mendoza, Second Division].
[170] 754 Phil. 499 (2015) [Per J. Mendoza, Second Division].
[171] Id. at 507-508.
[172] 518 Phil. 271 (2006) [Per J. Ynares-Santiago, First Division).
[173] Id. at 282-283.
[174] Wee v. Mardo, 735 Phil. 420, 433 (2014) [Per J. Mendoza, Third Division).
[175] Id.
[176] Id.
[177] Id.
[178] Abes v. Rodil, 124 Phil. 243, 248 (1966) [Per J. Sanchez, En Banc].
[179] Id.
[180] Id.
[181] Rollo (G.R. No. 208450), p. 32, Petition for Review.
[182] Id.
[183] Id.
[184] See Fangonil-Herrera v. Fangonil, 558 Phil. 235, 255-257 (2007) [Per J. Chico-Nazario, Third Division], citing Philippine
Airlines, Inc. v. Court of Appeals, 341 Phil. 624 (1997) [Per J. Regalado, Second Division].
Airlines, Inc. v. Court of Appeals, 341 Phil. 624 (1997) [Per J. Regalado, Second Division].
Airlines. Inc. v. Court of Appeals, 274 Phil. 624 (1997) [Per J. Regalado, Second Division].
[187] Rollo (G.R. No. 208497), p. 70.
[188] Id. at 71.
[189] Id. at 66.
[190] Id.
[191] Id.
[192] Id. at 67.
[193] Id.
[194] Id. at 68.
[195] Id.
[196] Id. at 69-71.
[197] Rollo, (G.R. No. 208450), p. 17.
[198] Id. at 92.
[199] Id. at 93.
[200] Destreza v. Riñoza-Plazo, 619 Phil. 775, 782-783 (2009) [Per J. Abad, Second Division].
[201] Heirs of Spouses Liwagon v. Heirs of Spouses Liwagon, G.R. No. 193117, November 26, 2014, 743 SCRA 16, 24 [Per J.
Villarama, Third Division].
[202] Id.
[203] Destreza v. Riñoza-Plazo, 619 Phil. 775, 782-783 (2009) [Per J. Abad, Second Division].
[204] Id.
[205] Rollo (G.R. No. 208450), p. 34.
[206] Lozano v. Ballesteros, 273 Phil. 43, 54 (1991) citing Co v. Intermediate Appellate Court, 245 Phil. 347 (1988) [Per J. Cruz,
First Division].
[207] Id. citing Acting Registrars of Land Titles and Deeds of Pasay City, Pasig and Makati v. Regional Trial Court of Makati, Branch
57, 263 Phil. 568 (1990) [Per J. Sarmiento, En Banc].
[208] Id.
[209] Id.
[210] Spring Homes Subdivision Co., Inc. v. Spouses Tablada, Jr., G.R. No. 200009, January 23, 2017
<http://sc.judiciary.gov.ph/pdf/web/viewer.html?file=/jurisprudence/2017/january2017/200009.pdf> 8-9 [Per J. Peralta, Second
Division].
[211] G.R. No. 200009, January 23, 2017 <http://sc.judiciary.gov.ph/pdf/web/viewer.html?file=/jurisprudence/2017/

january2017/200009.pdf> [Per J. Peralta, Second Division].
[212] Id. at 10-11.
[213] Seno v. Mangubat, 240 Phil. 121, 131 (1987) [Per J. Gancayco, First Division].
[214] U.S. v. Ballena, 18 Phil. 382, 385 (1911) [Per J. Trent, En Banc].
[215] Leong v. See, G.R. No. 194077, December 3, 2014, 743 SCRA 677, 687 [Per J. Leonen, Second Division].
[216] Sandoval v. Court of Appeals, 329 Phil. 48, 62 (1996) [Per J. Romero, Second Division].
[217] Leong v. See, G.R. No. 194077, December 3, 2014, 743 SCRA 677, 688 [Per J. Leonen, Second Division].
[218] Property Registration Decree (1978).
[219] 346 Phil. 506 (1997) [Per J. Belosillo, First Division].
[220] Id. at 511-512.
[221] Claudio v. Spouses Saraza, G.R. No. 213286, August 26, 2015, 768 SCRA 356, 365 [Per J. Mendoza, Second Division], citing
Cavite Development Bank vs. Lim, 381 Phil. 355 (2000) [Per J. Mendoza, Second Division].
[222] G.R. No. 194077, December 3, 2014, 743 SCRA 677, 687 [Per J. Leonen, Second Division].
[223] Id. at 686-688.
[224] Sandoval v. Court of Appeals, 329 Phil. 48, 60 (1996) [Per J. Romero, Second Division].
[225] Id.
[226] Id.
[227] Rollo (G.R. No. 208450), pp. 42-57.
[228] Id. at 60-61.

G.R. No. 222031 November 22, 2017
EMILIO CALMA, Petitioner vs. ATTY. JOSE M. LACHICA, JR.*, Respondent
DECISION
TIJAM, J.:
For Our resolution is a Petition for Review on Certiorari1 under Rule 45, assailing the Decision2 dated April 28, 2015 of the Court of
Appeals (CA) in CA-G.R. CV No. 93329, which reversed and set aside the Decision3 dated January 20, 2009 of the Regional Trial
Court (RTC) of Cabanatuan City, Branch 30 in Civil Case No. 4355.
Factual Antecedents
Respondent Atty. Jose M. Lachica, Jr. filed a complaint for Annulment of Void Deeds of Sale, Annulment of Titles, Reconveyance,
and Damages originally against Ricardo Tolentino (Ricardo) and petitioner Emilio Calma, and later on, Pablo Tumale (Pablo) was
imp leaded as additional defendant in a Second Amended Complaint.4
Subject of the said complaint was a 20,000-square meter parcel of land situated in Sumacabeste, Cabanatuan City covered by
Transfer Certificate of Title (TCT) No. T-28380.5
Respondent, in his complaint, alleged that he was the absolute owner and actual physical possessor of the subject property, having
acquired the same sometime in 1974 for PhP15,000 through sale from Ceferino Tolentino (Ceferino) married to Victoria Calderon,
who are Ricardo's parents. Consequently, the subject property's title was delivered to respondent also in 1974. Allegedly, he and his
tenant/helper Oscar Justo (Oscar) has been in actual physical possession and cultivation of the said land continuously since its
acquisition up to present.6
Unfortunately, however, the 1974 Deed of Sale was allegedly lost. Hence, sometime in 1979, respondent and Ceferino agreed to
execute another deed of sale. Spouses Tolentino allegedly took advantage of the situation and demanded an additional PhP15,000
from respondent to which the latter heeded. Thus, in the new Deed of Sale executed on April 29, 1979, the consideration for the
sale of the subject property was increased to PhP30,000.7
After the notarization of the 1979 Deed of Sale on April 29, 1986, respondent requested Spouses Tolentino to execute an Affidavit of
Non-Tenancy and other documents required by the Department of Agrarian Reform for the transfer of the title in respondent's name.
Again, taking advantage of the situation, Ceferino and his son Ricardo allegedly requested respondent to allow them to cultivate the
5,000-square meter portion of the subject land. The father and son allegedly offered to process the transfer of the title to
respondent's name to persuade the latter to grant their request. According to the respondent, because of the trust, confidence, love,
and respect that his family had for Ceferino's family, he entrusted the notarized Deed of Sale, TCT No. T-28380, and the other
documents on hand for the transfer of the title to his name and waited for the Tolentinos to make good on their promise.8
In the meantime, respondent, through Oscar, allegedly continued to possess the entire subject property.9
Respondent's employment in the government required him to travel to several distant places within the country.10 Hence, on May
25, 1981, before leaving Nueva Ecija again and being assigned to a far-away province, respondent caused the annotation of a
Notice of Adverse Claim on TCT No. T-28380 to protect his claimed rights and interest in the subject property.11
Due to respondent's employment and also because of an illness, he lost contact with the Tolentinos for a long period of time.12
Sometime in March 2001, respondent returned to Cabanatuan City and learned that Ceferino had already passed away. Ricardo, on
the other hand, was nowhere to be located despite efforts to do so.13 He also found Pablo to have been placed in possession of the
5,000-square meter portion of the subject property by the Tolentinos sometime in 1986.14
Upon checking with the Office of the Register of Deeds as regards to the processing of his title over the subject property, he
discovered that the same was transferred under the name of Ricardo, which had been later on transferred to the petitioner upon
Ricardo's sale thereof to the latter. In fine, TCT No. T-28380 under Ceferino's name was cancelled and replaced by TCT No. T-
68769 under Ricardo's name, which was then also cancelled and replaced by TCT No. T-96168 now under petitioner's name.15
Respondent argued that the sale between Ceferino and Ricardo was null and void for being executed with fraud, deceit, breach of
trust, and also for lack of lawful consideration. Respondent emphasized that not only was Ricardo in full knowledge of the sale of the
subject property to him by Ceferino, but also his adverse claim was evidently annotated in the latter's title and carried over to
Ricardo's title. Respondent also alleged that petitioner is an alien, a full-blooded Chinese citizen, hence, not qualified to own lands in
the Philippines, and is likewise a buyer in bad faith.16
Respondent, thus, prayed for the annulment of the Deed of Sale between Ceferino and Ricardo, as well as the Deed of Sale
between Ricardo and petitioner. TCT No. T-68769 under Ricardo's name and TCT No. T- 96168 under petitioner's name were
likewise sought to be annulled. Respondent further prayed for the ejectment of Pablo from the 5,000-square meter portion of the
subject property and the reconveyance of the entire property to him. Exemplary damages, actual damages, litigation expenses and
attorney's fees were also prayed for.17
To prove his case, respondent presented his testimony, the testimonies of Oscar Justo and Herminiano Tinio, Sr., and documentary
evidence comprising of TCT No. T-28380 with the annotation of his Notice of Adverse Claim dated May 25, 1981, the April 29, 1979
Deed of Sale, TCTT- 68769 with the annotation of the same Notice of Adverse Claim and an entry regarding the cancellation thereof
albeit the validity of such cancellation was challenged by the respondent, TCT No. T-96168 dated December 22, 1998, March 6,
1989 Deed of Absolute Sale, which he alleged to be certified copies thereof, and the alleged original copy of the certificate to file
action.18
For their part, defendants before the trial court averred in their Amended Answer19 that petitioner is a buyer in good faith and for
value, having acquired the subject property on July 10, 1998 through sale from Ricardo. They argued, among others, that petitioner,
despite merely relying on the correctness of Ricardo's TCT, is duly protected by the law. It was stated in Ricardo's title that
respondent's adverse claim had already been cancelled more than four years before the sale or on April 26, 1994. Thus, defendants
argued that petitioner had no notice of any defect in Ricardo's title before purchase of the subject property.20
Petitioner presented the July 10, 1998 Deed of Absolute Sale, TCT No. T-68769 with the annotation of the cancellation of
respondent's adverse claim, TCT No. T-96168, to prove good faith in the acquisition of the subject property, and a copy of his
passport, Marriage Certificate, and Certificate of Live Birth to prove his Filipino citizenship, contrary to respondent's allegation.21
The RTC Ruling

The RTC ruled that petitioner is an innocent purchaser for value and that he had already acquired his indefeasible rights over the
title. According to the trial court, while it may be true that respondent's adverse claim was annotated in Ricardo's title, the same title
also shows that such adverse claim had already been cancelled more than four years before he bought the property. Moreover, the
RTC ruled that respondent's cause of action had already prescribed.22 The trial court also noted that respondent failed to present
any evidence on the alleged fraud in the transfer of the title of subject property to petitioner.23
Ricardo was, however, held liable for the value of the property, damages, and attorney's fees in favor of respondent as, according to
the RTC, Ricardo cannot claim good faith because of the existence of the adverse claim.24
Lastly, the RTC ruled that respondent has no recourse against Pablo, who is liable to petitioner as the lawful owner.
The RTC disposed, thus:
WHEREFORE, premises considered, judgment is hereby rendered:
1. In favor of [respondent] and against Defendant Ricardo Tolentino.
The latter is hereby ordered to pay:
a) Forty Thousand Pesos (₱40,000.00), the estimated assessed value of the property formerly covered by TCT No. NT-68769 [sic],
as actual damages;
b) One Hundred Thousand Pesos (₱l00,000.00) as moral damages;
c) Fifty Thousand Pesos (₱50,000.00) as exemplary damages;
d) Eighty Thousand Pesos (₱80,000.00) as attorney's fees and litigation expenses; and
2. Against [respondent] and in favor of the [petitioner] Emilio Calma and Pablo Tumale dismissing this complaint against them.
No evidence having been offered by Defendant's [sic] to prove their Counterclaim, the same is, as it is, DISMISSED.
SO ORDERED.25
Respondent moved for the reconsideration of the said Decision, but the RTC denied the motion on March 24, 2009.26
Thus, respondent appealed before the CA.
The CA Ruling
In its assailed Decision, the CA reversed the RTC's ruling, finding that both Ricardo and petitioner were in bad faith in their
respective acquisitions of the subject property. Hence, both their titles should be annulled. While upholding the RTC's finding that
the registration of title in Ricardo's name was null and void as he had prior knowledge of the sale between his father and
respondent, the CA added that because of such bad faith, Ricardo's title must be annulled. Consequently, as Ricardo had no valid
title to the subject property, he had nothing to convey to petitioner.27
The CA then proceeded to discuss its finding of bad faith against petitioner. The appellate court concluded that the investigation
conducted by petitioner on the title of the subject property before purchase was not sufficient to consider him to be a buyer in good
faith. The CA noted petitioner's knowledge of the annotation of an adverse claim on Ricardo's title and that his act of asking
assurance from Ricardo, the Register of Deeds, and the bank where the subject property was mortgaged prior to the sale to
petitioner cannot be considered as diligent efforts to protect his rights as a buyer.28
The CA explained that petitioner should not have just relied on the face of the title as the notice of adverse claim annotated on
Ceferino's title carried over to Ricardo's title for a total of 13 years before its cancellation should have alerted him to conduct an
actual inspection of the title.29 If only petitioner had conducted an actual inspection of the property, the CA opined, petitioner would
have readily found that Oscar, respondent's alleged tenant, had been occupying and tilling the land.30 Thus, despite the fact that
petitioner registered his acquisition of the subject property, since he was considered to be in bad faith, such registration did not
confer any right upon him.31 Applying the rule on double sale under Article 154432 of the Civil Code, as his registration is deemed
to be no registration at all because of his bad faith, the buyer who took prior possession of the property in good faith shall be
preferred.33
The CA then disposed of the appeal as follows:
WHEREFORE, the appeal is hereby GRANTED. The appealed Decision dated January 20, 2009 of the Regional Trial Court of
Cabanatuan City, Branch 30, in Civil Case No. 4355 for Annulment of Void Deeds of Sale, Cancellation of Titles, Re conveyance,
and Damages is hereby REVERSED and SET ASIDE, and a NEW DECISION is hereby entered to read, thus:
"WHEREFORE, judgment is hereby rendered in favor of [respondent] Atty. Jose M Lachica, Jr. and against x x x Ricardo Tolentino
and [petitioner] Emilio Calma, declaring [respondent} as the rightful owner of the subject land covered under Transfer Certificate of
Title No. T- 96168 of the Registry of Deeds of Cabanatuan City, and ordering:
1) the annulment of the Deed of Sale between Ricardo Tolentino and Ceferino Tolentino;
2) the annulment of the Deed of Absolute Sale between Ricardo Tolentino and Emilio Calma dated July 10, 1998;
3) the Register of Deeds of Cabanatuan City to cancel Transfer Certificate of Title No. T-96168 and to issue a new one in the name
of Jose M Lachica, Jr. married to Warlita Ordonio;
4) x x x Ricardo Tolentino to pay [respondent] Atty. Jose M Lachica, Jr. the amounts of One Hundred Thousand Pesos (₱100,000.
00) as moral damages and Fifty Thousand Pesos (₱50, 000. 00) as exemplary damages, the monetary awards to earn interest at
six percent (6%) per annum from finality of this Decision until fully paid; and
5) costs against x x x Ricardo Tolentino and Emilio Calma."
SO ORDERED.34
Hence, this petition.
The Issue
The resolution of the instant controversy boils down to who between the petitioner and the respondent has better right over the
subject property.
The Ruling of the Court
We rule for the petitioner.
Both the petitioner and the respondent claim ownership over the subject property by virtue of acquisition through sale. To resolve
the present controversy, thus, it is necessary to look into the basis of each party's claimed rights.
Sale from Ceferino to respondent
Respondent's claimed right over the subject property is grounded upon his alleged acquisition of the same from Ceferino by sale.
Both the RTC and the CA were convinced that the sale of the subject property by Ceferino to respondent was valid and as such, the
latter has a valid claim of right over the same. This can be gleaned from the RTC's Decision ordering Ricardo to pay respondent
damages due to the former's bad faith in the acquisition of the subject property, recognizing thus the latter's interest and right over
the same. The CA upheld respondent's rights over the subject property even more by ordering, among others, the cancellation of
petitioner's title and the transfer thereof to respondent's name.
For this matter, thus, We adhere to the general rule of refraining to scrutinize further the factual findings of the trial court as affirmed
by the appellate court.35 Besides, it must be noted that Ricardo did not question the liability imposed against him by the RTC and
the CA anymore as only petitioner came before Us in this petition. Hence, the question as to respondent's right or the lack thereof in
connection with Ricardo's liability cannot be dealt with by this Court. Consequently, We are constrained to uphold respondent's
claimed right over the subject property.
Sale from Ricardo to Petitioner
Petitioner's claimed right over the subject property, on the other hand, is grounded upon his acquisition of the same from Ricardo by
sale. Unlike the sale from Ceferino to respondent, the Deed of Sale in petitioner's favor was registered with the Registry of Deeds,
giving rise to the issuance of a new certificate of title in the name of the petitioner.
However, in ruling that respondent is the rightful owner of the subject property, the CA ruled that no right was conferred upon the
petitioner by such sale primarily due to his predecessor's bad faith in the acquisition of the subject property. The CA also found that
petitioner, like his predecessor, cannot be considered as a buyer in good faith. These findings are grounded on the fact that
respondent's Notice of Adverse Claim appears in Ceferino's title and carried over to Ricardo's title, which according to the CA is
sufficient notice to both Ricardo and the petitioner of respondent's interests over the subject property. The CA opined that such
adverse claim should have alerted petitioner to conduct an actual inspection of the property, otherwise, he cannot be considered to
be a buyer in good faith.
We do not agree.
The Torrens system was adopted to "obviate possible conflicts of title by giving the public the right to rely upon the face of the
Torrens certificate and to dispense, as a rule, with the necessity of inquiring further."36 From this sprung 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.37 To be sure, this Court is not unaware of the
recognized exceptions to this rule, to wit: (1.) when the party has actual knowledge of facts and circumstances that would impel a
reasonably cautious man to make further inquiry; (2.) when the buyer has knowledge of a defect or the lack of title in his vendor;38
or (3.) when the buyer/mortgagee is a bank or an institution of similar nature as they are enjoined to exert a. higher degree of
diligence, care, and prudence than individuals in handling real estate transactions.39
Complementing this doctrinal rule is the concept of an innocent purchaser for value, which refers to someone who buys the property
of another without notice that some other person has a right to or interest in it, and who pays in full and fair the price at the time of
the purchase or without receiving any notice of another person's claim.40
Section 44 of Presidential Decree No. 1529 or the Property Registration Decree41 recognizes innocent purchasers for value and
their right to rely on a clean title:
Section 44. Statutory liens affecting title. - Every registered owner receiving certificate of title in pursuance of a decree of
registration, and every subsequent purchaser of registered land taking a certificate of title for value and good faith, shall hold the
same free from all encumbrances except those noted in said certificate and any of the following encumbrances which may be
subsisting, namely:
First. Liens, claims or rights arising or existing under the laws and Constitution of the Philippines which are not by law required to
appear of record in the Registry of Deeds in order to be valid against subsequent purchasers or encumbrances of record.
Second. Unpaid real estate taxes levied and assessed within two years immediately preceding the acquisition of any right over the
land by an innocent purchaser for value, without prejudice to the right of the government to collect taxes payable before that period
from the delinquent taxpayer alone.
Third. Any public highway or private way established or recognized by law, or any government irrigation canal or lateral thereof, if
the certificate of title does not state that the boundaries of such highway or irrigation canal or lateral thereof have been determined.
Fourth. Any disposition of the property or limitation on the use thereof by virtue of, or pursuant to, Presidential Decree No. 27 or any
other law or regulations on agrarian reform. (emphasis supplied)
Guided by the foregoing, We find that the circumstances obtaining in this case show that petitioner is an innocent purchaser for
value who exercised the necessary diligence in purchasing the property, contrary to the CA's findings.
The following facts are clear and undisputed: (1) petitioner acquired the subject property through sale from Ricardo as evidenced by
a Deed of Absolute Sale dated July 10, 1998, duly notarized on even date; (2) said sale was registered in the Registry of Deeds,
Cabanatuan City on December 22, 1998 as evidenced by TCT No. T-96168; (3) petitioner made inquiries with the Register of Deeds
and the bank where the subject property was mortgaged by Ricardo as regards the authenticity and the status of Ricardo's title
before proceeding with the purchase thereof; and (4) petitioner was able to ascertain that Ricardo's title was clean and free from any
lien and encumbrance as the said title, together with his inquiries, showed that the only annotations in the said title were
respondent's 1981 adverse claim and its cancellation in 1994.
From the foregoing factual backdrop, there was no indicia that could have aroused questions in the petitioner's mind regarding the
title of the subject property. Hence, We do not find any cogent reason not to apply the general rule allowing the petitioner to rely on
the face of the title.
For one, it is clearly manifest in the records that while respondent's adverse claim appears in Ricardo's title, it also appears therein
that the said adverse claim had already been cancelled on April 26, 1994 or more than four years before petitioner puchased the
subject property. As correctly found by the RTC, thus, Ricardo's title is already clean on its face, way before petitioner puchased the
same.
Further, respondent's allegation of fraud and petitioner's knowledge of the transaction between him and Ceferino are not supported
by any evidence except bare allegations. It is basic that an allegation of fraud must be substantiated.42 Section 543 , Rule 8
provides that in all averments of fraud, the circumstances constituting the same must be stated with particularity. Moreover, fraud is
a question of fact which must be proved by clear and convincing evidence.44
At any rate, contrary to the CA's ruling, petitioner was never remiss in his duty of ensuring that the property that he was going to
purchase had a clean title. Despite Ricardo's title being clean on its face, petitioner still conducted an investigation of his own by
proceeding to the Register of Deeds, as well as to the bank where said title was mortgaged, to check on the authenticity and the
status of the title. Thus, petitioner was proven to be in good faith when he dealt with Ricardo and relied on the title presented and
authenticated to him by the Register of Deeds and confirmed by the mortgagee-bank. Respondent, on the other hand, failed to
proffer evidence to prove otherwise.
Notably, the CA's conclusions to the contrary are merely based on assumptions and conjectures, such as that the bank's advice for
petitioner to buy the subject property was meant only for the protection of the bank's interest; and that the annotation of the adverse
claim on Ceferino's title and carried over to Ricardo's title for a total of 13 years before it was cancelled should have aroused
suspicion.45 These conclusions have no factual or legal basis. What is essential on the matter of petitioner's good faith in the
acquisition of the subject property is the cancellation of such adverse claim, which clearly appears on the face of Ricardo's title.
As the fact that petitioner is an innocent purchaser for value had been established, the validity and efficacy of the registration, as
well as the cancellation, of respondent's adverse claim is immaterial in this case. What matters is that the petitioner had no
knowledge of any defect in the title of the property that he was going to purchase and that the same was clean and free of any lien
and encumbrance on its face by virtue of the entry on the cancellation of adverse claim therein. Thus, petitioner may safely rely on
the correctness of the entries in the title.
Even the defect in Ricardo's title due to his bad faith in the acquisition of the subject property, as found by both the RTC and the CA,
should not affect petitioner's rights as an innocent purchaser for value. The CA patently erred in ruling that since Ricardo had no
valid title on the subject property due to his bad faith, he had nothing to convey to the petitioner. It is settled that a defective title may
still be the source of a completely legal and valid title in the hands of an innocent purchaser for value.46
Petitioner has a better

right of ownership over
the subject property
Applying now the rule on double sale under Article 1544 of the Civil Code, petitioner's right as an innocent purchaser for value who
was able to register his acquisition of the subject property should prevail over the unregistered sale of the same to the respondent.
Article 1544 states:
If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first
taken possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the
Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the
absence thereof, to the person who presents the oldest title, provided there is good faith. (emphasis supplied)
With that, We find no necessity to belabor on the other issues raised in the petition.
WHEREFORE, premises considered, the Decision dated April 28, 2015 of the Court of Appeals is REVERSED and SET ASIDE.
Accordingly, the Decision dated January 20, 2009 of the Regional Trial Court of Cabanatuan City, Branch 30, is hereby
REINSTATED.
SO ORDERED.
Footnotes
1 Rollo, pp.53-93.
2 Penned by CA Associate Justice Victoria Isabel A. Paredes with Justices Isaias P. Dicdican and Elihu A. Ybanez concurring.; id.
at 117-130.
3 Penned by Judge Virgilio G. Caballero; id. at 97-115.
4 Id. at 172-181.
5 Id. at 98-99.
6 Id.
7 Id. at 99.
8 Id.
9 Id.
10 Id.
11 Id. at 293.
12 Id. at 99.
13 Id.
14 Id. at 61.
15 Id. at 99-100.
16 Id. at 100.
17 Id. at 179-180.
18 Id. at 256-260.
19 Id. at 183-191.
20 Id. at 100.
21 Id. at 64, 66, and 68-69.
22 Id. at 113.
23 Id. at 114.
24 Id.
25 Id. at 114-115.
26 Id. at 120.
27 Id. at 122.
28 Id. at 123.
29 Id. at 124.
30 Id. at 125.
31 Id. at 122.
32 Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who
may have first taken possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the
Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the
absence thereof, to the person who presents the oldest title, provided there is good faith.
33 Rollo, p. 122.
34 Id. at 128-129.
35 Gepulle-Garbo v. Spouses Garbato, 750 Phil. 846, 855 (2015).
36 Leong, et al. v. See, 749 Phil. 314, 323 (2014).
37 Locsin v. Hizon, et al., 743 Phil. 420, 429-430 (2014).
38 Id. at 430.
39 Arguelles, et al. v. Malarayat Rural Bank, Inc., 730 Phil. 226, 237 (2014).
40 Leong, et al. v. See, supra note 36, at 324-325.
41 Effective June 11, 1978.
42 Leong, et al. v. See, supra note 36, at 328.
43 SEC. 5. Fraud, mistake, condition of the mind. - In all averments of fraud or mistake, the circumstances constituting fraud or
mistake must be stated with particularity. Malice intent, knowledge or other condition of the mind of a person may be averred
generally.
44 ECE Realty and Development, Inc. v. Mandap, 742 Phil. 164, 170 (2014).
45 Rollo, pp. 124.
46 Leong, et al. v. See, supra note 36, at 328.

G.R. No. 174004 October 9, 2013
VIRGILIO G. CAGATAO, Petitioner,

vs.
GUILLERMO ALMONTE, ARTHUR AGUILAR, SPS. ERNESTO FERNANDEZ AND AVELINA FERNANDEZ, MARVIN JOHN
FERNANDEZ, MARSON FERNANDEZ, and MARJUN FERNANDEZ, Respondents.
DECISION
MENDOZA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the 1997 Revised Rules of Civil Procedure assailing the March
9, 2006 Amended Decision1 and the August 7, 2006 Resolution2 of the Court of Appeals (CA), in CA-G.R. CV No. 72094, modifying
the June 22, 2001 Decision3 of the Regional Trial Court, Branch 24, Echague, Isabela (RTC), in Civil Case No. Br. 24-0458, an
action for annulment of sale, cancellation of title and damages.
The facts
This case stemmed from an action for annulment of deeds of sale, cancellation of title and damages filed on April 18, 1996 by
petitioner Virgilio G. Cagatao (Cagatao) against respondents Guillermo Almonte (Almonte), Arthur Aguilar (Aguilar), Spouses
Ernesto and Avelina Fernandez (Spouses Fernandez), and Marvin John Fernandez, Marson Fernandez and Marjun Fernandez
(collectively the Fernandez Siblings).4
On February 16, 1949, a homestead patent over the property subject of this controversy (Lot No. 5598, Pls-67) was issued in favor
of Juan Gatchalian.5 Cagatao claimed that sometime in 1940, Gatchalian sold the lotto Delfin Manzulin (Manzulin) in exchange for
one carabao, as embodied ina barter agreement which was unfortunately destroyed or lost during the Second World War.6 In 1990,
Manzulin allegedly executed a private written document in the Ilocano dialect, transferring ownership over the property to his son-in-
law, Cagatao.7 The latter then occupied and cultivated the land until the Fernandez Siblings attempted to take possession of the lot,
thereby prompting him to file the subject complaint before the RTC.8
The respondents, on the other hand, contended that on April 3, 1993,the Spouses Fernandez purchased the property from Almonte
and Aguilar who had in their possession a tax declaration covering the said land.9 To protect their interest, on January 17, 1996,
Spouses Fernandez once again bought the same property for ₱220,000.00 from Emmaculada Carlos (Carlos), believed to be the
owner of the lot by virtue of Transfer Certificate of Title (TCT) No. T-12159-A, a reconstituted title in her name.10 The former, in turn,
executed a deed of sale, dated January 22, 1996, in favor of their children, the Fernandez Siblings, resulting in the issuance of TCT
No.T-249437 in their names.11
In his Memorandum before the RTC, Cagatao questioned the sale to Spouses Fernandez by Carlos because, at that time, Manzulin
was already the owner of the subject property. He also pointed out that it was highly irregular that Spouses Fernandez would buy
the same property from two different vendors on two different occasions. Apart from these anomalous transactions, Cagatao
insisted that TCT No. T-249437 in the name of the Fernandez Siblings was a nullity because the sale from the Spouses Fernandez
was simulated, as testified to by Avelina Fernandez (Fernandez) who confirmed that she and her husband did not sign the deed of
sale purporting to have transferred ownership of the property to the Fernandez Siblings.12
The respondents claimed that Cagatao was unable to present proof of title or any public document embodying the sale of the
property from Gatchalian to Manzulin and from the latter to Cagatao. They also argued that even if a homestead patent was indeed
issued to Gatchalian, the same became void when he (Gatchalian) did not occupy the land himself, in violation of Commonwealth
Act No. 141 (Public Land Act of 1936).13
Pending litigation, the RTC issued a writ of preliminary injunction restraining the respondents from disturbing Cagatao’s possession
of the land in question during the pendency of the case.14 In its Decision, dated June 22,2001, however, the RTC ruled that
Cagatao’s evidence was insufficient to prove his ownership over the land in question because Manzulin never acquired a lawful title
to the property from his predecessor, Gatchalian. The court explained that the transfer to Manzulin was null and void because it
failed to comply with Section 2015 of Commonwealth Act No. 141. As to the supposed conveyance of the lot from Manzulin to
Cagatao, it could not have been valid because the document alleged to be a deed of sale was a private document which did not
conclusively establish his (Cagatao’s) right to the property because of the requirement in contract law that the transmission of rights
over an immovable property must be contained in a public document.
The RTC, after noting that Cagatao had no valid title, ruled that his claim of possession could not prevail over the claim of ownership
by Spouses Fernandez as evidenced by a certificate of title. Accordingly, it upheld the validity of the deed of sale, dated January 17,
1996, between Spouses Fernandez and Carlos. It, however, nullified the transfer from Spouses Fernandez to Fernandez Siblings
because Avelina herself admitted that she and her husband never signed the deed of sale which transferred ownership to their
children. Finally, the RTC sustained the validity of TCT No. T-12159-A in the name of Carlos, theorizing that someone must have
applied for an original certificate of title from which the said title was derived.16 Thus, the RTC disposed:
1. the dismissal of the plaintiff’s [Cagatao’s] Complaint;
2. the Cancellation and setting aside of the writ of preliminary injunction;
3. the Register of Deeds to cancel Transfer Certificate of Title No. T-249437 issued in favor of Marvin, Marson and Marjun, all
surnamed Fernandez, the Deed of Sale (Exhibit "C") dated January 22, 1996 being null and void; and
4. declaring the Deed of Sale (Exhibit "2") dated January 17, 1996 in favor of Sps. Avelina M. Fernandez and Ernesto S. Fernandez
and TCT No. T-12159-A registered in the name of Emmaculada G. Carlos as valid and binding.
SO ORDERED.17
Aggrieved, Cagatao elevated the case to the CA. On July 29, 2005, the CA partly granted his petition and modified the decision of
the RTC. The CA deemed as speculative and without legal basis18 the trial court’s conclusion that Gatchalian might have
abandoned his homestead patent, leaving it open for another person to apply for a patent and secure an original certificate of title
from which TCT No. T-12159-A in the name of Carlos originated. In other words, the ownership of the land remained with
Gatchalian by virtue of the homestead patent in his name, and neither the alleged transfer to Manzulin nor the theory of
abandonment of the RTC could divest him of said title.
In addition, the CA took note of Entry No. 7259 in the memorandum of encumbrances at the dorsal side of TCT No. T-12159-A,
which disclosed the existence of another deed of sale entered into by Carlos and the respondents on January 17, 1979. Holding that
the two sales could not overlap, it invalidated the January 17, 1996 deed of sale between Carlos and Spouses Fernandez. It also
considered as void the sale of the same property by Almonte to Spouses Fernandez and observed that neither the latter nor the
Fernandez siblings invoked this transaction as the basis of their claim.
Although the CA declared that Cagatao’s claim of ownership could not be recognized, it nevertheless ruled that his possession
could not be disturbed because only the true owner could challenge him for possession of the subject property. Leaving the parties
where it found them, the CA disposed:
1) the Register of Deeds is ORDERED TO CANCEL Transfer Certificate of Title No. 249437 issued in favor of Marvin, Marsonand
Marjun, all surnamed Fernandez; 2) the Deed of Sale dated January 17, 1996 between Emmaculada Carlos and the Fernandez
spouses is declared NULL and VOID; 3) the Deed of Sale dated January 22, 1996 between defendants-appellees Fernandez
siblings and the Fernandez spouses is DECLARED NULL and VOID; 4) the Deed of Sale dated April 3, 1993 between the
Fernandez spouses and Guillermo Almonte and Arthur Aguilar is likewise DECLAREDNULL and VOID; 5) the verbal sale between
Delfin Manzulin and plaintiff-appellant is DECLARED NULL and VOID. The Writ of Preliminary Injunction against defendants-
appellants Fernandez siblings is made PERMANENT.19
The respondents moved for a reconsideration of the CA decision on August 24, 2005. On March 9, 2006, the CA rendered the
questioned Amended Decision, reversing itself when it ruled that the deed of sale between Carlos and Spouses Fernandez could
not be declared null and void, especially because Carlos was not impleaded as a party in the case. It, however, stressed that
Cagatao’s possession of the subject property should be respected. Any party, including the respondents, who would like to assert
their claim of ownership or a better right over the lot should assert their right in an appropriate action in court against him.
Not in conformity, Cagatao moved for reconsideration but the motion was denied by the CA in its Resolution, dated August 7,
2006.20
Hence, this petition.
The Issues
In his petition, Cagatao raises the following issues:
I. WHETHER OR NOT THE COURT OF APPEALS ERREDIN NOT RULING THAT THE RECONSTITUTED TCT NO.12159-A IN
THE NAME OF EMMACULADA CARLOS IS VOID.
II. WHETHER OR NOT THE COURT OF APPEALS ERREDIN NOT RULING THAT HOMESTEAD TITLE HOLDERJUAN
GATCHALIAN AND THE PETITIONER AS HISSUCCESSORS-IN-INTEREST ARE THE TRUE OWNERSOF THE SUBJECT
PROPERTY.
III. WHETHER OR NOT THE COURT OF APPEALS ERREDIN RENDERING THE CHALLENGED AMENDEDDECISION BY
DELETING FROM THE DISPOSITIVEPORTION OF THE ORIGINAL DECISION ITS RULINGTHAT THE DEED OF SALE
BETWEEN EMMACULADACARLOS AND RESPONDENTS SPOUSES FERNANDEZOVER THE SUBJECT PROPERTY IS
VOID.21
The Court’s Ruling
Cagatao’s entire petition revolves around the assertion that the reconstituted TCT No. 12159-A in the name of Carlos was a fake
and should have been declared void. This claim is based on the existence of an allegedly falsified annotation (Entry No. 7259), the
speculative nature of the RTC’s declaration that the said title appeared valid, and the fact that the respondents were not able to
present an affidavit of loss or any proof of judicial reconstitution.22
The Court cannot accommodate the petitioner.
The validity of TCT No. 12159-A

cannot be attacked collaterally;
Carlos is an indispensable party
From the arguments of Cagatao, it is clear that he is assailing the validity of the title of Carlos over the land in question. Section 48
of P.D. No. 1529 clearly states that "a certificate of title shall not be subject to collateral attack. It cannot be altered, modified, or
cancelled except in a direct proceeding in accordance with law." An attack on the validity of the title is considered to be a collateral
attack when, in an action to obtain a different relief and as an incident of the said action, an attack is made against the judgment
granting the title.23 Cagatao’s original complaint before the RTC was for the cancellation of TCT No. T-249437 in the name of the
Fernandez Siblings and the nullification of the deeds of sale between the Fernandez Siblings and Spouses Fernandez, and the
earlier one between the latter and Almonte and Aguilar. Nowhere in his complaint did Cagatao mention that he sought to invalidate
TCT No. 12159-A.1âwphi1 It was only during the course of the proceedings, when Spouses Fernandez disclosed that they had
purchased the property from Carlos, that Cagatao thought of questioning the validity of TCT No. 12159-A.
Although the CA correctly ruled that the transfer from Gatchalian to Manzulin was invalid, the existence of a valid Torrens title in the
name of Carlos which has remained unchallenged before the proper courts has made irrelevant the issue of whether Gatchalian and
his successors-in-interest should have retained ownership over the property. This is pursuant to the principle that a Torrens title is
irrevocable and its validity can only be challenged in a direct proceeding. The purpose of adopting a Torrens System in our
jurisdiction is to guarantee the integrity of land titles and to protect their indefeasibility once the claim of ownership is established
and recognized. This is to avoid any possible conflicts of title that may arise by giving the public the right to rely upon the face of the
Torrens title and dispense with the need of inquiring further as to the ownership of the property.24 Hence, a Torrens certificate of
title is indefeasible and binding upon the whole world unless it is nullified by a court of competent jurisdiction in a direct proceeding
for cancellation of title.25
Moreover, Carlos, as the registered owner of the lot whose title Cagatao seeks to nullify, should have been impleaded as an
indispensable party. Section 7, Rule 3 of the 1997 Rules of Civil Procedure defines indispensable parties to be "parties in interest
without whom no final determination can be had of an action." It is clear in this case that Cagatao failed to include Carlos in his
action for the annulment of TCT No. 12159-A.Basic is the rule in procedural law that no man can be affected by any proceeding to
which he is a stranger and strangers to a case cannot be bound by a judgment rendered by the court.26 It would be the height of
injustice to entertain an action for the annulment of Carlos’ title without giving her the opportunity to present evidence to support her
claim of ownership through title. In addition, it is without question a violation of the constitutional guarantee that no person shall be
deprived of property without due process of law.27
Thus, should Cagatao wish to question the ownership of the subject lot of Carlos and Spouses Fernandez, he should institute a
direct action before the proper courts for the cancellation or modification of the titles in the name of the latter two. He cannot do so
now because it is tantamount to a collateral attack on Carlos’ title, which is expressly prohibited by law and jurisprudence.
Deed of sale between Carlos and

Spouses Fernandez is presumed valid
The CA did not err in amending its decision and recognizing the validity of the sale between Spouses Fernandez and
Carlos. Time and again, the Court has repeatedly ruled that a person dealing with a registered land has the right to rely on
the face of the Torrens title and need not inquire further, unless the party concerned has actual knowledge of facts and
circumstances that would impel a reasonably cautious man to make such an inquiry. The indefeasibility of a Torrens title
as evidence of lawful ownership of the property protects buyers in good faith who rely on what appears on the face of the
said certificate of title. Moreover, a potential buyer is charged with notice of only the burdens and claims annotated on the
title.28 As explained in Sandoval v. Court of Appeals,29
. . . 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
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.30
In this case, there has been no showing that Spouses Fernandez were aware of any irregularity in Carlos’ title that would
make them suspicious and cause them to doubt the legitimacy of Carlos’ claim of ownership, especially because there
were no encumbrances annotated on Carlos’ title. At any rate, that is the proper subject of another action initiated for the
purpose of questioning Carlos’ certificate of title from which Spouses Fernandez derived their ownership because,
otherwise, the title of Spouses Fernandez would become indefeasible. The reason for this is extensively explained in
Tenio-Obsequio v. Court of Appeals:31
The Torrens system was adopted in this country because it was believed to be the most effective measure to guarantee
the integrity of land titles and to protect their indefeasibility once the claim of ownership is established and recognized. If a
person purchases a piece of land on the assurance that the seller's title thereto is valid, he should not run the risk of being
told later that his acquisition was ineffectual after all. This would not only be unfair to him. What is worse is that if this
were permitted, public confidence in the system would be eroded and land transactions would have to be attended by
complicated and not necessarily conclusive investigations and proof of ownership. The further consequence would be
that land conflicts could be even more numerous and complex than they are now and possibly also more abrasive, if not
even violent. The Government, recognizing the worthy purposes of the Torrens system, should be the first to accept the
validity of titles issued thereunder once the conditions laid down by the law are satisfied.32
While the Court finds that the validity of TCT No. 12159-A cannot be attacked collaterally and that Cagatao had not
sufficiently established his claim of ownership over the subject prope1iy, it agrees with the CA that he, the current
possessor, shall remain to be so until such time that his possession is successfully contested by a person with a better
right.
WHEREFORE, the petition is DENIED.
SO ORDERED.
JOSE CATRAL MENDOZA

Associate Justice
WE CONCUR:
PRESBITERO J. VELASCO, JR.

Associate Justice
Chairperson
DIOSDADO M. PERALTA
Associate Justice ROBERTO A. ABAD
Associate Justice
MARVIC MARIO VICTOR F. LEONEN
Associate Justice
ATTESTATION
I attest that the conclusions in the above Decision had beet reached in consultation before the case was assigned to the writer of the
opinion of the Court's Division.
PRESBITERO J. VELASCO, JR.

Associate Justice
Chairperson, Third Division
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I certify that the conclusions in the
above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.
MARIA LOURDES P. A. SERENO

Chief Justice
Footnotes
1 Rollo. pp. 42-46.

2 Id. at 47-48.
3 Id. at 182-193; penned by Judge Bonifacio T. Ong.
4 Id. at 11.
5 Id. at 252.
6 Id. at 350.
7 Id. at 253.
8 Id.
9 Id. at 254.
10 Id.
11 Id. at 258.
12 Id. at 254.
13 Id. at 255.
14 Id. at 184.
15 SECTION 20. If at any time after the approval of the application and before the patent is issued, the applicant shall prove to the
satisfaction of the Director of Lands that he has complied with all the requirements of the law, but cannot continue with his
homestead, through no fault of his own, and there is a bona fide purchaser for the rights and improvements of the applicant on the
land, and that the conveyance is not made for purposes of speculation, then the applicant, with the previous approval of the Director
of Lands may transfer his rights to the land and improvements to any person legally qualified to apply for a homestead, and
immediately after such transfer, the purchaser shall file a homestead application for the land so acquired and shall succeed the
original homesteader in his rights and obligations beginning with the date of the approval of said application of the purchaser. Any
person who has so transferred his rights may not again apply for a new homestead. Every transfer made without the previous
approval of the Director of Lands shall be null and void and shall result in the cancellation of the entry and the refusal of the patent.
16 Rollo, pp. 190-192.
17 Id. at 193.
18 Id. at 259.
19 Id. at 263-264.
20 Id. at 47-48.
21 Id. at 362.
22 Id. at 363-365.
23 Casimiro Development Corporation v. Mateo, G.R. No. 175485, July 27, 2011, 654 SCRA 676.
24 Id.
25 Co v. Militar, 466 Phil. 217, 224 (2004).
26 Atilano II v. Asaali, G.R. No. 174982, September 10, 2012.
27 National Housing Authority v. Evangelista, 497 Phil 762, 771 (2005).
28 Clemente v. Razo, 493 Phil. 119, 128 (2005).
29 329 Phil. 48, 60-61 (1996)
30 Id.
31 G.R. No. 107967, March 1, 1994, 230 SCRA 550.
32 Id.
G.R. No. 211845 August 9, 2017
PEN DEVELOPMENT CORPORATION and LAS BRISAS RESORT CORPORATION, Petitioners, vs. MARTINEZ LEYBA, INC.,,
Respondent
DECISION
DEL CASTILLO, J.:
Assailed in this Petition for Review on Certiorari1 are the July 17, 2013 Decision2 of the Court of Appeals (CA) in CA-G.R. CV No.
97478 which affirmed with modification the January 20, 2009 Decision3 of the Regional Trial Court of Antipolo City, Branch 71
(RTC) in Civil Case No. 97-4386, and the CA's March 28, 2014 Resolution4 denying herein petitioners' Motion for Reconsideration.
Factual Antecedents
As found by the CA, the facts are as follows:
Plaintiff-Appellee Martinez Leyba, Inc. (hereafter Martinez) is a corporation organized and existing under Philippine laws and the
registered owner of three (3) contiguous parcels of land situated in Antipolo, Rizal, surveyed and identified as Lot Nos. 29, 30 and
31, Block 3, (LRC) Pcs-7305 and registered under Transfer Certificate of Title Nos. 250212, 25044 and 250243, respectively, with
the Register of Deeds of Rizal.
Defendants-Appellants Pen Development Corporation and Las Brisas Resorts Corporation are also domestic corporations duly
organized and existing under Philippine laws. Appellants, facreafter, merged into one corporate entity under the name Las Brisas
Resmis Corporation (hereafter Las Brisas). Las Brisas is the registered owner of a parcel of land under TCT No. 153101 which is
situated adjacent to the lMds owned by Martinez. Las Brisas occupied the said land in 1967 and fenced the same.
In l 968, Martinez noticed that the construction of Las Brisas' fence seemed to encroach on its land. Upon verification by surveyors,
Martinez was informed that the fence of Las Brisas overlaps its property. On 11 March 1968, Martinez sent a Letter informing Las
Brisas that the fence it constructed encroaches [sic] on Martinez's land and requested Las Brisas to refrain from further intruding on
the same. Las Brisa5 did not respond to Martinez's letter and continued developing its land.
Martinez sent two (2) more Letters dated 31 March 1970 and 3 November 1970 to Las Brisas informing the latter of the
encroachment of its structures and improvements over Martinez's titled land.
On 31 July 1971, Las Brisas, through a certain Paul Naidas, sent a letter to Martinez, claiming that it 'can not [sic] trace the origin of
these titles' (pertaining to Martinez's land).
Martinez sent two (2) Letters to Las Bdsas reiterating its ownership over the land that Las Brisas' improvements h.ave encroached
upon. Despite the notices, Las Brisas continued developing its property.
Martinez sought the services of a licensed geodetic engineer to survey the boundaries of its land. The verification survey plan
Vs.,Q4,Q0034, which was approved by the Regional Technical Director for Lands of the Department of Environment and Natural
Resources (DENR), revealed that the building and improvements constructed by Las Brisas occupied portions of Martinez's lands:
567 square meters of Lot No. 29, Block 3, (LRC) Pcs. 7305; a portion of 1,389 square meters of Lot No. 30, Block 3, (LRC) Pcs.
On 24 November 1994, Martinez sent a letter to Las Brisas demanding the latter to cease and desist from unlawfully holding
portions of Martinez's land occupied by Las Brisas structures and improvements. Despite the said demand, no action was taken by
Las Brisa.
On 24 March 1997, Martinez filed a Complaint for Quieting of Title, Cancellation of Title and Recovery of Ownership with Damages
against Las Brisas before the Regional Trial Court of Antipolo City, docketed as Civil Case No. 97-4386. The case was raffled to,
and heard by, Branch 71 thereof x x x.
In its Answer, Las Brisas denied that it encroached on Martinez's land and that it constructed the Las Brisas Resort Complex within
the land covered by TCT No. 153101.6
its Complaint,7 Martinez added that Transfer Certificate of Title (TCT) Nos. 250242, 250244 and 250243 (or the Martinez titles -
totaling 9,796 square meters )8 emanated from Decree No. 1921 issued by the General Land Registration Office pursuant to Land
Registration Case No. 3296, which was transcribed as Original Certificate of Title (OCT) No. 756 by the Register of Deeds of Rizal
on August 14, 1915; that Las Brisas "constructed a riprapping on the northern portion of Lot No. 29, a building straddling Lots 30
and 31, and are now constructing a new building on Lot No. 31,"9 which acts constitute an encroachment on lands covered by the
Martinez titles; that Las Brisas' s title, TCT 15310110 (TCT 153101), was originally registered on September 14, 1973, under OCT
9311 pursuant to Decree No. N-147380, LRC Case No. N-7993, Rec. No. N-43097; that the encroachment is confirmed per
verification survey conducted by a geodetic engineer and approved by the Regional Technical Director for Lands of the Department
of Environment and Natural Resources (DENR); and that TCT 153101 thus casts a cloud on the Martinez titles, which must be
removed in order to quiet title to the latter.
Las Brisas countered in its Answer11 that it bought the land covered by TCT 153101 (consisting of 3,606 square meters) on May
18, 1967 from Republic Bank; that it took possession thereof in good faith that very same year; and that it is actually Martinez that
was encroaching upon its land.
Ruling of the Regional Trial Court
After trial, the RTC issued its Decision dated January 20, 2009, containing the following pronouncement:
To clarify matters, the plaintiff12 engaged the services of Ricardo S. Cruz, a licensed Geodetic Engineer, to plot and verify the plans
and technical descriptions to determine the relative geographic positions of the land covered by the titles of plaintiff and
defendant.13 This verification survey was approved by the Regional Technical Director of Lands on May 23, 1996, under plan VS-
04- 000394. (Exh. T-1, T-2, T-3, T-4, T-5). 'Ibis plan revealed that Psu-234002, in relation to T.C.T. No. 153101 of the defendant
overlapped thus:
a. A portion of 567 square meters of Lot No. 29, Block 3, (LRC) Pcs- 7305, covered by plaintiff's T.C.T. No. 250242. This is the
portion where the defendant built a riprapping.
b. A portion of 1,389 square meters of Lot No. 30, Block 3, (LRC) Pcs- 7305, covered by plaintiff's T.C.T. No. 250243. This is the
portion where the defendant had constructed an old building.
c. A portion of 1,498 square meters of Lot No. 31, Block 3, (LRC) Pcs- 7305, covered by plaintiff's T.C.T. No. 250244. This is the
portion where the defendant constructed a new multi-story edifice.
xxxx
The issues sought to be resolved x x x can be read in the respective memorandum [sic] submitted by the parties.
For the plaintiff, the statement of issues are as follows:
1. Whether x x x the Certificate of Title of the defendant overlapped and thus created a cloud on plaintiff T.C.T. Nos. 250242,
250243, 250244, covering lots nos. 29, 30, and 31, block 3 (LRC) PCS-7305, which should be removed under Article 476 of the Civil
Code of the Philippines;
2. Whether x x x defendant's T.C.T. No. 153101 should be cancelled insofar as it overlapped Lots 29, 30 and 31, Block 3, (LRC)
PCS- 7305;
3. Whether x x x the defendant is a builder in bad faith and is liable for the consequence of his acts;
4. Whether x x x the plaintiff is entitled to collect actual or compensatory and moral damages in the amount of ₱5,000,000.00,
exemplary damage in the amount of ₱1,000,000.00, nominal damage in the amount of ₱l,000,000.00, and attorney's fees in the
amount of ₱300,000.00, exclusive of appearance fee of ₱3,000.00 per hearing or unferome [sic] attended.
For defendants, the issues presented are:
1. Whether x x x defendant's title over the property is valid and effective;
2. Whether x x x defendant is an innocent purchaser for value;
3. Whether x x x defendant is entitled to reimbursement for expenses in developing the property.
For its evidence in chief, plaintiff presented Nestor Quesada (direct, June 7, 2001; cross July 26, 2001) rested its case on October 4,
2001. Its Formal Offer of Evidence as filed with the Couit on November l 5, 2001 wherein Court Order dated January 15, 2002,
Exhibits A to U. inclusive of their submarkings were admitted over the objections of defendant.
The defendant presented Eu:fracia Naidas (direct/cross on July 11, 2004), then rested its case on May 11, 2005, the Formal Offer of
Evidence was filed in Court on June 10, 2005 wherein the Court Order dared June 27, 2005, Exhibits 1 to 7 inclusive of
submarkings were all admitted over plaintiff's objections.
xxxx
Considering that the defendant has raised the defense of the validity of T.C.T. No. N-21871 of the Registry of Deeds, Marikina
(Exhibit 1), and subsequently cancelled by T.C.T. No. 153101 as transferred to the Pen Development Corp. (Exh. 2) and introduced
substantial improvements thereon which from the facts established and evidence presented during the hearings of the case it
cannot be denied that said title over the property in question is genuine and valid. Moreover, the defendant obtained the property as
innocent purchasers for value, having no knowledge of any irregularity, defect, or duplication in the title.
Defendant further argued that there is no proof to plaintiff's claim that it had sent notices and claims to defendant. Assuming that
notices were sent to defendant as early as 1968, it took plaintiff almost thirty (30) years to file the action to quiet its title. Therefore,
by the principle of laches it should suffer the consequence of its failure to do so within a reasonable period of time. x x x
Defendant, having introduced substantial improvements on the property, if on the ground or assumption that the case will be
decided in favor of the plaintiff, that defendant should be, by law, entitled to be reimbursed for the expenses incurred in purchasing
and developing the property, the construction cost of the building alone estimated to be Fifty-Five Million Pesos (₱55,000,000.00) x
x x.
Defendant also cited Articles 544, 546, 548 of the New Civil Code of the Philippines in further support of its defense.
It is incumbent upon the plaintiff to adduce evidence in support of his complaint x x x. Likewise, the trial shall be limited to the issues
stated in the pretrial order.
As earlier stated, the Court shall rule on whether x x x plaintiff has discharged its obligation to do so in compliance with the Rules of
Court. Having closely examined, evaluated and passed upon the evidence presented by both the plaintiff and defendant the Court is
convinced that the plaintiff has successfully discharged said obligation and is inclined to grant the reliefs prayed for.
Clearly this is a valid complaint for quieting of title specifically defined under Article 476 of the Civil Code and as cited in the cases of
Vda. De Angeles v. CA, G.R. No. 95748, November 21, 1996; Tan vs. Valdehuesa, 66 SCRA 61 (1975).
As claimed by the plaintiff, defendant's T.C.T. No. 153101 is an instrument, record or claim which constitutes or casts a cloud upon
its T.C.T. Nos. 250242, 250243, and 250244. Sufficient and competent evidence has been introduced by the plaintiff that upon
plotting verification of the technical description of both parcels of land conducted by Geodetic Engineer Ricardo Cruz, duly approved
by the Regional Technical Director of Lands of the DENR that Psu-234002, covered by defendant's T.C.T. No. 153101 overlapped a
portion of 567 square meters of Lot No. 29 x x x, a portion of 1,389 square meter of Lot No. 30 x x x covered by plaintiff's T.C.T.
Nos. 250242, 250243and 250244, respectively. Surprisingly, defendant has not disputed nor has it adduced evidence to disprove
these findings.
It was likewise established that plaintiffs T.C.T. No[s]. 250242, 250243 and 250244 emanated from O.C.T. No. 756, which was
originally registered on August 14, 1915, whereas, from defendant's own evidence, its T.C.T. No. 153101 was derived from O.C.T.
No. 9311, which was originally registered on September 14, 1973, pursuant to Decree No. D-147380, in LRC Case No. N- 7993,
Rec. No. 43097.
Plaintiffs mother title was registered 58 years ahead of defendant's mother title. Thus, while defendant's T.C.T. No. 153101 and its
mother title are apparently valid and effective in the sense that they were issued in consequence of a land registration proceeding,
they are in truth and in fact invalid, ineffective, voidable, and unforceable [sic] insofar as it overlaps plaintiffs prior and subsisting
titles.
xxxx
In the cases of Chan vs. CA, 298 SCRA 713, de Villa vs. Trinidad, 20 SCRA 1167, Gotian vs. Gaffud, 27 SCRA 706, again the
Supreme Court held:
'When two certificates of title are issued to different persons covering the same land, in whole or in part, the earlier in date must
prevail and in cases of successive registrations where more than one certificate of title is issued over the same land, the person
holding a prior certificate is entitled to the land as against a person who relies on a subsequent certificate. '
xxxx
Article 526 of the Civil Code defines a possession in good faith as 'one who is not aware that there exists in his title or mode of
acquisition any flaw which invalidates it, and a possession in bad faith as one who possesses in any case contrary to the foregoing.
xxxx
In the case of Ortiz vs. Fuentebella, 27 Phil. 537, the Supreme Court held.
'Thus, where defendant received a letter from the daughter of the plaintiff, advising defendant to desist from planting coconut on a
land in possession of defendant, and which letter the defendant answered by saying she did not intend to plant coconuts on the land
belonging to plaintiff, it was held that the possession [in] bad faith began from the receipt of such letter.'
A close similarity exists in Fuentebella above cited with the facts obtaining in this case. The pieces evidence [sic] show that while
defendant was in good faith when it bought the land from the Republic Bank as a foreclosed property, the plaintiff in a letter dated as
early as March 11, 1968 x x x had advised the defendant that the land it was trying to fence is within plaintiff’s property and that the
defendant should refrain from occupying and building improvements thereon and from doing any act in derogation of plaintiff's
property rights. Six other letters followed suit x x x. The records show that defendant received these letters but chose to ignore them
and the only communication in writing from the defendant thru Paul Naidas was a letter dated July 31, 1971, stating that he (Naidas)
was all the more confused about plaintiff's claim to the land. The defendant cannot dispute the letters sent because it sent a
response dated July 31, 1970. It is very clear that while defendant may have been [in] good faith when it purchased the land from
Republic Bank on December 6, 1977, such good faith ceased upon being informed in writing about plaintiff's title or claim over the
same land, and, worse, it acted with evident bad faith when it proceed [sic] to build the structures on the land despite such notice.
Consequently, the rule on the matter can be found in Articles 449, 450 of the Civil Code of the Philippines which provide:
'Article 449. - He who builds, plants, or sows in bad faith on the land of another, loses what is built, planted or sown without right to
indemnity. "
Article 450. - The owner of the land on which anything has been built, planted or sown in bad faith may demand the demolition of the
work, or that the planting or sowing be removed, in order to replace things in their former condition at the expense of the person who
built, planted or sowed, or he may compel the builder or planter to pay the price of the land, and the sower the proper rent.'
In the case of Tan Queto vs. CA, 122 SCRA 206, the Supreme Court held:
'A builder in bad faith loses the building he builds on another's property without right of refund, 'x x x
xxxx
As to defendant's claim that they had obtained title to the property as innocent purchasers for value, lack of knowledge of any
irregularity, effect or duplication of title, they could have discovered the overlapping had they only bothered to engage a licensed
geodetic engineer to check the accuracy of their plan Psu-234002. To that extent, defendant has failed to exercise the diligence to
be entitled to the status as an innocent purchaser for value. It was clearly established that defendant's certificate of title emanated
from a mother title that partially overlapped the plaintiff's prior and subsisting title. Hence, defendant's certificate of title is void
abinittio [sic] insofar as the overlapped areas are concerned.
Defendant's claim of lack of notice on the claim of the plaintiff on the overlapped properties is belied by the evidence presented by
plaintiff which consisted by [sic] a letter dated as early as March 11, 1968 (Exh. N, N-1, N-2) advising defendant that the land it was
trying to fence of [sic] is within plaintiff's property, and at the same time asking the defendant to refrain from occupying and building
improvements thereon and from doing any act in derogation of plaintiff's property rights. Five (5) succeeding let1ers addressed to
defendant
followed suit and the evidence clearly show that the san1e were received by defendant and no less than Paul Naidas wrote a reply
letter to plaintiff's counsel, Alfonso Roldan on July 31, 1971 which conclusively affi1m the fact that defendant is well aware of
plaintiffs claim to the portion of the land encroached. Thus, the defendant's claim that it is a builder in good faith finds no factual nor
legal basis. On the contrary, the defendant's continued construction and introduction of improvements on the questioned portion of
plaintiff's property clearly negates good faith.
The claim for damages prayed for by plaintiff as a result of defendant's obstinate refusal to recognize [the] plaintiff's title to the land
insofar as the encroachments were made and to turn over the possession thereof entitles the plaintiff to the award of moral,
exemplary damages and attorney's fees. However, since no sufficient evidence was presented that the plaintiff suffered actual
damages, the Court cannot award any pursuant to [Article] 2199 of the New Civil Code of the Philippines.
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against 1he defendant as follows:
1. Quieting its T.C.T. Nos. 250242, 240243 and 250[2]44, and removing the clouds thereon created by the issuance of T.C.T. No.
153101 insofar as the said titles are overlapped by the T.C.T. No. : 153101;
2. Ordering the cancellation or annulment of portions of T.C.T. No. 153101 insofar as it overlaps plaintiff's T.C.T. No. 250242, to Lot
29, Block 3, (LRC) Pcs-7305; plaintiff's T.C.T. No. 250243 to Lot 30, Block 3 (LRC) Pcs- 7305; and plaintiff's [TCT] No. 250244 to
Lot 31, Block 3, (LRC) Pcs-7305;
3. Ordering the defendant to vac1.ite and turn over the possession of said portions in favor of the plaintiff: and to remove the
building or structures it has constructed thereon at its own expense without right to indemnity [therefor]; to allow the plaintiff to
appropriate what the defendant has built or to compel the defendant to pay for the value of the land encroached upon;
4. Ordering the defendant to pay moral damages to the plaintiff in thy amount of ₱ 1,000,000.00; exemplary damages in the amount
of ₱1,000,000.00 and attorney's fees in 1he amount of ₱100,000.00.
5. Ordering the defendant to pay for the cost of suit.
SO ORDERED.14
Petitioners filed a joint Motion for Reconsideration.15 However, in an August 7, 2009 Order,16 the RTC held its ground.
Ruling of the Court of Appeals
Petitioners interposed an appeal before the CA, docketed as CA-G.R. CV No. 97478. They argued that the trial court erred in- giving
probative value to respondent's documentary evidence despite its hearsay character; that the trial court erred in declaring them
builders in bad faith; that the respondent is guilty of laches; and that the lower court erred in awarding damages to respondent.
On July 17, 2013, the CA rendered the assailed Decision declaring as follows:
The appeal fails.
Good faith is an intangible and abstract quality with no technical meaning or statutory definition, and it encompasses, among other
things, an honest belief, the absence of malice and the absence of design to defraud or to seek an unconscionable advantage. An
individual's personal good faith is a concept of his own mind and, therefore, may not conclusively be determined by his protestations
alone. It implies honesty of intention, and freedom from knowledge of circumstances which ought to put the holder upon inquiry. The
essence of good faith lies in an honest belief in the validity of one's right, ignorance of a superior claim, and absence of intention to
overreach another.
Article 528 of the New Civil Code provide that possession acquired in good faith does not lose 1his character, except in a case and
from the moment facts exist which show 1hat the possessor is not unaware that he possesses the thing improperly or wrongfully.
Possession in good faith ceases from the moment defects in the title are made known to the possessors, by extraneous evidence or
by suit for recovery of the property by the true owner. Whatever may be the cause or the fact from which it can be deduced that the
possessor has knowledge of the defect of his title or mode of acquisition, it must be considered sufficient to show bad faith.
In the instant case, as early as 1968, Martinez sent several letters to Las Brisas informing the latter of Martinez's Ownership over
the land covered by TCT Nos. 250242, 250243 and 250244 and that the buildings and improvements Las Brisas made have
encroached on the said property. In the Letter dated 11 March 1968, Martinez informed Las Brisas that the latter's fence had
overlapped into the former's land and requested that Las Brisas refrain from entering Martinez's property. However, Las Brisas did
not heed Martinez's demand and continued developing its property. Martinez sent six (6) more letters to Las Brisas reiterating that
the latter's structures and improvements encroached on Martinez land. Records show that Las Brisas received these notices and in
fact, made a reply to one of Martint1z's letters. Clearly, Las Brisas was informed on several occasions about Martinez's title x x x
over its land and, despite such notices, Las Brisas chose to ignore Martinez's demand and continued constructing other buildings
and improvements that intruded into Martinez's property. Hence, Las Brisas cannot claim that it had no knowledge of the defects of
its title and, consequently, cannot be considered in good faith.
Neither did Las Brisas bother to have its property surveyed in order to discover, for its own benefit, the actual boundaries of its land
(TCT No. 153101). It is doctrinal in land registration law that possession of titled property adverse to the registered owner is
necessarily tainted with bad faith. Thus, proceeding with the construction works on the overlapped portions of TCT Nos. 250242,
250243 and 250244 despite knowledge of Martinez's ownership thereof puts Las Brisas in bad faith.
Las Brisas further argues that Martinez is guilty of laches as it failed to assert its right over the encroached portions of TCT Nos.
250242, 250243 and 250244 within reasonable time.
We disagree.
xxxx
Furthermore, Martinez is the registered owner of TCT Nos. 250242, 250243 and 250244 (and, as such, its right to demand to
recover the portions thereof encroached by Las Brisas is never barred by laches. In the case of Arroyo vs. Bocage Inland Dev't
Corp., the Supreme Court held:
'As registered owners of the lots in question, the private respondents have a right to eject any person illegally occupying their
property. This right is in1prescriptible. Even if it be supposed that they were aware of the petitioners' occupation of the property, and
regardless of the length of that possession, the lawful owners have right to demand the return of their property at any time as long
as the possession was unauthorized or merely tolerated, if at all. This right is never barred by laches.'
Las Brisas argues that the court a quo erred in admitting Martinez's Relocation Survey of tot Nos. 28, 29 and 30 and the Verification
Plan Vs-04-00394 as they constitute hearsay evidence and as such are inadmissible.
We are not persuaded.
It bears noting that this issue of hearsay evidence was raised for the first time on appeal. It is a fundamental rule that no question
will be entertained on appeal unless it has been raised below Stated differently, issues of fact and arguments not adequately
brought to the attention of the lower courts will not be considered by the reviewing courts as they cannot be raised for the first time
on appeal. An issue, which was neither averred in the complaint nor raised during the trial in the lower courts, cannot be raised for
the first time on appeal because it would be offensive to the basic rule of fair play and justice, and would be violative of the
constitutional right to due process of the other party. In fact, the determination of issues at the pre-trial bars consideration of other
issues or questions on appeal,
In this case, Las Brisas failed to raise this argument during pre-trial and in the trial proper. Las Brisas even failed to [raise] its
objection during Martinez's fom1al offer of evidence. Clearly, Las Brisas waived its right to object on [sic] the admissibility of
Martinez's evidence. Thus, We cannot bend backwards to examine this issue raised by Las Brisas at this late stage of the
proceedings as it would violate Martinez's right to due process and should thus be disregarded.
Anent the award of moral damages of Php1,000,000.00 and exemplary damages of Php1,000,000.00, We find the same without
factual or legal basis.
A juridical person is generally not entitled to moral damages because, unlike a natural person, it cannot experience physical
suffering, or such sentiment as wounded feelings, serious anxiety, mental anguish or moral shock. While the courts may allow the
grant of moral damages to corporations in exceptional situations, it is not automatically granted because there must still be proof of
the existence of the factual basis of the damage and its causal relation to the defendant's acts. Moral damages, though incapable of
pecuniary estimation, are in the category of an award designed to compensate the claimant for actual injury suffered and not to
impose a penalty 0n the wrongdoer. In this case, We find no evidence that Martinez suffered besmirched reputation on account of
the Las Brisas encroachment on Martinez's land. Hence, the award of moral damages should be deleted.
Neither is Martinez entitled to exemplary damages. Exemplary damages may only be awarded if it has been shown that wrongful act
was accompanied by bad faith or done in a wanton, fraudulent and reckless or malevolent manner. Exemplary damages are allowed
only in addition to moral damages such that no exemplary damage can be awarded unless the claimant first establishes his clear
right to moral damages. As the moral damages are improper in the instant case, so is the award of exemplary damages.
Nevertheless, an award of nominal damages of Php100,000.00 is warranted since Las Brisas violated the property rights of
Martinez. The New Civil Code provides:
Art. 2221. Nominal damages are adjudicated in order that a right of the plaintiff; which has been violated or invaded by the
defendan4 may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him.
Art. 2222. The court may award nominal damages in every obligation arising from any source enumerated in Article 1157, or in
every case where any property right has been invaded.
The award of damages is also in accordance with Article 451 of the New Civil Code which states that the landowner is entitled to
damages from the builder in bad faith.
WHEREFORE, the Decision dated 20 January 2009 of the Regional Trial Court of Antipolo City, Branch 71, in Civil Case No. 97-
4386 is AFFIRMED with MODIHCATION, as follows:
1.) deleting the award of moral damages and exemplary damages to Martinez Leyba, Inc.; and
2.) ordering Las Brisas Resort Corporation to pay Martinez Leyba, Inc., Php 100,000.00, as nominal damages.
SO ORDERED.17 (Citations omitted)
Petitioners sought to reconsider, but were rebuffed. Hence, the present Petition.
Issues
In a June 15, 2015 Resolution,18 this Court resolved to give due course to the Petition, which contains the following assignment of
errors:
A. THE HONORALBE COURT OF APPEALS SERIOUSLY ERRED IN RULING THAT PETITIONER IS A POSSESSOR/BUILDER
IN BAD FAITH.
B. THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN FAILING TO RULE THAT THE RESPONDENT INCURRED
LACHES IN ENFORCING ITS PUTATIVE RIGHTS.
C. THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN RULING THAT THE ISSUE ON HEARSAY CANNOT BE
RAISED FOR THE FIRST TIME ON APPEAL.19
Petitioners' Arguments
In praying that the assailed CA and trial court dispositions be set aside and that Civil Case No. 97-4386 be dismissed instead,
petitioners argue in their Petition and Reply20 that they are not builders in bad faith; that in constructing the improvements subject of
the instant case, they merely relied on the validity and indefeasibility of their title, TCT 153101; that until their title is nullified and
invalidated, the same subsists; that as builders in good faith, they are entitled either to a) a refund and reimbursement of the
necessary expenses, and full retention of the land until they are paid by respondent, or b) removal of the improvements without
damage to respondent's property; that contrary to the CA's pronouncement, respondent may be held accountable for laches in filing
a case only after the lapse of thirty years; and that the Survey Plan of Lots 29, 30 and 31 and the Verification Survey Plan Vs-04-
000394 are inadmissible in evidence for being hearsay, as they were not authenticated in court.
Respondent's Arguments
Respondent, on the other hand, counters in its Comment21 that the CA is correct in declaring that petitioners are possessors and
builders in bad faith; that while petitioners may have been innocent purchasers for value, they were not possessors and builders in
good faith because despite having been regularly informed in writing that they encroached on respondent's land and are building
illegal structures thereon, they continued with their illegal occupation and construction; that under the Civil Code, petitioners are not
entitled to retention or reimbursement for being bi1ilders in bad faith; that the principle of laches does not apply against owners of
land registered under the Torrens system of land registration; and that petitioners cannot be allowed to argue for the first time on
appeal that the pieces of documentary evidence it presented before the trial court are hearsay.
Our Ruling
The Court denies the Petition.
Under the Manual on Land Survey Procedures of the Philippines, on Verification Surveys, particularly, it is provided, thus:
Section 146. The Regional Technical Director for Lands may issue order to conduct a verification survey whenever any approved
survey is reported to be erroneous, or when titled lands are reported to overlap or where occupancy is reported to encroach another
property. xxx
xxxx
Section 149. All survey work undertaken for verification purposes shall be subject of verification and approval in the DENR~LMS
Regional Office concerned and shall be designated as Verification Surveys (Vs). x x x
Pursuant to these provisions, respondent caused its property to be surveyed, and on May 23, 1996, the Regional Technical Director
of Lands approved the verification survey under Verification Survey Plan Vs-04-000394.22 This Verification Survey Plan revealed
that petitioners encroached on respondent's land to the following extent:
a. A portion of 567 square meters of Lot No. 29, Block 3, (LRC) Pcs-7305, covered by respondent's TCT-250242. This is the portion
where the petitioners built a riprapping.
b. A p01tion of 1,389 square meters of Lot No. 30, Block 3, (LRC) Pcs-7305, covered by respondent's TCT 250243. This is the
portion where the petitioners had constructed an old building.
c. A portion of 1,498 square meters of Lot No. 31, Block 3, (LRC) Pcs7305, covered by respondent's TCT 250244. This is the
portion where the petitioners constructed & new multi-story edifice.
On this basis, respondent filed Civil Case No. 97·"4386. Respondent's main evidence is the said Verification Survey Plan V s-04-
000394, which is a public document. As a public document, it is admissible in evidence even without further proof of its due
execution and genuineness,23 and had in its favor the presumption of regularity. To contradict the same, there must be evidence
that is clear, convincing and more than merely preponderant, otherwise the document should be upheld,24 The certification and
approval by the Regional Technical Director of Lands signifies the technical correctness of the survey plotted in the said plan."25
On the other hand, petitioners' evidence consists mainly of the claim that their TCT 153101 is a valid title and that they purchased
the land covered by it in good faith and for value. They did not present evidence to contradict respondent's Verification Survey Plan
VS-Q4-000394; in other words, no evidence was presented to disprove respondent's claim of overlapping. Their evidence only goes
so far as proving that they acquired the land covered by TCT 153101 in good faith. However, while it may be true that they acquired
TCT 153101 in good faith and for value, this does not prove that they did not encroach upon respondent's lands.
In effect, respondent's Verification Survey Plan Vs-04-000394 remains unrefuted. Petitioners' sole objection to this piece of evidence
that it was not authenticated during trial is of no significance considering that the said documentary evidence is a public document.
Although "[i]n overlapping of titles disputes, it has always been the practice for the [trial] court to appoint a surveyor from the
government land agencies [such as] the Land Registration Authority or the DENR to act as commissioner,"26 this is not mandatory
procedure; the trial court may rely on the parties' respective evidence to resolve the case.27 In this case, respondent presented the
results of a verification survey conducted on its lands. On the other hand, petitioners did not present proof like the results of a survey
conducted upon their initiative to contradict respondent's evidence; nor did they move for the appointment by the trial court of
government or private surveyors to act as commissioners. Their sole defense is that they acquired their land in good faith and for
value; but this does not squarely address respondent's claim of overlapping.
For the RTC and CA, respondent's undisputed evidence proved its claim of overlapping. This Court agrees. As a public document
containing the certification and approval by the Regional Technical Director of Lands, Verification Survey Plan Vs-Q4-000394 can
be relied upon as proof of the encroachment over respondent's lands. More so when petitioners could not present contradictory
proof.
On the issue of being a builder in had faith, there is no question that petitioners should be held liable to respondent for their
obstinate refusal to abide by the latter's repeated demands to cease and desist from continuing their construction upon the
encroached area. Petitioners' sole defense is that they purchased their property in good faith and for value; but this does not
squarely address the issue of encroachment or overlapping. To repeat, while petitioners may have been innocent purchasers for
value with respect to their land, this does not prove that they are equally innocent of the claim of encroachment upon respondent's
lands. The evidence suggests otherwise: despite being apprised of the encroachment, petitioners turned a blind eye and deaf ear
and continued to construct on the disputed area. They did not bother to conduct their own survey to put the issue to rest, and to
avoid the possibility of being adjudged as builders in bad faith upon land that did not belong to them.
Under the Civil Code,
Art. 449. He who builds, plants or sows in bad faith on the land of another, loses what is built, planted or sown without right to
indemnity.
Art. 450. Tue owner of the land on which anything has been built, planted or sown in bad faith may demand the demolition of the
work, or that the planting or sowing be removed, in order to replace things in their former condition at the expense of the person who
built, planted or sowed; or he may compel the builder or planter to pay the price of the land, and the sower the proper rent.
Art. 451. In the cases of the two preceding articles, the landowner is entitled to damages from the builder planter or sower.
Moreover, it has been declared that
The right of the owner of the land to recover damages from a builder in bad faith is clearly provided for in Article 451 of the Civil
Code. Although said Article 451 does not elaborate on the basis for damages, the Court perceives that it should reasonably
correspond with the value of the properties lost or destroyed as a result of the occupation in bad faith, as well as the fruits (natural,
industrial or civil) from those properties that the owner of the land reasonably expected to obtain. x x x28
For their part, petitioners are not entitled to reimbursement for necessary expenses. Indeed, under Article 452 of the Civil Code,29
the builder, planter or sower in bad faith is entitled to reimbursement for the necessary expenses of preservation of the land.
However, in this case, respondent's lands were not preserved: petitioners' construction and use thereof in fact caused dan1age,
which must be undone or simply endured by respondent by force of law and circumstance. Respondent did not in any way benefit
from petitioners' occupation of its lands.
Finally, on the question of laches, the CA correctly held that as owners of the subject property, respondent has the imprescriptible
right to recover possession thereof from any person illegally occupying its lands. Even if petitioners have been occupying these
lands for a significant period of time, respondent as the registered and lawful owner has the right to demand the return thereof at
any time.
Jurisprudence consistently holds that ‘prescription and laches cannot apply to registered land covered by the Torrens system'
because 'under the Property Registration Decree, no title to registered land in derogation to that of the registered owner shall be
acquired by prescription or adverse possession.’30
Under Section 47 of the Property Registration Decree, or Presidential Decree No. 1529, "(n)o title to registered land in derogation of
the title of the registered owner shall be acquired by prescription or adverse possession."
WHEREFORE, the Petition is DENIED. The July 17, 2013 Decision and March 28i 2014 Resolution of the Court of Appeals in CA-
G.R. CV No. 97478 are AFFIRMEDin toto.
SO ORDERED.
MARIANO C. DEL CASTILLO

Associate Justice
Footnotes
1 Rollo, pp. 11-40.
2 Id. at 42-52; penned by Associate Justice Jane Aurora C. Lantion and concurred in by Associate Justices Vicente S.E. Veloso and
Eduardo B. Peralta, Jr.
3 Id. at 198-207; penned by Assisting Judge Armando A. Yanga.
4 Id. at 81-82.
5 Id. at 53-62.
6 Id. at 43-45.
7 Id. at 91-99.
8 Id. at 113-115.
9 Id. at 92.
10 Id. at 166-167.
11 Id. at 100-104.
12 Martinez.
13 Las Brisas.
14 Rollo, pp. 200-207.
15 Id. at 208-222.
16 Id. at 245-251.
17 Id. at 46-52.
18 Id. at 425-426,
19 Id. at 17-18.
20 Id. at 405-411.
21 Id. at 369-387.
22 Annex "E," records, p, 13,
23 Iwasawa v. Gangan, 717 Phil. 825, 830(2013).
24 Ladignon v. Court of Appeals, 390 Phil. 1161, 1 In (2000).
25 Republic v. Dayaoen, G.R. No. 200773, July 8, 2015, 762 SCRA 310, 337.
26 Cambridge Realty and Resources Corporation v. Eridanus Development, Inc., 579 Phil. 375, 395-396 (2008).
27 Id.
28 Heirs of Durano, Sr. v. Spouses Uy, 398 Phil. 125, 155 (2000).
29 Art. 452. The builder, planter or sower in bad faith is entitled to reimbursement for the necessary expenses of preservation of the
land.
30 Spouses Ocampo v. Heirs of Bernardino U Dionisio, 744 Phil. 716, 730 (2014), citing Jakosalem v. Barangan, 682 Phil. 130, 142
(20 l2).
G.R. No. 197923 June 22, 2015
RUBY RUTH S. SERRANO MAHILUM, Petitioner, vs. SPOUSES EDILBERTO ILANO and LOURDES ILANO, Respondents.
DECISION
DEL CASTILLO, J.:
Assailed in this Petition for Review on Certiorari1 are the following dispositions of the Court of Appeals: 1) February 2, 2011
Decision2 in CA-G.R. SP No. 113782 which granted herein respondents' Petition for Certiorari and Prohibition and thus nullified and
set aside the January 5, 20103 and February 24, 20104 Orders of the Regional Trial Court of Las Pinas City, Branch 255 in Civil
Case No. LP-07-0109; and 2) July 28, 2011 Resolution5denying the herein petitioner's motion for reconsideration.
Factual Antecedents
Petitioner Ruby Ruth S. Serrano Mahilum is the registered owner of a parcel of land covered by Transfer Certificate of Title No.
855336 (TCT 85533) of the Registry of Deeds of Las Pinas City.
In September 2003, she entrusted the original owner’s duplicate copy of TCT 85533 to Teresa Perez (Perez) – a purported real
estate broker – who claimed that she can assist petitioner in obtaining a loan, with TCT 85533 serving as collateral. After several
months, petitioner demanded the return of the title, but Perez failed to produce the same; after much prodding, Perez admitted that
the title was lost. Thus, in June 2004, petitioner executed an Affidavit of Loss and caused the same to be annotated upon the origin
al registry copy of TCT 85533 as Entry No. 1668-247 on October 7, 2004.
In June 2006, petitioner received a letter from the Registry of Deeds of Las Piñas City informing her that the owner’s duplicate copy
of TCT 85533 was not lost, but that it was presented to the registry by respondents, spouses Edilberto and Lourdes Ilano, who
claimed that the property covered by the title was sold to them. In this connection, respondents – instead of registering the
supposed sale in their favor – executed an Affidavit of Non-Loss, which was entered on TCT 85533 on June 28, 2006 as Entry
No.1875-27.8
Petitioner confronted respondents, w ho showed her a notarized Agreement9 with right of repurchase dated December 4, 2003 and
a notarized and undated Deed of Absolute Sale,10 on which documents petitioner’s purported signatures were affixed. These
documents indicate that petitioner sold the property covered by TCT 85533 to respondents for 250,000.00 with right to repurchase
the same within a period of 90 days. Petitioner told respondents that she did not execute these documents, and that her purported
signatures therein were in fact falsified and forged. She demanded the return of TCT85533, but respondents refused to surrender
the title to her. They claimed that the property was sold to them by Perez and "a companion."
All this time, title to the property remained in petitioner’s name, as respondents have not registered the unnotarized and undated
Deed of Absolute Sale.
Civil Case No. LP-07-0109
On June 20, 2007, petitioner and her husband Richard instituted against respondents and Perez Civil Case No. LP-07-0109 with the
Regional Trial Court of Las Piñas City. Her Complaint11 for "annulment of agreement and deed of absolute sale, specific
performance, with damages," which contained the foregoing statement of facts, likewise contained the following allegations and
prayer:
18. That by reason of the actuations of the defendants in facilitating the execution of the aforesaid falsified documents, and adamant
refusal to return to plaintiffs the duplicate original owner’s copy of their title, which were all done with evident bad faith, the plaintiffs
suffered and continue to suffer sleepless nights, wounded feelings, besmirched reputation, serious anxiety and other similar
feelings, which, when quantified, can reasonably be compensated with the sum of Fifty Thousand (50,000.00) Pesos, as moral
damages;
PRAYER
WHEREFORE, it is most respectfully prayed of this Honorable Court, that after due notice and hearing, judgment be rendered in
favor of the plaintiffs and against the defendants, as follows:
1. Ordering the annulment of the documents denominated as Agreement (Deed of Sale with Right to Repurchase) , dated
December 4, 2003, and Deed of Absolute Sale and declaring the same as null and void;
2. Ordering defendants Ilano to surrender and return to plaintiffs the duplicate original owner’s copy of TCT No. 85533;
3. Ordering the defendants, jointly and severally, to pay the plaintiffs the sum of Fifty Thousand Pesos (50,000.00) as moral
damages;
[4.] Ordering the defendants, jointly and severally, to pay the plaintiffs the sum of Twenty Thousand Pesos (20,00 0.00) as attorney’s
fees, and the additional amount of Two Thousand Pesos (2,000.00) for every court hearing; and
[5.] Ordering the defendants to pay the costs of this suit.
Other reliefs deemed just and equitable are also prayed for.12
Respondents’ Amended Answer with Compulsory Counterclaim13 alleged and admitted, among others, that petitioner was the
owner of the lot covered by TCT 85533; that said title was entrusted to Perez; that petitioner executed an affidavit of loss which was
annotated on TC T 85533; that they caused the annotation of an affidavit of non-loss on TCT 85533, as Entry No. 1875-27; that
petitioner confronted them ; that they showed petitioner the Agreement and unnotarized Deed of Absolute Sale; that they are in
possession of the owner’s copy of TCT 85533; that sometime in October 2003, Perez – accompanied by one Corazon Tingson
(Tingson) "and a female person who introduced herself as Ruby Ruth Serrano" – offered to sell to them the property covered by
TCT 85533; that "in support of the identity of the said Ruby Ruth Serrano, the original owner’s copies of the title (T CT No. T-85533),
Declaration of Real Property, Tax Clearance, Barangay Clearance, Community Tax Certificate with picture of Ruby Ruth Serrano
attached therein" were presented to respondent Edilberto Ilano (Edilberto); that upon being satisfied as to the "identity of the person
who introduced herself as Ruby Ruth Serrano," Edilberto instructed his secretary to verify the authenticity of the title with the
Register of Deeds of Las Piñas City and conduct an ocular inspection of the property; that "the person who introduced herself as
Ruby Ruth Serrano" obtained a cash advance of 50,000.00; that after verification confirmed that the property is indeed owned by
and registered in the name of Ruby Ruth Serrano, Edilberto – "believing in good faith that the person [with] whom he is dealing x x x
is indeed the real Ruby Ruth Serrano" – entered into the sale transaction; that on the same day, or October 30, 2004, petitioner
received the full consideration of 250,000.00 and signed the Agreement and Deed of Absolute Sale; that petitioner’s affidavit of loss
filed with the Registry of Deeds is false as TCT 85533 was never lost but was entrusted to Perez who, together with Tingson "and
another person he rein named as ‘Jane Doe’ whose identity is yet to be established who introduced herself as Ruby Ruth Serrano,"
came to respondents’ office to obtain a loan because petitioner was in dire need of money as she admitted in her complaint; that
TCT 85533 was negotiated and/or sold by petitioner "or by her duly authorized person, otherwise no one can present/deliver the
original owner’s duplicate copy of the said title x x x and the original copies of the documents x x x;" that "for failure of the registered
owner, Ruby Ruth Serrano, to exercise her right of repurchase within the agreed period, ownership of the subject property now
lawfully belongs to" respondents; that the complaint failed to allege that respondents were purchasers in bad faith or at least with
notice of the defect in the title, which leads to the conclusion that the complaint states no cause of action; and that respondents filed
a perjury case against petitioner with the Office of the City Prosecutor of Parañaque.
Respondents thus prayed for the dismissal of the complaint, and by way of counterclaim, sought indemnity for moral damages in the
amount of 300,000.00; 100,000.00 as nominal damages; 200,000.00 as exemplary damages; 100,000.00 for attorney’s fees; and
costs of suit.
Pre-trial and presentation of petitioner’s evidence ensued. Thereafter, petitioner rested her case.
Respondents filed a Demurrer to Evidence,14arguing that the complaint failed to state a cause of action in that petitioner failed to
allege that respondents were purchasers in bad faith or with notice of a defect in the title; that in the absence of such an allegation,
the presumption that respondents are purchasers in good faith prevails. Petitioner filed a Comment/ Opposition,15 contending
essentially that her complaint contained an allegation that respondents were purchasers in bad faith, which is found in paragraphs
13 to 15 of the complaint; and that the issues raised in the demurrer may only be resolved after trial on the merits.
Ruling of the Regional Trial Court
In a January 5, 2010 Order,16 the trial court denied respondents’ demurrer. It held that the question of whether respondents are
purchasers in bad faith can only be resolved after the parties present their respective evidence. Thus, it stated:
The Court, after taking into account a ll the foregoing, does not find merit in the above demurrer. For one, the Court already held in
its Order dated 11 April 2008 that "during the pre-trial held last 11 February 2008 one of the issues submitted for resolution by the
Court is whether or not [sic] defendants Sps. Ilano are buyers in good faith and for value of the property subject hereof". This being
so, the same can only be resolved upon presentation of evidence by the parties herein regarding their respective positions."Thus,
the instant case cannot just be dismissed simply because the defendants said so base on their own evaluation of the evidence
presented by the plaintiff.
If only to stress, as far as the Court is concerned the assertions of the defendants are merely conclusions they arrived at on their
own that [run] counter to the position of the plaintiffs. As such, the defendants will have to present their own evidence to substantiate
their claims.
More importantly, the Court cannot just disregard the evidence and testimonies of the witnesses presented by the plaintiffs. Further,
in order to ferret out the truth and determine the veracity of the assertions being made by the parties herein, it is best that the "other
side" be heard. It is only in allowing the defendants to present their evidence that this can be achieved so that the herein case
against them can be resolved judiciously.
In the end, it is for the Court to evaluate the evidence to be presented by the parties herein. The conclusions being forwarded by the
parties will have to be reckoned with what have been presented and not on their respective self-serving assertions.
Indeed, a demurrer to evidence is anchored on the claim that "upon the facts and the law the plaintiff has shown no right to relief"
(Sec. 1, Rule 33, Rules of Court). With respect to the herein case, there is no clear showing that plaintiffs Sps. Mahilum have no
right to the reliefs being sought by them. On the contrary, and if not opposed by contravening evidence by the defendants, their
causes of action may end up being supported by evidence that may merit rulings in their favor.
WHEREFORE, premises considered, the "Demurrer to Evidence" dated 11 November 2009 filed by defendants Sps. Edilberto and
Lourdes Ilano is DENIED for lack of merit.
SO ORDERED.17
Respondents filed a Motion for Reconsideration,18but the trial court denied the same in a February 24, 2010 Order.19
Ruling of the Court of Appeals
Respondents went up to the Court of Appeals (CA) via an original Petition for Certiorari.20 Docketed as CA-G.R. SP No. 113782,
the petition essentially insisted that since petitioner’s complaint failed to include an allegation that respondents were purchasers in
bad faith, then her complaint for annulment of sale failed to state a cause of action, which entitles them to a dismissal on demurrer;
and that in denying their demurrer, the trial court disregarded existing jurisprudence to the effect that where a complaint does not
contain all the facts constituting the plaintiff’s cause of action, it is subject to a motion to dismiss. In addition to seeking the reversal
of the trial court’s January 5, 2010 and February 24, 2010 Orders, respondents prayed for injunctive relief as well.
On July 15, 2010, the CA issued a Resolution21 denying respondents’ application for a temporary restraining order.
Petitioner filed her Comment to the Petition.
On February 2, 2011, the CA issued the assailed Decision, which contained the following decretal portion:
WHEREFORE, the above premises considered, the instant petition is GRANTED. The Orders of public respondent Regional Trial
Court of Las Piñas City, Branch 255 dated 5 January 2010 and 24 February 2010, respectively, are NULLIFIED and SET ASIDE.
Private respondents’ complaint for Annulment of Agreement and Deed of Absolute Sale, Specific Performance with Damages is
DISMISSED for lack of cause of action.
SO ORDERED.22
The CA held that –

A careful reading of private respondents’23 complaint before public respondent would show that private respondents indeed failed to
allege that petitioners24 were in bad faith or at least aw are of the misrepresentation of the vendor of the subject property at the time
they purchased the same.
Thus, absent an allegation in the subject complaint that petitioners were in bad faith or with notice of the vendor’s misrepresentation
at the time of sale or prior thereto, they are presumed to be innocent purchasers for value of the subject property.
Under the law, a title procured through fraud and misrepresentation can still be the source of a completely legal and valid title if the
same is in the hands of an innocent purchaser for value and in good faith. Again, how can public respondent render a valid
judgment when, based on the allegations in the complaint, petitioners are presumed to have bought the subject lot in good faith?
Stated differently, private respondents have no cause of action against petitioners.
In their comment or opposition to petitioners’ demurrer to evidence, private respondents argued that it is not accurate that they failed
to allege bad faith because paragraphs 13, 14, and 15 of their complaint indicated the evident bad faith of petitioners. However, a
review of said averments would only prove that petitioners became aware of the alleged fraud or misrepresentation after the
execution of the assailed agreement and deed of sale when private respondents confronted the former, and not before or during the
execution of the same. The Supreme Court held:
"A person is considered in law as an innocent purchaser for value when he buys the property of another, without notice that some
other person has a right or an interest in such property, and pays a full price for the same at the time of such purchase, or before he
has notice of the claims or interest of some other person in the property. A person dealing with registered land may safely rely on
the correctness of the certificate of title of the vendor/transferor, and the law will in no way oblige him to go behind the certificate to
determine the condition of the property."25
When the complaint alleges that private respondents did not sell the subject property to petitioners but does not allege that the latter
were purchasers in bad faith or with notice of the defect in the title of their vendors, there is a failure to state a cause of action.26 By
reason of this failure, petitioners are presumed to be innocent purchasers for value and in good faith, entitled to protection under the
law.
"In Spouses Chu, Sr. v. Benelda Estate Development Corporation, this Court pronounced that it is crucial that a complaint for
annulment of title must allege that the purchaser was aware of the defect in the title, so that the cause of action against him or her
will be sufficient. Failure to do so, as in the case at bar, is fatal for the reason that the court cannot render a valid judgment against
the purchaser who is presumed to be in good faith in acquiring said property."27
It was further held that a title issued to an innocent purchaser and for value cannot be revoked on the basis that the deed of sale
was falsified, if he or she had no knowledge of the fraud committed.28 Here, there is clearly no imputation that petitioners had
knowledge of the fraud committed during the execution of the assailed agreement and deed of sale. Furthermore, in the formal offer
of the testimony of private respondent Ruby Ruth, proving bad faith was not even among the purposes for which her testimony was
offered. Accordingly, the testimony itself did not show bad faith on the part of petitioners.
It is significant to note that in the subject complaint, formal offer of evidence, and oral testimony, only two things were established:
(1) private respondents did not sell the subject property to petitioners and (2) Teresa Perez breached the trust given to her by
private respondents. These facts cannot constitute a cause of action or relief against petitioners because, absent an allegation of
bad faith in the complain t, they are presumed to be innocent purchasers for value during the execution of the agreement and deed
of sale.
There is the established rule that if the defendant permits evidence to be introduced, without objection, which supp lies the
necessary allegations of a defective complaint, this evidence has the effect of curing the defects of such complaint, and a demurrer
thereafter is inadmissible on the ground that the complaint does not state fact s sufficient to constitute a cause of action. This rule,
however, cannot be applied in the instant case. Granting that petitioners did not object to the presentation of evidence of private
respondents, the latter still failed to cure the defect in their complaint since no evidence of bad faith on the part of petitioners was
presented before the court. Proofs of bad faith were all directed against Teresa Perez and her companion who introduced herself as
Ruby Ruth Serrano.
Although this Court relied on the transcript of stenographic notes quoted by petitioners, as complete records of the case are still with
public respondent, private respondents did not question in their Comment on the petition, the truthfulness of the statements quoted
therein. Hence, private respondents are deemed to have admitted the veracity of said transcript. Without an imputation [or] a
showing that petitioners were in bad faith or aware of the fraud perpetrated by Teresa Perez and her companion, no action can be
maintained against them.
In view of the foregoing, public respondent RTC committed grave abuse of discretion amounting to lack or excess of jurisdiction
when it denied the Demurrer to Evidence notwithstanding the complete absence of a cause of action against petitioners. Public
respondent RTC contravened and disregarded the settled and prevailing jurisprudence on the matter.29
Petitioner filed her Motion for Reconsideration,30 which the CA denied in its assailed July 28, 2011Resolution. Hence, the present
Petition.
Issues
Petitioner raises the following issues:
ON QUESTION OF LAW, WHETHER x x x FAILURE TO ALLEGE BAD FAITH IN THE COMPLAINT IS A FATAL DEFECT
CONSIDERING THAT THE SUBJECT DOCUMENTS (AGREEMENT/DEED OF ABSOLUTE SALE WITH RIGHT TO
REPURCHASE, AND UNNOTARIZED DEED OF SALE) WERE MERELY SIMULATED, FICTITIOUS AND FORGERY [sic], AND
HENCE, NULL AND VOID FROM THE BEGINNING.
II
ON QUESTION OF LAW, WHETHER x x x THE PETITIONER WAS DEPRIVED OF HER PROPERTY WHEN THE COURT OF
APPEALS GRANTED THE DEMURRER TO EVIDENCE ON THE GROUND THAT THERE WAS NO CAUSE OF ACTION WHEN
ONE OF THE ISSUED[sic] AGREED UPON BY THE PARTIES DURING THE PRE-TRIAL BEFORE THE RTC WAS WHETHER x x
x PRIVATE RESPONDENTS WERE PURCHASERS IN GOOD FAITH.
III
WHETHER x x x PETITIONER/S WERE PREVENTED FROM CONFRONTING THE PRIVATE RESPONDENTS AND THEIR
WITNESSES TO DETERMINE WHETHER x x x THEY REALLY DEALT WITH PETITIONER AND TO DETERMINE WHO WAS
THE IMPOSTOR WHO SIGNED THE SUBJECT AGREEMENT AND DEED OF ABSOLUTE SALE AND HENCE, ALLOW THE
RTC COURT TO DETERMINE WHETHER THE SUBJECT AGREEMENT AND DEED OF ABSOLUTE SALE WERE SIMULATED,
FICTITIOUS AND NULL AND VOID AND IF PRIVATE RESPONDENTS WERE REALLY PURCHASERS FOR VALUE IN GOOD
FAITH THAT WILL AF FECT THE OUTCOME OF THE INSTANT CASE.31
Petitioner’s Arguments
In praying that the assailed CA dispositions be set aside and that in effect the January 5, 2010 and February 24, 2010 Orders of the
trial court denying respondents’ demurrer to evidence be re instated, petitioner insists in her Petition and Reply32 that during the
pre-trial conference, one of the issues agreed upon by the parties to be resolved was whether respondents were buyers in good
faith, which was reflected in the trial court’s January 5, 2010 Order;33 that since the issue of good or bad faith has been agreed
upon by the parties as one of the matters to be tackled during trial, then the failure to allege bad faith in the complaint is deemed
cured, and the defense is deemed waived by the respondents with their assent given during pre-trial; and that the agreement and
deed of absolute sale, being forgeries, are null and void and without force and effect.
Petitioner adds that although a complaint which does not contain all the facts constituting the plaintiff’s cause of action is subject to a
motion to dismiss, the defect is cured if the defendant permits the introduction of evidence which supplies or remedies such
defect;34 thus, respondents’ assent to the framing of the issues during pre-trial and their failure to object to the presentation of
evidence on the issue of good or bad faith cu red her defective complaint.
Finally, petitioner contends that the grant of respondents’ demurrer amounts to a deprivation of property without due process of law,
as she was prevented from defending her ownership over the same by duly confronting the respondents and their witnesses and
proving that the agreement and deed of absolute sale were mere forgeries.
Respondents’ Arguments
Respondents, on the other hand, argue in their Comment35 that the CA was correct in declaring that petitioner’s complaint in Civil
Case No. LP-07-0109 failed to state a cause of action owing to her failure to allege that the property in question was purchased in
bad faith. They add that petitioner failed to present evidence during trial to the effect that they bought the subject property in bad
faith; that the scope of her evidence covered only her claim that she did not execute the subject agreement and deed of absolute
sale, and that these documents are fictitious and forged – she did not present evidence to show that they were buyers in bad faith.
Thus, they maintain that for failing to allege and prove bad faith on their part, the CA was correct in ordering the dismissal of Civil
Case No. LP-07-0109.
Our Ruling
The Court grants the Petition.
In granting demurrer, the CA failed to consider that title to the property remained in petitioner’s name; TCT 85533 was never
cancelled and no new title was issued in respondents’ name. As a matter of fact, what they did when petitioner annotated her
affidavit of loss upon TCT 85533 was to cause the annotation of an "affidavit of non-loss" afterward.
Since a new title was never issued in respondents’ favor and, instead, title remained in petitioner’s name, the former never came
within the coverage and protection of the Torrens system, where the issue of good or bad faith becomes relevant. Since
respondents never acquired a new certificate of title in their name, the issue of their good or bad faith which is central in an
annulment of title case is of no consequence; petitioner’s case is for annulment of the Agreement and Deed of Absolute Sale , and
not one to annul title since the certificate of title is still in her name. The jurisprudential bases for the CA’s pronouncement that there
is a failure to state a cause of action if the e is no allegation in the complaint that respondents were purchasers in bad faith – Castillo
v. Heirs of Vicente Madrigal36 and Heirs of Julian Tiro v. Philippine Estates Corporation37 – involved complaints for annulment of
new titles issued to the buyers ; they cannot apply to petitioner’s case where title remains in her name.
Petitioner’s case is to annul the agreement and deed of sale based on the allegation that they are forgeries, and that respondents
were parties to the fraud; since no new title was issued in respondents ’ favor, there is no new title to annul. Indeed, if the agreement
and deed of sale are forgeries, then they are a nullity and convey no title.38 The underlying principle is that no one can give what
one does not have. Nemo dat quod non habet .
In Sps. Solivel v. Judge Francisco, we held that:
x x x in order that the holder of a certificate for value issued by virtue of the registration of a voluntary instrument may be considered
a holder in good faith for value, the instrument registered should not be forged. When the instrument presented 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
assignee in the forged deed acquire any right or title to the property.
x x x The innocent purchaser for value protected by law is one who purchases a titled land by virtue of a deed executed by the
registered owner himself, not by a forged deed, as the law expressly states. x x x
In Instrade, Inc. v. Court of Appeals, we reiterated the said ruling maintaining that "[A]s early as Joaquin v. Madrid, x x x, we said
that in order that the holder of a certificate for value issued by virtue of the registration of a voluntary instrument may be considered
a holder in good faith and for value, the instrument registered should not be forged." Indubitably, therefore, the questioned Deed of
Absolute Sale did not convey any title to herein petitioners. Consequently, they cannot take refuge in the protection accorded by the
Torrens system on titled lands.
Thus, we hold that with the presentation of the forged deed, even if accompanied by the owner’s duplicate certificate of title, the
registered owner did not thereby lose his title, and neither does the assignee in the forged deed acquire any right or title to the said
property. x x x39
In this case, it is petitioner who must be protected under the Torrens system – as the registered owner of the subject property. "A
certificate of title serves as evidence of an indefeasible and incontrovertible title to the property in favor of the person whose name
appears therein. The real purpose of the Torrens system of land registration is to quiet title to land and put a stop forever to any
question as to the legality of the title."40
In Tenio-Obsequio v. Court of Appeals , we explained the purpose of the Torrens system and its legal implications to third persons
dealing with registered land, as follows:
The main purpose of the Torrens system is to avoid possible conflicts of title to real estate and to facilitate transactions relative
thereto by giving the public the right to rely upon the face of a Torrens certificate of title and to dispense with the need of inquiring
further, except when the party concerned has actual knowledge of facts and circumstances that should impel a reasonably cautious
man to make such further inquiry. Where innocent third persons, relying on the correctness of the certificate of title thus issued,
acquire rights over the property, the court cannot disregard such rights and order the total cancellation of the certificate. The effect
of such an outright cancellation would be to impair public confidence in the certificate of title, for everyone dealing with property
registered under the Torrens syst em would have to inquire in every instance as to whether the title has been regularly or irregularly
issued by the court . Every person dealing with registered land may safely rely on the correctness of the certificate of title issued
there for and the law will in no way oblige him to go beyond the certificate to determine the condition of the property.
The Torrens system was adopted in this country because it was believed to be the most effective measure to guarantee the integrity
of land titles and to protect their indefeasibility once the claim of ownership is established and recognized. If a person purchases a
piece of land on the assurance that the seller’s title thereto is valid, he should not run the risk of being told later that his acquisition
was ineffectual after all. This would not only be unfair to him. What is worse is that if this were permitted, public confidence in the
system would be eroded and land transactions would have to be attended by complicated and not necessarily conclusive
investigations and proof of ownership. The further consequence would be that land conflicts could be even more numerous and
complex than they are now and possibly also more abrasive, if not even violent. The Government, recognizing the worthy purposes
of the Torrens system, should be the first to accept the validity of titles issued there under once the conditions laid down by the law
are satisfied.
The Torrens system was intended to guarantee the integrity and conclusiveness of the certificate of registration, but the system
cannot be used for the perpetration of fraud against the real owner of the registered land. The system merely confirms ownership
and does not create it. It cannot be used to divest lawful owners of their title for the purpose of transferring it to another one who has
not acquired it by any of the modes allowed or recognized by law. Thus, the Torrens system cannot be used to protect a usurper
from the true owner or to shield the commission of fraud or to enrich oneself at the expense of another.41
A cursory examination of the record will show that petitioner’s action does not appear to be groundless. There are circumstances
which lead one to believe that respondents are not exactly innocent of the charge. Their failure to register the unnotarized and
undated deed of absolute sale is at the very least unusual; it is contrary to experience. It is uncharacteristic of a conscientious buyer
of real estate not to cause the immediate registration of his deed of sale as well as the issuance of a new certificate of title in his
name. Having supposedly paid a considerable amount (250,000.00) for the property, respondents certainly would have protected
themselves by immediately registering the sale and obtaining a new title in their name; but they did not. Even after petitioner caused
the annotation of her affidavit of loss, respondents did not register their supposed sale, but merely annotated an "affidavit of non-lo
ss." This, together with the fact that the deed of absolute sale is undated and unnotarized, places their claim that they are
purchasers in good faith seriously in doubt. The ruling in Rufloe v. Burgos42 comes to mind:
We cannot ascribe good faith to those who have not shown any diligence in protecting their rights, Respondents had know ledge of
facts that should have led them to inquire and investigate in order to acquaint themselves with possible defects in the title of the
seller of the property. However, they failed to do so. Thus, Leonarda, as well as the Burgos siblings, cannot take cover under the
protection the law accords to purchasers in good faith and for value. They cannot claim valid tit le to the property.
Moreover, the defense of indefeasibility of a Torrens title does not extend to a transferee who takes it with notice of a flaw in the title
of his transferor.1âwphi1 To be effective, the inscription in the regist ry must have been made in good faith. A holder in bad faith of a
certificate of title is not entitled to the protection of the law, for the law cannot be used as a shield for fraud.
We quote with approval the following findings of the trial court showing that the sale between the Burgos siblings and Leonarda is
simulated :
1. The sale was not registered, a circumstance which is inconceivable in a legitimate transfer. A true vendee would not brook any
delay in registering the sale in his favor. Not only because registration is the operative act that effects property covered by the
Torrens System, but also because registration and issuance of new title to the transferee, enable this transferee to assume
domiciliary and possessory rights over the property. These benefits of ownership shall be denied him if the titles of the property shall
remain in the name of vendor. Therefore, it is inconceivable as contrary to behavioral pattern of a true buyer and the empirical
knowledge of man to assume that a buyer who invested on the property he bought would be uninvolved and not endeavor to
register the property he bought. The nonchalance of Leonarda amply demonstrates the pretended sale to her, and the evident
scheme of her brother
Amado who invested on the property he bought.43
Most telling is respondents’ Amended Answer with Compulsory Counterclaim, which tends to admit and indicate that when the
December 4, 2003 Agreement with right of repurchase and unnotarized and undated Deed of Absolute Sale were executed, an
individual – who falsely represented herself to be petitioner – appeared and signed these documents. Thus, respondents alleged in
their amended answer that sometime in October 2003, Perez – accompanied by one Corazon Tingson (Tingson) " and a female
person who introduced herself as Ruby Ruth Serrano" – offered to sell to them the property covered by TCT 85533; that "in support
of the identity of the said Ruby Ruth Serrano, the original owner’s copies of the title (TCT No. T-85533), Declaration of Real
Property, Tax Clearance, Barangay Clearance, Community Tax Certificate with picture of Ruby Ruth Serrano attached therein" were
presented to respondent Edilberto Ilano (Edilberto); that upon being satisfied as to the "identity of the person who introduced herself
as Ruby Ruth Serrano," Edilberto instructed his secretary to verify the authenticity of the title from the Register of Deeds of Las
Piñas City and conduct an ocular inspection of the property; that " the person who introduced herself as Ruby Ruth Serrano "
obtained a cash advance of 50,000.00; that after verification confirmed that the property is indeed owned by and registered in the
name of Ruby Ruth Serrano, Edilberto – " believing in good faith that the person [with] whom he is dealing x x x is indeed the real
Ruby Ruth Serrano" – entered into the sale transaction; that petitioner’s affidavit of loss filed with the Registry of Deeds is false as
TCT 85533 was never lost but was entrusted to Perez who, together with Tingson "and another person herein named as ‘Jane Doe’
whose identity is yet to be established who introduced herself as Ruby Ruth Serrano ," came to respondents’ office to obtain a loan
because petitioner was in dire need of money as she admitted in her complaint.
Even at the level of the CA, respondents admitted, in their petition for certiorari, that they bought the property not from petitioner, but
from their "co-defendants who had a defective title" – presumably Perez and the impostor. The pertinent portion of their petition
reads:
Bad faith cannot be presumed. It must be established by clear evidence. And it appearing that the subject complaint is for recovery
and possession of a parcel of land, and that defendants bought it from their co-defendants who had a defective title, but does not
allege in the complaint that the purchasers were buyers in bad faith or with notice of the defect in the title of their vendors x x x44
The above allegations in respondents’ pleadings are certainly revealing. They already knew petitioner’s identity and how she looked,
having me t her even before the filing of the complaint – when petitioner confronted them and they showed her the agreement and
deed of sale. Thus, they should not have referred to the supposed seller as " another person herein named as ‘Jane Doe’ whose
identity is yet to be established who introduced herself as Ruby Ruth Serrano" or "the person who introduced herself as Ruby Ruth
Serrano" if indeed it was petitioner herself who appeared and signed the agreement and deed of sale in question. They should have
categorically alleged that they bought the property from petitioner herself if indeed this was so. Their ambiguous allegations
constitute a negative pregnant, which is in effect an admission.
Evidently, this particular denial had the earmark of what is called in the law on pleadings as a negative pregnant, that is, a denial
pregnant with the admission of the substantial facts in the pleading responded to which are not squarely denied. It was in effect an
admission of the averments it was directed at. Stated otherwise, a negative pregnant is a form of negative expression which carries
with it an affirmation or at least an implication of some kind favorable to the adverse party. It is a denial pregnant with an admission
of the substantial facts alleged in the pleading. Where a fact is alleged with qualifying or modifying language and the words of the
allegation as so qualified or modified are literally denied, it has been held that the qualifying circumstances alone are denied while
the fact itself is admitted.45
"If an allegation is not specifically denied or the denial is a negative pregnant, the allegation is deemed admitted." "Where a fact is
alleged with some qualifying or modifying language, and the denial is conjunctive, a 'negative pregnant' exists, and only the
qualification or modification is denied, while the fact itself is admitted." "A denial in the form of a negative pregnant is an ambiguous
pleading, since it cannot be ascertained whether it is the fact or only the qualification that is intended to be denied." "Profession of
ignorance about a fact which is patently and necessarily within the pleader's knowledge, or means of knowing as ineffectual, is no
denial at all.'46
Finally, petitioner's complaint in Civil Case No. LP-07-0109 clearly states that in the execution of the agreement and deed of
absolute sale, respondents and Perez acted in bad faith and connived in the forgery. Specifically, paragraph 18 of her complaint
states, as follows:
18. That by reason of the actuations of the defendants in facilitating the execution of the aforesaid falsified documents, and adamant
refusal to return to plaintiffs the duplicate original owner's copy of their title, which were all done with evident bad faith, the plaintiffs
suffered and continue to suffer sleepless nights, wounded feelings, besmirched reputation, serious anxiety and other similar
feelings, which, when quantified, can reasonably be compensated with the sum of Fifty Thousand (₱50,000.00) Pesos, as moral
damages;47
Thus, the CA' s pronouncement - that nowhere in the complaint is it alleged that respondents were purchasers in bad faith - is
patently erroneous. The primary ground for reversing the trial court's denial of respondents' demurrer is therefore completely
unfounded. Besides, the action itself, which is grounded on forgery, necessarily presupposes the existence of bad faith.
With the foregoing pronouncement, the Court finds no need to tackle the other issues raised by petitioner. They are rendered moot
and irrelevant by the view taken and manner in which the case was resolved.
WHEREFORE, the Petition is GRANTED. The assailed February 2, 2011 Decision and July 28, 2011 Resolution of the Court of
Appeals in CA-G.R. SP No. 113782 are REVERSED and SET ASIDE. The case is remanded to the Regional Trial Court of Las
Pifias City, Branch 255 in Civil Case No. LP-07-0109 for proper disposition.
SO ORDERED.
MARIANO C. DEL CASTILLO

Associate Justice
Footnotes
* Per Special Order No. 2067 dated June 22, 2015.
** Per Special Order No. 2056 dated June 10, 2015.
1 Rollo, pp. 8-29.
2 Id. at 30-43; penned by Associate Justice Mariflor P. Punzalan Castillo and concurred in by Associate Justices Josefina Guevara-
Salonga and Franchito N. Diamante.
3 Id. at 110-112; penned by Judge Raul Bautista Villanueva.
4 Id. at 129-131.
5 Id. at 44-46.
6 Id. at 60-61.
7 Id. at 61.
8 Id.
9 Id. at 62-63.
10 Id. at 64-65.
11 Id. at 66-71.
12 Id. at 68-69.
13 Id. at 85-94.
14 Id. at 95-103.
15 Id. at 104-106.
16 Id. at 110-112.
17 Id. at 111-112.
18 Id. at 113-120.
19 Id. at 129-131.
20 Id. at 132-151.
21 Id. at 152-153.
22 Id. at 42.
23 Herein petitioner and her husband.
24 Herein respondents.
25 Citing Spouses Chu, Sr. v. Benelda Estate Development Corporation , 405 Phil. 936 (2001).
26 Citing Castillo v. Heirs of Vicente Madrigal, G.R. No. 62650, June 27, 1991, 198 SCRA 556.
27 Citing Heirs of Julian Tiro v. Philippine Estates Corporation, 585 Phil. 306 (2008).
28 Id.
29 Rollo, pp. 37-42.
30 Id. at 47-55.
31 Id. at 19-20.
32 Id. at 196-199.
33 See note 15.
34 Citing Pascua v. Court of Appeals, 262 Phil. 278 (1990).
35 Rollo, pp. 186-191.
36 Supra note 24.
37 Supra note 25.
38 Fudot v. Cattleya Land, Inc ., 559 Phil. 756, 766-767 (2007); Salomon v. Intermediate Appellate Court , 263 Phil. 1068, 1078-
1081 (1990).
39 Spouses Bernales v. Heirs of Julian Sambaan, 624 Phil. 88, 104-105 (2010).
40 Peralta v. Heirs of Abalon, G.R. No. 183448, June 30, 2014, citing Pioneer Insurance & Surety Corporation v. Heirs of Vicente
Coronado, 612 Phil. 573 (2009). Italics supplied
41 Id.
42 597 Phil. 261 (2009)
43 Id. at 272-273.
44 Rollo, p. 144.
45 Republic of the Philippines v. Sandiganbayan, 453 Phil. 1059, 1107 (2003).
46 Venzon v. Rural Bank of Buenavista (Agusan de/ Norte), Inc., G.R. No. 178031, August 28, 2013, 704 SCRA 138, 147-148.
47 Rollo, pp. 68-69.

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[ G.R. No.

208450, June 05, 2017 ]

[G.R. No. 208497]

Spouses Aboitiz filed a Reply[67] reiterating their arguments in the Petition.

Spouses Po filed a Reply.[72]

For resolution are the following issues:

Second, whether the action is barred by prescription,

Third, whether the doctrines of estoppel and laches apply;

The Spouses Po's action has not prescribed.

(1) Upon a written contract;

(2) Upon an obligation created by law;

(3) Upon a judgment.

Thus, it cannot be said that they are barred by laches.

The Regional Trial Court thus held:

Rule 132, Section 30 of the Rules of Court provides that:

The Mariano Heirs are not indispensable parties.

Rule 3, Section 7 of the Revised Rules of Court provides:

Section 44 of Presidential Decree No. 1529[218] states:

Carpio, (Chairperson), and Peralta, JJ., concur.

[5] Rollo (G.R. No. 208450), pp. 55-56.

[6] Id. at 60-61.

[7] Id. at 11-40-A.

[8] Rollo (G.R. No. 208497), pp. 10-27.

[9] Rollo (G.R. No. 208450), p. 43.

[10] Id. at 45.

[12] Id. at 43.

[13] Id. at 43-44.

[15] Id. at 44.

[19] Rollo (G.R. No. 208450), p. 43.

[20] Id. at 44.

[21] Id. at 87.

[22] Id. at 44.

[26] Id. at 16, Petition for Review of Spouses Aboitiz.

[28] Id. at 45.

[34] Id. at 42.

[35] Id. at 175.

[36] Id. at 57.

[37] Id. at 48-49.

[38] Id. at 54.

[39] Id. at 49-50.

[40] Id. at 49.

[41] Id. at 51-52.

[42] Id. at 50.

[43] Id. at 55-56.

[45] Id. at 11-40-A.

[46] Id. at 23.

[47] Id. at 21.

[48] Id. at 23.

[49] Id. at 27-28.

[52] Id. at 32.

[53] Id. at 25.

[54] Id. at 29.

[55] Id. at 32.

[58] Id. at 34.

[59] Id. at 275-288.

[60] Id. at 282.

[61] Id. at 283-284.

[62] Id. at 284.

[63] Id. at 285.

[66] Id. at 287-288.

[68] Rollo (G.R. No. 208497), p. 18.

[70] Id. at 86-106.

[71] Id. at 103.