LTD – The Land Registration Commission and Its Registries of Deeds
[17] Naawan Community Rural Bank v. CA
G.R No. 128573, January 13, 2003, J. Corona
SUMMARY: After respondents purchased a house and lot from Comayas and
having a TCT issued in their names, they discovered that the property was also
declared for tax purposes in the name of petitioner. Apparently, petitioner purchased
the property at a public auction as the highest bidder, and had the Deed of Final
Conveyance registered under Act No. 3344 and recorded in the Register of Deeds.
Thus, respondents filed an action for quieting of title.
The Supreme Court ruled that when respondents purchased the property, it was
covered by the Torrens System. In dealing with the registered land, respondents
were not required by law to go beyond the register to determine the legal condition of
the property. Otherwise, it would defeat the primary object of the Torrens System
which is to make the Torrens Title indefeasible and valid against the whole world.
But since respondents still made the necessary inquiries, they should be considered
as innocent purchasers for value and in good faith.
DOCTRINE:
 GR: Persons dealing with registered land have the legal right to rely on the
face of the Torrens Certificate of Title and to dispense with the need to
inquire further
o XPN: Except when the party concerned has actual knowledge of
facts and circumstances that would impel a reasonably cautious
man to make such inquiry
FACTS:
 On April 30, 1988, Guillermo Comayas offered to sell a 340 sqm house and
lot in Cagayan de Oro City to respondents Sps. Lumo
 Respondents made inquiries at the Register of Deeds of Cagayan de Oro
City and the Bureau of Lands on the legal status of the vendor’s title where
they found out that:
o The property was mortgaged for P8,000 to a certain Mrs. Galupo
o The owner's copy of the Certificate of Title to said property was in
her possession
 Respondents then directed Comayas to redeem the property from Galupo
o A release of the adverse claim of Galupo was annotated on the
TCT
 Before the said release, Comayas and respondents executed a Deed of
Absolute Sale
o The Deed was registered and inscribed on the old TCT
o A new TCT was then issued in favor of respondents
 After obtaining their TCT, respondents requested the issuance of a new Tax
Declaration Certificate in their names
o However, they discovered that the property was also declared for
tax purposes in the name of Naawan Community Rural Bank Inc.
 Apparently, on February 7, 1983, Comayas obtained a P15,000 loan from
petitioner bank using the property as security
 However, Comayas failed to pay
 Thus, the real estate mortgage was foreclosed and the property was sold at
a public auction
o Petitioner bank was the highest bidder
 On April 17, 1984, the property was registered under the Land Registration
Act
 When the redemption period lapsed on Sept. 5, 1986, the Deed of Final
Conveyance was registered under Act No. 3344 and recorded in the
registration book of the Register of Deeds
 The bank later filed an action for ejectment against Comayas and was
issued a writ of execution in its favor
o When the writ was served, the property was already being
occupied by respondents
 Respondents then filed an action for quieting of title before RTC
 RTC ruled in favor of respondents
o Respondents were purchasers for value and in good faith
o RTC declared them as the absolute owners and possessors of the
house and lot
 CA affirmed
 Hence, this petition
ISSUES/RATIOS:
1. W/N the registration of the sheriff’s Deed of Finial Conveyance in the Registry of
Deeds is effective against respondents – NO
Petitioner contends:
 The earlier registration of the sheriff's Deed of Final Conveyance in the day
book under Act 3344 should prevail over the later registration of
respondents’ Deed of Absolute Sale
Court:
 Where a person claims to have superior proprietary rights over another on
the ground that he derived his title from a sheriff's sale registered in the
Registry of Property, Art. 1473 (now Art. 1544) of the Civil Code will apply
only if said execution sale of real estate is registered under Act No. 496
 In this case, the property was still untitled when it was already
acquired by petitioner by virtue of a Final Deed of Conveyance
 On the other hand, when respondents purchased the same property, it
was covered by the Torrens System.
Petitioner contends:
 The registration of an instrument involving unregistered land in the Registry
of Deeds creates constructive notice and binds third person who may
subsequently deal with the same property
Court:
LTD – The Land Registration Commission and Its Registries of Deeds
 At the time of the execution and delivery of the sheriff's Deed of Final o However, the claim of Galupo was eventually settled and the
Conveyance on Sept. 5, 1986, the property was already covered by the adverse claim previously annotated on the title was cancelled
Land Registration Act and its OCT already entered in the registration book  Thus, since they made the necessary inquiries, respondents did not
of the Register of Deeds of as of April 17, 1984 have to go beyond the certificate of title.
o Thus, from April 17, 1984, the property was already under the o Otherwise, the efficacy and conclusiveness of the Torrens
operation of the Torrens System Certificate of Title would be rendered futile and nugatory
 Under the Torrens System, registration is the operative act that gives  Therefore, respondents should be considered as innocent purchasers
validity to the transfer or creates a lien upon the land for value and in good faith
 Moreover, the issuance of a certificate of title had the effect of
relieving the land of all claims except those noted thereon DISPOSITIVE: Petition DENIED.
 Accordingly, in dealing with the registered land, respondents were not
required by law to go beyond the register to determine the legal
condition of the property
o To require them to do so would defeat the primary object of the
Torrens System which is to make the Torrens Title indefeasible
and valid against the whole world

2. W/N respondents are considered buyers in good faith – YES

Petitioner contends:
 The due and proper registration of the sheriff's Deed of Final Conveyance
on December 2, 1986 amounted to constructive notice to respondents.
 Thus, when respondents bought the property on May 17, 1988, they were
deemed to have purchased the property with the knowledge that it was
already registered in the name of petitioner

Court:
 Mere registration of title in case of double sale is not enough
o Good faith must concur with the registration
 The “priority in time" principle being invoked by petitioner is misplaced
o Its registration referred to land not within the Torrens System but
under Act No. 3344.
o On the other hand, when respondents bought the property, it
was already registered under the Torrens System
 GR: Persons dealing with registered land have the legal right to rely on the
face of the Torrens Certificate of Title and to dispense with the need to
inquire further
o XPN: Except when the party concerned has actual knowledge of
facts and circumstances that would impel a reasonably cautious
man to make such inquiry
 In this case, before respondents bought the property from Comayas,
inquiries were made with the Registry of Deeds and the Bureau of
Lands regarding the status of the vendor's title.
o No liens or encumbrances were found to have been annotated on
the certificate of title.
o Respondents were also not aware of any adverse claim or lien on
the property other than the adverse claim of a certain Galupo to
whom Comayas had mortgaged the property