G.R. No.

204280

EVELYN V. RUIZ, Petitioner

vs.
BERNARDO F. DIMAILIG, Respondent

DECISION

DEL CASTILLO, J.:

This Petition for Review on Certiorari assails the October 22, 2012 Decision 1 of the Court of Appeals (CA)
in CA-GR. CV No. 95046 which reversed and set aside the November 26, 2009 Decision 2 and the March
19, 2010 Order3 of the Regional Trial Court (RTC) of Cavite City, Branch 16 in Civil Case No. N-7573. The
CA declared void the Real Estate Mortgage (REM) constituted on the property covered by Transfer
Certificate of Tit1e (TCT) No. T-361747.

Factual Antecedents

Respondent Bernardo F. Dimailig (Bernardo) was the registered owner of a parcel ofland covered by TCT
No. T-361747 located inAlapan, Imus, Cavite.4 In October 1997, he entrusted the owner’s copy of the said
TCT to his brother, Jovannie,5 who in turn gave the title to Editha Sanggalang (Editha), a broker, for its
intended sale. However, in January 1998, the property was mortgaged to Evelyn V. Ruiz (Evelyn) as
evidenced by a Deed of REM6 without Bernardo’s knowledge and consent. Hence, Bernardo instituted this
suit for annulment of the Deed of REM.7

In her Answer,8 Evelyn contended that she met Jovannie when she inspected the subject property and
assured her that Bernardo owned the property and his title thereto was genuine. She further claimed that
Jovannie mortgaged the property to her. She also insisted that as a mortgagee in good faith and for value,
the REM cannot be annulled and that she had the right to keep the owner's copy of TCT No. T-3617 4 7
until the loan was fully paid to her.

During pre-trial, the parties arrived at the following stipulations:9

1. That x x x it was not [Bernardo] who signed as mortgagor in the subject Deed of Real Estate Mortgage.

2. That there was a demand letter sent to [Evelyn] x x x to cause a release of mortgage on the subject
property.

3. The x x x controversy [was referred] to the Barangay for conciliation and mediation.

[4.] That Jovannie x x x is the brother of [Bernardo].

Thereafter, trial on the merits ensued.

Bernardo testified that when he went abroad on October 19, 1997, he left the owner's copy of the TCT of
the subject property to Jovannie as they intended to sell the subject property. 10 However, on January 26,
1998, a REM was executed on the subject property. Bernardo argued that his alleged signature appearing
therein was merely forged11 as he was still abroad at that time. When he learned in September or
November 1998 that Editha mortgaged the subject property, be personally told Evelyn that the REM was
fake and demanded the return of his title. Not heeding his request, he filed a complaint for estafa through
falsification of public document against Editha and Evelyn, The criminal case against Evelyn was
dismissed12 while Editha was found guilty as charged.13

Jovannie also took the witness stand. He testified that sometime in December 1997, Editha convinced him
to surrender the owner's copy of TCT No. T-361747 which she would show her buyer.14 Subsequently,
however, Editha informed him that she misplaced the title. Hence, he executed in August 1998 15 an
affidavit of loss and registered it with the Register of Deeds (RD). 16 In September 1998, Editha finally
admitted that the title was not lost but was in Evelyn's possession because of the REM. 17 Upon learning
this, Jovannie inquired from Evelyn if Editha mortgaged Bernardo's property to her. Purportedly, Evelyn
confirmed said mortgage and told him that she would not return the owner's copy of TCT No. T-361747
unless Editha pay the loan,18 Jovannie also alleged that he told Evelyn that Bernardo's alleged signature in
the REM was not genuine since he was abroad at the time of its execution.19

On the other hand, Evelyn maintained that she was a mortgagee in good faith. She testified that sales
agents - Editha, Corazon Encarnacion, and a certain Parani, - and a person introducing himself as
"Bernardo" mortgaged the subject property to her for ₱300,000.00 payable within a period of three
months.20 She asserted that even after the expiration of said period, "Bernardo" failed to pay the loan. 21

Evelyn narrated that before accepting the mortgage of the subject property, she, the sales agents, her
aunt, and "Bernardo," visited the property. She pointed out that her companions inspected it while she
stayed in the vehicle as she was still recuperating from an operation.22 She admitted that she neither
verified from the neighborhood the owner of the property nor approached the occupant thereof. 23

Moreover, Evelyn asserted that when the Deed of REM was executed, the person who introduced himself
as Bernardo presented a community tax certificate and his picture as proof of identity.24 She admitted
that she did not ask for any identification card from "Bernardo."25

Contrary to the allegation in her Answer that Jovannie mortgaged the property, Evelyn clarified that she
met Jovannie for the first time when he went to her house and told her that Bernardo could not have
mortgaged the property to her as he was abroad.26

Corazon Abella Ruiz (Corazon), the sister-in-law of Evelyn, was presented to corroborate her testimony.
Corazon averred that in January 1998, she accompanied Evelyn and several others in inspecting the
subject property.27 The day after the inspection, Evelyn and '"Bernardo'' executed the Deed of REM in the
office of a certain Atty. Ignacio; Evelyn handed ₱300,000.00 to Editha, not to "Bernardo;" 28 in turn, Editha
handed to Evelyn the owner's copy of TCT No. T-361747.29

Ruling of the Regional Trial Court

On November 26, 2009, the RTC dismissed the Complaint. It held that while Bernardo was the registered
owner of the subject property, Evelyn was a mortgagee in good faith because she was unaware that the
person who represented himself as Bernardo was an impostor. It noted that Evelyn caused the verification
of the title of the property with the RD and found the same to be free from any lien or encumbrance.
Evelyn also inspected the property and met Jovannie during such inspection. Finally, the RTC declared that
there was no showing of any circumstance that would cause Evelyn to doubt the validity of the title or the
property covered by it. In fine, Evelyn did all that was necessary before parting with her money and
entering into the REM.
On March 19, 2010, the RTC denied Bernardo's Motion for Reconsideration. Thus, he appealed to the CA.

Ruling of the Court of Appeals

On October 22, 2012, the CA rendered the assailed Decision reversing and setting aside the RTC Decision.
The decretal portion of the CA Decision reads:

WHEREFORE, the appeal is GRANTED. The assailed dispositions of the RTC are REVERSED and SET ASIDE.
The complaint of Bernardo F. Dimailig is GRANTED. The Deed of Real Estate Mortgage constituted on the
real property covered by TCT No. T-361747 of the Registry of Deeds for the Province of Cavite, registered
in his name, is DECLARED null and void. Evelyn V. Ruiz is ORDERED to reconvey or return to him the
owner's duplicate copy of the said title. His claims for the payment of attorney's fees and costs of suits
are DENIED. Costs against Evelyn V. Ruiz.

SO ORDERED.30

The CA held that the "innocent purchaser (mortgagor in this case) 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."31 Since the Deed of REM was forged, and the title to the subject property is still in the name of the
rightful owner, and the mortgagor is a different person who only pretended to be the owner, then Evelyn
cannot seek protection from the cloak of the principle of mortgagee in good faith. The CA held that in this
case, "the registered owner will not personally lose his title." 32

The CA further decreed that Evelyn's claim of good faith cannot stand as she failed to verify the real
identity of the person introduced by Editha as Bernardo. It noted that the impostor did not even exhibit
any identification card to prove his identity; and, by Evelyn's admission, she merely relied on the
representation of Editha relative to the identity of "Bernardo." It also held that Evelyn transacted only
with Editha despite the fact that the purported owner was present during the inspection of the property,
and during the execution of the REM.

In sum, the CA ruled that for being a forged instrument, the Deed of REM was a nullity, and the owner's
copy of TCT No. T-361747 must be returned to its rightful owner, Bernardo.

Issue

Hence, Evelyn filed this Petition raising the sole assignment of error as follows:

[T]he Court of Appeals erred in holding that petitioner is not a mortgagee in good faith despite the
presence of substantial evidence to support such conclusion of fact. 33

Petitioner’s Arguments

Petitioner insists that she is a mortgagee in good faith. She claims that she was totally unaware of the
fraudulent acts employed by Editha, Jovannie, and the impostor to obtain a loan from her. She stresses
that a person dealing with a property covered by a certificate of title is not required to look beyond what
appears on the face of the title.

Respondent’s Arguments
Bernardo, on his end, contends that since the person who mortgaged the property was a mere impostor,
then Evelyn cannot claim that she was a mortgagee in good faith. This is because a mortgage is void where
the mortgagor has no title at all to the property subject of such mortgage.

Bernardo asserts that there were circumstances that should have aroused suspicion on the part of Evelyn
relative to the mortgagor's title over the property. He specifies that throughout the negotiation of the
mortgage, Evelyn transacted only with Editha, not with "Bernardo," despite the fact that Editha and the
other real estate agents who assisted Evelyn in the mortgage transaction were not armed with a power
of attorney.

Bernardo likewise stresses that although Evelyn caused the inspection of the subject property, she herself
admitted that she did not alight from the vehicle during the inspection, and she failed to verify the actual
occupant of the property.

Our Ruling

The Petition is without merit.

As a Rule, the issue of whether a person is a mortgagee in good faith is not within the ambit of a Rule 45
Petition.1âwphi1 The determination of presence or absence of good faith, and of negligence are factual
matters, which are outside the scope of a petition for review on certiorari.34 Nevertheless, this rule allows
certain exceptions including cases where the RTC and the CA arrived at different or conflicting factual
findings,35 as in the case at bench. As such, the Court deems it necessary to re-examine and re-evaluate
the factual findings of the CA as they differ with those of the RTC.

No valid mortgage will arise unless the mortgagor has a valid title or ownership over the mortgaged
property. By way of exception, a mortgagee can invoke that he or she derived title even if the mortgagor's
title on the property is defective, if he or she acted in. good faith. In such instance, the mortgagee must
prove that no circumstance that should have aroused her suspicion on the veracity of the mortgagor's
title on the property was disregarded.36

Such doctrine of mortgagee in good faith presupposes "that the mortgagor, who is not the rightful owner
of the property, has already succeeded in obtaining a Torrens title over the property in his name and that,
after obtaining the said title, he succeeds in mortgaging the property to another who relies on what
appears on the said title."37 In short, the doctrine of mortgagee in good faith assumes that the title to the
subject property had already been transferred or registered in the name of the impostor who thereafter
transacts with a mortgagee who acted in good faith. In the case at bench, it must be emphasized that the
title remained to be registered in the name of Bernardo, the rightful and real owner, and not in the name
of the impostor.

The burden of proof that one is a mortgagee in good faith and for value lies with the person who claims
such status. A mortgagee cannot simply ignore facts that should have put a reasonable person on guard,
and thereafter claim that he or she acted in good faith under the belief that the mortgagor's title is not
defective.38 And, such good faith entails an honest intention to refrain from taking unconscientious
advantage of another.39

In other words, in order for a mortgagee to invoke the doctrine of mortgagee in good faith, the impostor
must have succeeded in obtaining a Torrens title in his name and thereafter in mortgaging the property.
Where the mortgagor is an impostor who only pretended to be the registered owner, and acting on such
pretense, mortgaged the property to another, the mortgagor evidently did not succeed in having the
property titled in his or her name, and the mortgagee cannot rely on such pretense as what appears on
the title is not the impostor's name but that of the registered owner.40

In this case, Evelyn insists that she is a mortgagee in good faith and for value. Thus, she has the burden to
prove such claim and must provide necessary evidence to support the same. Unfortunately, Evelyn failed
to discharge her burden.

First, the Deed of REM was established to be a forged instrument. As aptly discussed by the CA, Bernardo
did not and could not have executed it as he was abroad at the time of its execution, to wit:

Verily, Bernardo could not have affixed his signature on the said deed on January 26, 1998 for he left the
Philippines on March 21, 1998. Not only that, his signature on his Seafarer’s Identification and Record
Book is remarkably different from the signature on the assailed mortgage contract. The variance is obvious
even to the untrained eye. This is further bolstered by Evelyn’s admission that Bernardo was not the one
who represented himself as the registered owner of the subject property and was not the one who signed
the questioned contract. Thus, there can be no denying the fact that the signature on the Deed of Real
Estate Mortgage was not affixed or signed by the same person. 41

In fact, during pre-trial, both parties agreed that it was not Bernardo who signed as the mortgagor in the
Deed of REM. It was only an impostor - representing himself as Bernardo - who mortgaged the property.
This impostor is not only without rightful ownership on the mortgaged property, he also has no Torrens
title in his own name involving said property.

Simply put, for being a forged instrument, the Deed of REM is a nullity and conveys no title. 42

Second, Evelyn cannot invoke the protection given to a mortgagee in good faith. As discussed, the title to
the subject property remained registered in the name of Bernardo. It was not transferred to the
impostor's name when Evelyn transacted with the latter. Hence, the principle of mortgagee in good faith
finds no application; correspondingly, Evelyn cannot not seek refuge therefrom.

Third, even assuming that the impostor has caused the property to be titled in his name as if he had
rightful ownership thereof, Evelyn would still not be deemed a mortgagee in good faith. This is because
Evelyn did not take the necessary steps to dete1mine any defect in the title of the alleged owner of the
mortgaged property. She deliberately ignored pertinent facts that should have aroused suspicion on the
veracity of the title of the mortgagor "Bernardo."43

One, while '"Bernardo" introduced himself to Evelyn as the owner of the property, he did not present any
proof of identification. To recall, he only exhibited his co1rununity tax certificate and a picture when he
introduced himself to Evelyn. ''Bernardo's" failure to sufficiently establish his identity should have aroused
suspicion on the part of Evelyn whether the person she was transacting with is the real Bernardo or a
mere impostor. She should have investigated further and verified the identity of ''Bernardo" but she failed
to do so. She even admitted that she did not at all ask for any identification card from "'Bernardo."

Two, Evelyn also ignored the fact that "Bernardo'' did not participate in the negotiations/transactions
leading to the execution of the Deed of REM. Notably, no power of attorney was given to Editha who
supposedly transacted in behalf of Bernardo. Despite "Bernardo's" presence during the ocular inspection
of the property and execution of the mortgage contract, it was Editha who transacted with Evelyn. As
gathered from the testimony of Corazon, after the execution of the deed, Evelyn handed the loan amount
of ₱300,000.00 to Editha, not to "Bernardo," and it was Editha who handed to Evelyn the owner's copy of
TCT No. T-361747.

Three, Evelyn likewise failed to ascertain the supposed title of "Bernardo" over the property, Evelyn
admitted that during the ocular inspection, she remained in the vehicle. She did not inquire from the
subject property's occupant or from the occupants of the surrounding properties if they knew "Bernardo"
and whether or not he owned the subject property.

Notably, the RTC misapprehended certain facts when it held that Evelyn inspected the property and met
Jovannie during the inspection. By her own account, Evelyn clarified that she met Jovannie for the first
time only when the latter visited her house to inform her that an impostor mortgaged Bernardo's property
to her.

Four, the Court observes that Evelyn hastily granted the loan and entered into the mortgage contract. As
also testified by Corazon, a day after the supposed ocular inspection on the property, Evelyn and
"Bernardo" executed the Deed of REM even without Evelyn verifying the identity of the property's
occupant as well as the right of the mortgagor, if any, over the same. Indeed, where the mortgagee acted
with haste in granting the loan, without first determining the ownership of the property being mortgaged,
the mortgagee cannot be considered as an innocent mortgagee in good faith.44

Thus, considering that the mortgage contract was forged as it was entered into by Evelyn with an
impostor, the registered owner of the property, Bernardo, correspondingly did not lose his title thereon,
and Evelyn did not acquire any right or title on the property and cannot invoke that she is a mortgagee in
good faith and for value.45

WHEREFORE, the Petition is DENIED. Accordingly, the October 22, 2012 Decision of the Court of Appeals
in CA·G.R. CV No. 95046 is AFFIRMED.

SO ORDERED.

G.R. No. 179543 October 6, 2010

CAMPER REALTY CORP., Petitioner,

vs.
MARIA NENA PAJO-REYES represented by her Attorney-in-Fact Eliseo B. Ballao, AUGUSTO P. BAJADO,
RODOLFO PAJO and GODOFREDO PAJO, JR., Respondents.

DECISION

CARPIO MORALES, J.:

Rodolfo Pajo (Rodolfo) caused the notarization on March 27, 1974 by Atty. Camilo Naraval of a Special
Power of Attorney (SPA) executed by him and purportedly by his four siblings Maria Nena Pajo Reyes
(Nena), Godofredo, Jr. (Godofredo), Tito (Tito), and Isaias (Isaias). The SPA authorized Rodolfo to sell a
parcel of land (the property) containing an area of 8,060 square meters, situated in Catalunan Pequeño,
Davao City, and covered by Transfer Certificate of Title (TCT) No. T-41086 in the name of the siblings.

A day after the notarization of the SPA or on March 28, 1974, Rodolfo sold the property to Ligaya Vda. De
Bajado (Ligaya) who thereafter caused the cancellation of the title thereto and the issuance on April 1,
1974 of TCT No. T-43326 in her name.

Two days after he notarized the SPA, Atty. Naraval observed that all the signatures therein, except that of
Rodolfo, were forged, drawing him to write Rodolfo’s co-owners respecting his cancellation of the SPA
from his notarial register.

After Ligaya passed away, the property was bequeathed to her son-respondent Augusto Bajado (Augusto)
via Partition Agreement dated June 14, 1985. Ligaya’s title was thereafter cancelled and TCT No. T- 118270
was, in its stead, issued on July 16, 1986 in the name of Augusto.

In 1992, Augusto caused the division of the property into two. Before the completion of the technical
survey of the property or on August 31, 1992, Augusto sold the bigger portion thereof consisting of 7,420
square meters, later covered by TCT No. 185958 issued on December 11, 1992 still in his name, to Camper
Realty Corporation (petitioner). Augusto retained ownership of the remaining 640 square meters of the
property (covered by TCT No. 185959 in his name.

By Augusto’s claim, despite his sale of the 7,420 square meter lot to petitioner, petitioner acquiesced to
the issuance of the title in his name since its representative, Jose Campo, was still out of the country and
he would thus not be available to sign the pertinent documents to effect the transfer. TCT No. 195213
was finally issued in petitioner’s name on May 5, 1993.

On April 2, 1993, 19 years after Rodolfo’s co-owners of the property were notified two days after the
notarization of SPA of the forged signatures, Nena, Rodolfo’s sister-co-owner, filed a complaint against
Augusto and her brothers Rodolfo and Godofredo, Jr. for "declaration of nullity and/or inexistence of
contracts, cancellation of title, quieting of title and possession, damages and attorney’s fees with prayer
for writ of preliminary injunction and a temporary restraining order,"1 before the Regional Trial Court (RTC)
of Davao City. Godofredo, Jr. was impleaded as defendant allegedly because he refused to be a co-
plaintiff.

Nena alleged that only her brother Godofredo, Jr. remained as co-owner, her other brothers Rodolfo and
Tito having ceded to her their respective shares in the property by a notarized Deed of Confirmation on
May 5, 1976; and her brother Isaias had died without issue.

By Order of April 7, 1993, the RTC issued a Temporary Restraining Order restraining the "defendants
Augusto P. Bajado, his privies and all persons working for him or under his control or order to cease and
desist from committing acts of harassment against the plaintiff (Nena) . . . "2

On learning of Augusto’s sale of part of his interest in the property to petitioner, Nena, by Amended
Complaint dated April 20, 1993, impleaded petitioner as a necessary party. Nena contended that no right
could have been transmitted to Ligaya and the subsequent transferees, the SPA being a forged document.

By Decision of September 5, 1997,3 Branch 16 of the Davao RTC dismissed Nena’s complaint, disposing as
follows:
PREMISES CONSIDERED, judgment, is hereby rendered:

1) dismissing plaintiff’s complaint against defendants Augusto Bajado and Camper Realty Corporation;

2) ordering defendant Rodolfo Pajo to pay plaintiff the sums of:

a) ₱50,000.00 as moral damages;

b) ₱10,000.00 as exemplary damages; and

c) ₱10,000.00 as attorney’s fees; and

3) ordering the dismissal of defendants Augusto Bajado and Camper Realty Corporation counterclaims.

SO ORDERED. (underscoring supplied)4

The trial court, albeit finding that Rodolfo’s co-owners’ signatures on the SPA were forged, held that Nena
is guilty of laches and declared the validity of the transfer of the property to Augusto by way of judicial
partition, and of the subsequent sale to petitioner in this wise:

Titles to the property were already under the names of the transferors at the time of the transfer – From
Ligaya Vda. de Bajado to Augusto Bajado thru succession/partition and from Augusto Majado to Camper
Realty Corporation by Deed of Sale. On this basis, the Court cannot declare the nullity or inexistence of
the succeeding contracts, to wit: Partition Agreement and the Deed of Sale executed by Augusto Bajado
to Camper Realty Corporation, much more cancel the Certificate of Title which at present is under
Camper’s name for lot previously titled No. 185958 now 195213 and Augusto Bajado for the smaller lot
under Title No. 185959. This aside, the Court also finds plaintiff Maria Nena Pajo-Reyes guilty of laches –
defined as the failure or neglect to do that which, by exercising due diligence could or should have been
done earlier; x x x5 (underscoring supplied)

On appeal, the Court of Appeals (CA), by the challenged Decision,6 reversed the trial court’s decision. It
demurred to the trial court’s finding that Nena is guilty of laches. It held that Augusto, as an heir of Ligaya,
did not acquire a better right over the property, viz:

x x x There was no valid transfer to Ligaya and, accordingly, her son (Augusto), the appellee, did not
acquire any right over the subject lot since an heir merely steps into the shoes of the decedent and is
merely the continuation of the personality of his predecessor-in-interest.

Having thus declared that appellee acquired no right whatsoever over the property in question, it follows
that the contract of sale he entered into with Camper was invalid and did not effectively transfer
ownership over the property.7 (underscoring supplied)

Thus the appellate court disposed:

WHEREFORE, the appealed Decision is hereby REVERSED and SET ASIDE, and judgment rendered:

1. Declaring null and void and of no effect, the Deed of Absolute Sale dated March 28, 1974, and TCT No.
T- 43326;

2. Declaring null and void and of no effect, the Deed of Absolute Sale dated August 31, 1992 and TCT Nos.
T-185959 and T-195213;
3. Ordering the Register of Deeds for Davao City to cancel TCT No. T-185959 in the name of Augusto P.
Bajado and TCT No. T-195213 in the name of Camper Realty Corporation and to restore and/or reinstate
TCT No. T-41086 of the Register of Deeds of Bataan (sic) to its full force and effect;

4. Ordering defendant Rodolfo Pajo to pay appellant the following sums:

a. ₱50,000.00 as moral damages;

b. ₱25,000.00 as attorney’s fees; and

c. ₱20,000.00 as exemplary damages.

5. Ordering defendant-appellee Augusto Bajado to return the amount of the purchase price and/or
consideration of sale of the disputed land he sold to his co-defendant Camper Realty Corporation within
ten (10) days from the finality of this decision with legal interest thereon from date of the sale;

6. Ordering Rodolfo Pajo to return to the heirs of Ligaya Bajado the amount of the purchase price of the
sale of the subject land within ten (10) days from the finality of this decision with legal interest from date
of the sale.8

It appears that petitioner’s counsel of record, Atty. Raul C. Nengasca, died during the pendency of the
appeal, notice of which the appellate court was given. Petitioner, who opted not to retain the services of
a new counsel, claims not to have received a copy of the decision and that it was only informed of it by
Augusto’s counsel, hence, its filing of a Motion for Reconsideration on March 8, 2007 of the appellate
court’s decision.

By Resolution of July 25, 2007, the Court of Appeals resolved to deny petitioner’s motion for review for
being filed out of time, it relying on the Postmaster’s certification that a copy of its decision was actually
received by petitioner on December 28, 2006.

Hence, the present petition for review on certiorari.

The records show that service via registered mail of the copy of the decision addressed to petitioner was
made on December 28, 2006 on a certain Daisy Belleza (Daisy) who, petitioner avers, was not authorized
to receive the copy, she being a mere househelper of petitioner’s director Arturo F. Campo.

Although petitioner’s principal office and Campo’s residence are housed in the same building, Campo’s
househelper Daisy cannot be considered as a person-in-charge of petitioner’s office to consider her
receipt of copy of the decision on behalf of petitioner. 9 Neither can the househelper’s receipt suffice as
service to Campo, even if he is a member of petitioner’s Board of Directors, absent a showing that he had
been authorized by petitioner to accept service.

On to the merits of the petition.

In sales involving real property or any interest therein, a written authority in favor of the agent is
necessary, otherwise the sale is void.10 Since the property was subjected to ensuing transfers, it is
necessary to establish the rights, if any, of the transferees vis-à-vis that of Nena’s.

Respondent Augusto acquired the property as his share in his mother Ligaya’s estate. As compulsory heir,
he merely stepped into the shoes of Ligaya. Since Ligaya’s title was derived from Rodolfo’s sale to her on
the basis of a forged SPA, Augusto’s title must be cancelled. Nemo dat quod non habet. In fact, it appears
that Augusto did not interpose an appeal from the appellate court’s decision divesting him of his title,
rendering it final and executory as to him.

The nullity of Augusto’s title notwithstanding, the Court finds petitioner, who acquired the bigger portion
of the property from Augusto, a purchaser in good faith. Cayana v. Court of Appeals reiterates a well-
ensconced doctrine:

. . . 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. 11

A forged deed can legally be the root of a valid title when an innocent purchaser for value intervenes. 12 For
a prospective buyer of a property registered under the Torrens system need not go beyond the title,
especially when he has no notice of any badge of fraud or defect that would place him on guard. 13 His
rights are thus entitled to full protection, for the law considers him an innocent purchaser.

There was no duty on petitioner’s part to go beyond the face of Augusto’s title and conduct inquiries on
its veracity. Nena did not present proof of any circumstance that could serve as caveat for petitioner to
undertake a searching investigation respecting the title. Moreover, the property was registered in Ligaya’s
name in 1974 yet, and Augusto’s in 1986, and no encumbrance or lien was annotated either on Ligaya’s
or Augusto’s title. For 18 years or in 1992, there was no controversy or dispute hounding the property to
caution petitioner about Augusto’s title thereto.

Contrary to Nena’s assertion that the sale to petitioner was a mere subterfuge by Augusto to validate his
claim on the property, evidence shows that it was not. Augusto presented a certified true copy of a
Certificate Authorizing Registration issued by the Bureau of Internal Revenue on September 3, 1992 14 to
show that capital gains tax had been duly paid on the transfer. The Court takes judicial notice that said
certificate is necessary for presentation to the Register of Deeds to register the transfer.

AT ALL EVENTS, factual findings of the trial court are accorded great respect and shall not be disturbed on
appeal, save for exceptional circumstances. It bears noting that despite the appellate court’s reversal of
the trial court’s decision, it did not disturb the trial court’s findings respecting petitioner’s good
faith.1avvphi1

In fine, the title in the name of Augusto is defeasible, he having acquired no better right from that of his
predecessor-in-interest Ligaya. His title becomes conclusive and indefeasible, however, in the hands of
petitioner, it being an innocent purchaser for value.

A word on the legal interest due on the reimbursement of the purchase price to Nena and her remaining
co-owner Godofredo, Jr. In accordance with Eastern Shipping Lines v. Court of Appeals,15 since the claim
does not involve a loan or forbearance of money, imposition of interest rate of six percent (6%) per annum
from date of filing of the complaint is in order.
WHEREFORE, the assailed Court of Appeals Decision in CA-G.R. CV. 59600 is SET ASIDE and another
is rendered as follows:

1) The Deed of Absolute Sale dated March 28, 1974 executed by respondent Rodolfo Pajo in favor of
Ligaya Vda. De Bajado is declared NULL and VOID.

2) Transfer Certificate of Title No. 195213 in the name of petitioner, Camper Realty Corporation, is
declared VALID. The Register of Deeds of Davao City is accordingly ORDERED to RETAIN in the Registry
said Transfer Certificate of Title.

3) Respondent Rodolfo Pajo is ORDERED to pay respondent Maria Nena Pajo-Reyes the amounts of
₱50,000.00 as moral damages, ₱25,000.00 as attorney’s fees, and ₱20,000.00 as exemplary damages; and

4) Respondent Augusto Bajado is ORDERED to return the purchase price paid by petitioner for the land
covered by Transfer Certificate of Title No. 195213 to respondents Maria Nena Pajo-Reyes and Godofredo
Pajo, Jr., the amount to bear legal interest of 6% per annum from the date of filing of the complaint.

The Register of Deeds of Davao City is FURTHER ORDERED to cancel Transfer Certificate of Title No. T-
185959 in the name of respondent Augusto Bajado and to issue in its stead a title in the names of
respondents Maria Nena Pajo-Reyes and Godofredo Pajo, Jr.

SO ORDERED.

G.R. No. L-4340 May 28, 1952

REBECCA LEVIN, plaintiff-appellee,

vs.
JOAQUIN V. BASS, ET AL., defendants.
EUGENIO MINTU, defendant-appellant.

PADILLA, J.:

G. R. No. L-4340 is an action (case No. 70054 of the Court of First Instance of Manila) for annulment of
sales of, and mortgage on, a lot and two houses erected thereon and damages brought by Rebecca Levin
against Joaquin V. Bass, Emiliano R. Eustaquio, Co Chin Leng and Eugenio Mintu where the last named
defendant is the appellant; G. R. No. L-4343 is the same case where Joaquin V. Bass is the appellant; G.R.
No. L-4341 is an action (case No. 71549 of the same court) for detainer brought by Joaquin V. Bass against
Jose C. Robles and Aminta T. de Robles, in which Rebecca Levin and Eugenio Mintu intervened, and where
the last named intervenor is the appellant; G.R. No. L-4345 is the same case for detainer where Joaquin
V. Bass is the appellant; G. R. No. L-4342 is an action (case No. 516 of the same court) for annulment of
sale brought by Joaquin V. Bass against Eugenio Mintu where the latter is the appellant; G. R. No. L-4344
is an action (case No. 71159 of the same court) for detainer of a building located at No. 328 San Rafael
street brought by Joaquin V. Bass against Rebecca Levin where the former is the appellant; and G. R. No.
L-4346 is an action (case No. 2371 of the same court) for detainer brought by Joaquin V. Bass against
Aminta T. de Robles where the former is the appellant. The two main cases (G. R. No. L-4340 and No. L-
4342) around which others revolve all under the appellate jurisdiction of this court.

After a joint hearing the trial court rendered judgment annulling Exhibit A dated 5 January 1944, where it
appears that, for and in consideration of P30,000, Rebecca Levin and conveyed to Emiliano Eustaquio a
lot containing an area of 317.70 square meters and the house erected thereon bearing No. 326 San Rafael
street Manila; Exhibit B dated 30 March 1944, where it appears that, for and in consideration of P38,000,
Emiliano R. Eustaquio sold and conveyed to Joaquin V. Bass the same lot and house; and Exhibit C dated
18 February 1944, where it appears that, for and consideration of P65,000, Rebecca Levin sold and
conveyed to Joaquin V. Bass a lot containing an area of 1,006.80 square meters and the house erected
thereon bearing No 328 San Rafael Street Manila; to cancel transfer of certificates of title Nos. 73450 and
73451 issued in the name of Joaquin V. Bass and in lieu thereof to issue new Torrens certificates of title
in the names of Rebecca Levin, widow, of legal age and resident of the City of Manila at No. 328 San Rafael
Street, said new certificates to bear a memorandum of mortgage in favor of Co Chin Leng, entry No. 1616,
as said mortgage appears on both transfer certificate of titles Nos. 73450 and 73451 to be cancelled, and
the certificate of title to be issued in the name of Rebecca Levin, in lieu of transfer certificate of title No.
73450, to bear a memorandum of a notice of lis pendens noted on said transfer certificate of title in
connection with civil case No. 2562 of the Court of First Instance of Manila entitled "Isabelo
Martinez vs. Joaquin V. Bass," entry No. 20955; holding that Rebecca Levin is entitled to recover from
Joaquin V. Bass," damages for losses which she may suffer by reason of said mortgage annotation and
notice of lis pendens; dismissing the complaint of Joaquin V. Bassin civil case No. 516, holding that the
deed of sale under certain conditions executed by Joaquin V. Bass in favor of Eugenio Munti is without
force and effect as against Rebecca Levin and ordering Joaquin V. Bass to pay Eugenio Mintu the sum of
P4,173.16, together with lawful interests thereon from 23 October 1946, the date of the filing of the said
answer in said civil case, until paid; dismissing the complaint of Joaquin V. Bass in civil cases Nos. 71159,
71549 and 2371 and declaring Rebecca Levin to be entitled to the payment of rentals by Jose C. Robles
and/or Aminta T. de Robles for the use and occupation of the premises at No. 326 San Rafael street,
Manila, from 11 March 1945 until the tenants move out of the premises and to receive from the clerk of
court the sums of money deposited by Aminta T. de Robles and/or Jose C. Robles by way of rentals for the
said property at No. 326 San Rafael street, still remaining in his possession, the said amounts to be applied
to the rentals to be granted upon by and between them or those which may be declared by final judgment
to be the reasonable compensation for the use of occupation of the premises; and ordering Joaquin V.
Bass to render an accounting of the sums of money he had received from the court, or otherwise, as
rentals of the house at No. 326 San Rafael street from and after 11 March 1945, and to pay to Rebecca
Levin the balance that may result from said accounting. Costs are taxed against Joaquin V. Bass.

In 1943 Rebecca Levin was a widow, 65 years old and the registered owner of a lot on which two houses
stood—one bearing No. 326 and the other No. 328 San Rafael Street, Manila—as evidenced by transfer
certificate of title No. 62680. She was illiterate and knew only how to sign her name. At about the end of
December 1943 Joaquin V. Bass called on Rebecca Levin at her house on No. 328 San Rafael street, Manila,
and representing himself to be a real estate broker asked her whether she would sell her lot and house at
No. 326 adjoining her residence. At that time there lived in the house of Rebecca Levin some Japanese
civilians, officers or employees of the Pacific Mining Co., occupying or renting two rooms, Angelita
Martinez a brother, and Meliton Villasenor, a houseboy. In addition to P50 collected by her as monthly
rental for the house at No 326, the Japanese renting the two rooms paid her P200 monthly and supplied
her with rice and other foodstuffs without charge. Rebecca Levin told Joaquin V. Bass that she was not
selling her house at No. 326 San Rafael street. On subsequent calls Joaquin V. Bass told Rebecca Levin that
it would be to her advantage and benefit to sell the lot and house at No. 326 San Rafael street and with
the proceeds of the sale to purchase another house. He told her that if she would not sell the lot and
house the Japanese who had been looking for houses to occupy might deprive her thereof without getting
anything in exchange therefor. He told her further that by selling her house, which she rented for P50 a
month only, and buying for P26,000 one on Antonio Rivera street she would gain because the monthly
rental of the latter was P140. She consented to see the house at Antonio Rivera street and went there
accompanied by Joaquin V. Bass and Meliton Villasenor, her houseboy. Joaquin V. Bass pointed to a
building (Exhibit G) of for apartments (accessorias) not far from the Tutuban railroad station. They were
not able to see the second story of the building because, according to Joaquin V. Bass, the owner had
gone to Pampanga. For the second time, they went to see the building on Antonio Rivera street but they
again failed to see the second story of the building for the same reason given by Joaquin V. Bass when
they went to see it the first time. Relying upon the representations made by Joaquin V. Bass, Rebecca
Levin finally consented to sell her house. One of the last days of December 1943 or of the first days of
January 1944, while Rebecca Levin was engaged in conversation with Dr. Pastor L. Manlapaz and Angelita
Martinez, Joaquin V. Bass called on her bringing along with him certain papers. Upon Joaquin V. Bass"
suggestion Rebecca Levin followed by him entered a room adjoining that where she, Dr. Manlapaz and
Angelita Martinez were conversing, and upon repeated representations and assurances made by Joaquin
V. Bass that the papers he brought were just an authority to sell the house at No. 326 San Rafael street,
Rebecca Levin signed five documents and Bass took from her bag which she placed on a small table in the
room her residence certificate and the receipt showing payment of realty tax on her property. None of
the documents Rebecca Levin signed was left to her. The following day (6 January 1944), Joaquin V. Bass
called on Rebecca Levin at her house and handed to her P10,000 saying that it was a partial payment of
the purchase price of the lot and house at No. 326 San Rafael street which he represented had been sold
to a Japanese and asked her to give him the Torrens title of the house and lot. Upon being informed by
her that the Torrens title of the houses and lot was in the possession of the Agricultural and Industrial
Bank, to which they were mortgage for P2,000, Joaquin V. Bass took from her P2,000 and requested her
to go with him to the Agricultural and Industrial Bank where they paid the mortgage debt of Isidore Reich
(presumably the predecessor of the late husband of Rebecca [Exhibit M]) and received a mortgage release
and the Torrens certificate of title No. 62680 (Exhibit K and K-1); and on February 1944, she signed a
receipt for P2,000 (Exhibits L and L-1). Joaquin V. Bass not only took P2,000 to pay the mortgage debt to
the Agricultural and Industrial Bank (Exhibit M) but also the balance of P8,000 telling her that he would
pay it to the owner of the building on Antonio Rivera street; that the balance of the repurchase price of
her house At No. 326 San Rafael street would be paid to her as soon as the lot and house sold be
segragated or separated from the larger lot on which her house at No 328 San Rafael street stood; and
that it was necessary to make such subdivision to be approved by the court in order that the sale of her
house and lot not to arose any suspicion on her part Joaquin V. Bass gave her a receipt from that partial
amount paid for the building on Antonio Rivera street signed by one Mariano Irurin y Reyes but the
amount written therein was just P6,000. The signer of the receipt promised to deliver the deed of sale of
the building of Antonio Rivera street within 5 days from the date of payment of P20,000, the balance of
the purchase price (Exhibit H). Being illiterate Rebecca Levin did not notice that the amount appearing in
the receipt was P6,000 instead of P8,000 which was the sum taken from her by Joaquin V. Bass. To make
her believe that she was the owner of the building on Antonio Rivera street, Joaquin V. Bass turned over
to her the monthly rentals of the building for five months which he claimed he had collected from the
tenants of the building. Not long after the signing by Rebecca Levin of the documents giving Joaquin V.
Bass authority to sell the house at No. 326 San Rafael street and the pretended purchase by her through
him of the building on Antonio Rivera street, the latter called on the former at her house. He found her
sick. He told her that he had tested medicine or drug for ailments such as the one she was suffering from
and that if she would take it she would feel immediately and completely relieved. He went down.
Immediately after his return to the house he called and told the houseboy Meliton Villasenor to bring a
glass of water where he diluted the drug and asked Rebecca Levin to take it. The latter did not hesitate to
take it as until then she did not have the least suspicion of him who succeeded in winning and enjoyed
her trust and confidence. After taking the medicine she become to vomit and suffer stomach pains and
her face and lips became swollen. She went for Dr. Pastor L. Manlapaz who found that she was poisoned.
After application of antidotes she recovered from the poisoning. This incident coupled with the failure of
Joaquin V. Bass to return to her the documents she had been asking made Rebecca Levin suspicious of
him and consulted with Dr. Pastor L. Manlapaz and Filemon Poblador, the latter when working in the office
of the President of the Republic. As Poblador was not a lawyer he talked to attorney Esteban Nedruda
who being also an employee in the office of the President of the Republic at Malacañang refused to handle
the case but promised to investigate it. After investigation Nedruda found that the lots were transferred
and registered in the name of Joaquin V. Bass and mortgaged him. Finally, the services of attorney Cesar
de Larrazabal on the property of Rebecca Levin which were registered in the office of Register of Deeds
of Manila. It was found out that the papers signed by her on 5 January 1944 were a deed of sale of her
house and lot at No. 326 San Rafael street for P30,000 in favor of Emiliano R. Eustaquio acknowledge on
the same day before notary public Eliezar A. Manikan (Exhibit A) and another deed of sale of her house
and a lot No. 328 San Rafael street for P65,000 in favor of Joaquin V. Bass dated 18 February 1944 and
acknowledge on that date before the same notary public Elizer A. Manikan (Exhibit C); and that on 30
March 1944, for and in consideration of P38,000, Emiliano R. Eustaquio sold to Joaquin V. Bass the lot and
the house at No. 326 San Rafael street (Exhibit B.). Prior to the registration of these three deeds of sale,
or on 24 February 1944, a petition was filed by attorney Eliezer A. Manikan in the name of Rebecca Levin
praying for the subdivision of parcels of land into two lots-the certificate of title to lot No. 1 containing an
area of 317.7 square meters to be issued in the name of Emiliano R. Eustaquio and the certificate of title
to lot No. 2 containing an area of 1,006.80 square meters to be issued in the name of Rebecca Levin
(Exhibit I). On February 1944, the petition was granted by the Court of First Instance of Manila, Fourth
Branch, presided over by Judge Gervasio Diaz, (Exhibit J.) Transfer certificate of title No. 62680 in the name
of Rebecca Levin describing a parcel of land located on San Rafael street containing an area of 1,3228.40
square meters entered on September 1941, together with a memorandum of mortgage executed in favor
of the Agricultural and Industrial Bank entered on 26 September 1939-a memorandum noted on the
previous certificate of title No. 9220-was cancelled, and in lieu thereof Transfer certificate of title No.
71907 in the name of Emiliano R. Eustaquio for a parcel of land containing an area of 317.70 square meters
more or less, and the house erected thereon, and transfer certificate of title No. 71908 in the name of
Rebecca Levin for the remaining area of 1,006.80 square meters and the house erected thereon, were
issued by the Registrar of Deeds of Manila on 27 February 1944, pursuant to the order of the court dated
22 February referred to (Exhibit J). On 11 May 1944, transfer certificate of title No. 71908 in the name of
Rebecca Levin was cancelled and in the lieu thereof transfer certificate of title No. 73451 was issued in
the name of Joaquin V. Bass by the Registrar of Deeds of Manila; and on 10 April 1944, transfer of
certificate of title No. 71907 in the name of Emiliano R. Eustaquio was cancelled and in lieu thereof
transfer certificate of title No. 73450 was issued in the name of Joaquin V. Bass by the Registrar of Deeds.
On 8 April 1944, to secure the payment of P70,000, together with interests thereon at 5 per cent per
annum, payable in five years, Joaquin V. Bass mortgaged to Co Chin Leng the two lots and house selected
thereon and the instrument of mortgage was registered on 10 April 1944 on both certificates of title Nos.
73450 and 73451. On 6 July 1944, a notice of lis pendens was noted in the back of transfer certificate of
title No. 73450 in connection with civil case No. 2562 of the Court of First Instance of Manila entitled
"Isabelo Martinez vs. Joaquin V. Bass." On October 1944, for and in consideration of P200,000 "presenting
circulating currency," Joaquin V. Bass sold to Eugenio Mintu the lot and house at No. 328 San Rafael street
desrcibed in transfer certificate of title No. 73450, P90,000 of which was paid on the date of the execution
of the deed of sale; P10,000, to be retained by the vendee (Eugenio Mintu) and to be paid to the vendor
(Joaquin V. Bass) after the notice of lis pendens in connection with civil case No. 2652 of the Court First
Instance of Manila entitled "Isabelo Martinez vs. Joaquin V. Bass" shall have been removed or cancelled;
and P100,00, the balance, to be deposited by the vendee (Eugenio Mintu) upon instructions of the vendor
(Joaquin V. Bass) with the clerk of court of Manila after return of the former from a trip to Ilocos Norte,
the deposit to be made within 30 days from the date of the deed of sale and for the purpose of securing
there release of the mortgage in favor of Co Chin Leng, the vendor (Joaquin V. Bass) undertaking to obtain
the release of the mortgage on the property sold and to deliver it (the mortgage release) to the vendee
(Eugenio Mintu) and the cancellation of the notice of lis pendens on or before 8 April 1945 (Exhibit 3-
Mintu). To secure the fulfillment of the undertaking-the mortgage release and cancellation of the notice
of lis pendens-the vendor (Joaquin V. Bass) assigned, transferred and conveyed by way of liquidated
damages to the vendee (Eugenio Mintu) his title, rights, interest, participation or share in and to lot No.
2, the larger lot on which house No. 328 San Rafael street is errected, and both parties agreed that if the
condition provided for in paragraph (d) of the deed of sale be fulfilled, the condition in paragraph (e)
thereof relative to the assignment, transfer and conveyance of lot No. 2 to the vendee would be null and
void without legal effect, otherwise it would remain in full force and effect. The following clause was
inserted with initials of both parties: "force majeure and fortuitous events exempts the vendor from
compliance thereto" (Exhibit 3-Mintu.) On 1 November 1944, Eugenio Mintu and Jose C. Robles entered
into a lease contract on the house and lot No. 326 San Rafael street, Manila (Exhibit 1-Mintu). From
November 1944 to January 1945 Jose C. Robles paid to Eugenio Mintu the rental of P45 a month as agreed
upon (Exhibit 2-Mintu), but beginning February the rental of the house were not paid to Mintu because
there was a dispute as to who was the owner of the house. On 3 November 1944, Eugenio Mintu deposited
with the sheriff of Manila for the account of Joaquin V. Bass the sum of P100,416.67 as full payment of
the purchase price of the property sold to him on 14 October 1944. The sum of P100,000 is the total of
Bass" indebtedness to Co Chin Leng-P70,000 secured by mortgaged and P30,000 unsecured, the sum of
P416,67 represents the interest on the amount owned to Co Chin Leng up to the time of the deposit
(Exhibit 4-Mintu) and the sum of P158.92 represents the sheriff's fees on the amount deposited (Exhibit
5-Mintu). On November 1944, Eugenio Mintu presented and filed with the office of Registrar of Deeds of
Manila the original of the deed of sale (Exhibit E) duly notarized and paid the sum of P224.50: P.50 for
entry in the day book; P220 for registration fees; and P4 for the issuance of two titles (Exhibit 6-Mintu).
On the same date, together with the original deed of sale (Exhibit E) the owner's duplicates of transfer of
certificate of title Nos. 73450 and 73451 were presented and filed with the office of Registrar of Deeds of
Manila but said documents were not among those salvaged and were presumed to have been lost or
burned according to the certification of the Registrar of Deeds in and for the City of Manila (Exhibit 8-
Mintu). On 19 January 1945, Eugenio Mintu paid to Joaquin V. Bass the sum of P10,000 in full settlement
of the purchase price of the property acquired by him on 14 October 1944 (Exhibit 7-Mintu). On 29
October 1945, a notice of lis pendens was noted at the back of transfer certificate of title No. 70054 of the
Court of First Instance of Manila entitled "Rebecca Levin vs. Joaquin V. Bass".

Joaquin V. Bass testifies that he acquired the lot and house at No. 328 San Rafael street from Emiliano R.
Eustaquio for P38,000 and the lot and house at No. 328 San Rafael street from Rebecca Levin for P65,000,
the first on 30 March 1944 and the second on 18 February 1944; that Rebecca Levin paid him the monthly
rental of P150 for the lot and house at No. 328 San Rafael street from March 1944 to January 1945, as
shown by the stubs of the receipts issued to her (Exhibits 20-Bass to 20-K-Bass); that Rebecca Levin
refused to pay the rental for February unless it was reduced to P100; that on 19 May 1945 he brought
against her an action for detainer which on appeal to the Court of First Instance of Manila bears No. 71159;
that after he acquired the property at No. 326 San Rafael street from Emiliano R. Eustaquio the latter
brought him to the tenant, Rosario Vda. de Altonaga, who left the premises to go to the Cagayan to look
for her daughter; that Vicente Tagle rented the premises signing a contract for one year but after 2 or 4
months he left the premises and his daughter Aminta T. de Robles married to Jose C. Robles became the
tenant; that in February 1945 Jose C. Robles left the premise after a quarrel he had with his wife Aminta
T. de Robles; that in April 1945 he brought against Jose C. Robles and Aminta T. de Robles an action for
detainer on which on appeal to the Court of First Instance of Manila bears No. 71549; that on May 1946
Aminta T. de Robles and he signed a lease contract (Exhibit 1-Bass); that he did not make Rebecca Levin
sign documents authorizing him to sell her house at No. 326 San Rafael street as testified to by Dr.
Manlapaz; that he did not show to Rebecca Levin any house on Calle Antonio Rivera to be exchanged with
or for her property at No. 326 San Rafael street, as testified to by Dr. Manlapaz, Meliton Villaseñor and
Angelita Martinez; that it is not true that Rebecca Levin did not receive the consideration for the sale of
her house at No. 328 San Rafael street; that on October 1944 he sold for P200,000 the house and lot at
No. 326 San Rafael street to Eugenio Mintu, who handed to him P65,000 and a check for P25,000 which
the bank refused to cash, but later on Mintu told him that he had deposited funds in the bank and so the
check was honored and cashed at the bank of the Philippine Islands; that all in all he was paid P90,000
and P10,000 for 16 gantas of rice given him to Mintu; that the balance of P100,000 was never and has not
been paid to him; that he has not given possession of the property to Eugenio Mintu the transaction not
having been consummated because of force majeure; and that he was bound to return to Eugenio Mintu
the P100,000 received by him.

Eliezer A. Manikan, the notary public before whom the deeds of sale sought to be annulled were
acknowledged, testifies that Rebecca Levin appeared before him and acknowledged the execution of the
documents in favor of Emiliano R. Eustaquio on 5 January 1944 and in favor of Joaquin V. Bass on 18
February 1944.

The testimony of Rebecca Levin as to how she consented to sell her house and lot No. 326 San Rafael
street and the manner she was induced by Joaquin V. Bass to sign papers which he represented were
mere authorization to sell is corroborated by Dr. Pastor L. Manlapuz, Angelita Martinez and Meliton
Villasenor.

These witnesses had no interest to pervert the truth. Rebecca Levin was not in need of money of fact she
led quite a comfortable life. Only because of the misrepresentation that she would gain by selling her
house at No. 326 San Rafael street and of the threat made by Joaquin V. Bass that she might lose it did
she finally consent to sell it.
On the other hand, Joaquin V. Bass has a criminal record — was convicted of estafa (Exhibit O) — and was
involved ina shady deal (Exhibit R) and found to have presented a promisory note for P5,000 and a chattel
mortgage which he claimed Rebecca Levin had signed and upon which he brought an action against her
for foreclosure (civil case No. 71481, the Court of First Instance of Manila), when in truth and in fact, as
pronounced by the trial court, they were not signed and acknowledged by her before a notary public
(Exhibit P). He succeeded in winning the trust and confidence of Rebecca Levin, a widow, 65 years old, a
foreigner in this country and without relatives. Joaquin V. Bass claims he was employed at that time by
the Manila Electric Co. as mechanical engineer but on cross examination he had to admit that he did not
have any degree nor was he licensed by the Government of the Philippines to practice the profession of
mechanical engineer. When he was pressed to answer the question whether he was actually employed
by the Manila Electric Co. he evaded it by saying that he was employed by White and Co. which owned 60
per cent of the shares of the Manila Electric Co. During the occupation of the country by the enemy he
was engaged in the buy and sell business and had no known income. It is unbelieavable that he could
acquire the house and lot of Rebecca Levin at No. 328 San Rafael street for P65,000 and the one allegedly
sold to Emiliano R. Eustaquio at No. 326, same street, through his machinations, for P38,000. He claims
he deposited his money in the Bank of Taiwan but in the same way that he presented his pass book (Exhibit
7) showing his deposits in the Bank of the Philippine Islands, he could have presented the pass book of
certificate of deposit of money he had in the Bank of Taiwan, Ltd. In fact, during the occupation of the
country by the enemy and before he mortgaged the two houses and lots to Co Chin Leng Joaquin V. Bass
had no money. According to Exhibit 7, on 10 April 1944 only he made the first or initial deposit of P50,000
with the Bank of the Philippine Islands. That money must be of the P70,000 loaned to him by Co Chin Leng
on April 8 1944 secured by mortgage on the houses and lots he had acquired fraudulently from Rebecca
Levin.

Eliezer A. Manikan perverted the truth when he testified that P10,000 was paid to or received by Rebecca
Levin in his office, whereas Joaquin V. Bass testified that she received it in her house; when he testified
that on the date of the excecution of the deed of sale (Exhibit A) by Rebecca Levin, or on 5 January 1944,
the Torrens title to the property was brought by her to his office, when in truth and in fact the title was
on that date kept by the Agricultural and Industrial Bank and taken from it the following day when the
motrgage debt was paid. Eliezer A. Manikan did not tell the truth when he testified that on the date of
the execution of the deed of sale by Rebecca Levin the sum of P35,000 in Japanese war notes, consisting
of six packages of P10,000 each P10 bills and the rest of P5 bills, was counted by her, because, according
to Joaquin V. Bass, Rebecca Levin mortgaged her house to him for P35,000 and later converted it into an
absolute sale for P65,000 (Exhibits S and S-1). Eliezer A. Manikan did not tell the truth when he testified
that the deed of sale marked Exhibit C was executed two or three weeks after the order of the court-
referring to the order approving the subdivisions of the parcels of land of Rebecca Levin into two lots
presented for registration on 24 February 1944-because the deed of sale (Exhibit C) dated February 1944
was executed and acknowledged on that date, whereas the court order approving the subdivision and six
days before its presentation for registration. On the cross examination Joaquin V. Bass testified that the
consideration for the sale of the house and lot on No. 328 San Rafael street consisted of payment in cash
of P35,000 and the transfer to or assumption by him of Rebecca Levin's debt for P30,000 to one
Concepcion de la Rama. On further cross-examination he testified that the purchase price agreed upon
between him and Rebecca Levin was P60,000 plus P2,800 which was not included in the price.
There is overwhelming evidence to support the conclusion of the trial court that Rebecca Levin did not
execute the deeds of sale Exhibit A and Exhibit C. What she was made to believe she signed was an
authorization to sell the house at No. 326 San Rafael street.

As to the mortgage in favor of Co Chin Leng we hold that the court below that there is no evidence to
show that the mortgage was made in bad faith and without consideration. He must, therefore, be deemed
to be a mortgaged in good faith and for value. As to the sum consigned by Eugenio Mintu for Joaquin V.
Bass' account there is no evidence as to the outcome of the complaint for consignation filed 3 November
1944 by Joaquin V. Bass against Co Chin Leng in the Court of First Instance of Manila (case No. 2984).

As regards Eugenio Mintu, the evidence shows that he paid P200,000 to Joaquin V. Bass in the manner
and form above stated; that the orignal deed of sale (Exhibit E), together with the owner's duplicate
certificate of title Nos. 73450 and 73451, was presented for registration on 8 November 1944 in the office
of Registrar of Deeds of Manila and entered in the day book-entry No. 27161, but that, according to the
certification of the registrar, the original deed of sale and the owner's duplicate certificate of titles have
not been found, were not among the salvaged records and were, therefore, presumed to have been lost
or burned (Exhibit 8-Mintu). It also appears that the registration free consisting of P.50, the fee for the
entry in the day book; P220, the registration fees for a sale of P200,000; and P4, the fee for the issuance
of two certificates of title were paid by Eugenio Mintu (Exhibit 6-Mintu). On the other hand, on October
1945, a notice of lis pendens was filed in the office of Registrar of Deeds of Manila and noted on the backof
transfer certificate of title Nos. 73450 and 73451 in connection with civil case No. 70054 of Court of First
Instance of Manila entitled "Rebecca Levin vs. Joaquin V. Bass et al."

The claim of Joaquin V. Bass that the sale between him and Mintu was conditional is devoid of merit,
because the conditional part of the deed of sale concerns the guarantee undertaken by him as vendor to
obtain the release of the mortgage of Co Chin Leng and the cancellation of the notice of lis pendens in
connection with civil case No. 2562 entitled "Isabelo Martinez vs. Joaquin V. Bass," which release and
cancellation he promised and would secure on or before 8 April 1945. It is not a condition which, if not
fulfilled, would avoid the sale made of the lot and house at No. 328 San Rafael street, but one which, if
not performed, would cause the vesting in the vendee (Eugenio Mintu) of the title to the lot and house at
No. 328, same street, which was given as security for the fulfillment of the undertaking.

We now take up the question between Eugenio Mintu and Rebecca Levin. Under the Torrens system the
act of registration is the operative act to convey and affect the land. 1 Do the entry in the day book of a
deed of sale which was presented and filed together with the owner's duplicate certificate of title with
the office of Register of Deeds and full payment of registration fees constituted a complete act of
registration which operates to convey and affect the land? In voluntary registration such as sale,
mortgage, lease and the like, if the owner's duplicate certificate be not surrendered and presented or if
no payment of registration fees be made within 15 days, entry in the day book of the deed of sale does
not operate to convey and affect the land sold.2 In voluntary registration, such as an attachment, levy
upon, execution, lis pendens and the like entry thereof in the day book is a sufficient notice to all persons
of such adversed claim.3 Eugenio Mintu fulfilled or took the steps he was expected to take in order to have
the Registrar of Deeds in and for the City of Manila issue to him the corresponding transfer certificate of
title on the lot and house at No. 328 San Rafael Street sold to him by Joaquin V. Bass. The evidence shows
that Eugenio Mintu is an innocent purchaser for value. Nevertheless, the court below held that the sale
made by Bass to Mintu is as against Rebecca Levin without force and effect because of the express
provision of law which in part says:

. . . Provided, however, That 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 certificate of title; (Section 55, Act 496, as amended by Act 3322).

In other words, the sale made by Joaquin V. Bass to Eugenio Mintu is valid as between them but not as
against Rebecca Levin who could avail herself of all her legal and equitable remedies against Joaquin V.
Bass and reach the property acquired fraudulently by the latter and subsequently sold to Eugenio Mintu
who admittedly is an innocent purchaser for value, for the reason that the later though an innocent
purchaser for value is not a holder of a certificate of title. The pronouncement of the court below is to the
effect that an innocent purchaser for value has no right to the property because he is not a holder of a
certificate of title to such property acquired by him for value in good faith. It amounts to holding that for
failure of the Registrar of Deeds to amply and perform his duty an innocent purchaser for value loses that
character—he is not an "innocent holder for value of a certificate of title." The court below has strictly
and literally construed the provision of law applicable to the case. If the strict and literal construction of
the law made by the court below be the true and correct meaning and intent of the lawmaking body, the
act of registration—the operative act to convey and effect registered property—would be left to the
Registrar of Deeds. True, there is a remedy available to the registrant to compel the Registrar of Deeds to
issue him the certificate of title but the step would entail expense and cause unpleasantness. Neither
violence to, nor stretching of the meaning of, the law would be done, if we should hold that an innocent
purchaser for value of registered land becomes the registered owner and in the contemplation of law the
holders of a certificate thereof the moment he presents and files a duly notarized and lawfull deed of sale
and the same is entered on the day book and at the same he surrenders or presents the owner's duplicate
certificate of title to the property sold and pays the full amount of registration fees, because what remains
to be done lies within his power to perform. The Registrar of Deeds is in duty bound to perform it. We
believe that is a reasonable and practical interpretation of the law under consideration—a construction
which would lead to no inconsistency and injustice.

Taking into consideration all the circumstances of the case and bearing in mind that the only objective
courts must strive to attain is to do justice, we believe that our interpretation of the law applicable to the
case at bar subserves the interests of justice. True, Rebecca Levin loses he house and lot No. 326 San
Rafael street, but "as between not innocent persons, one of whom must suffer the consequence of a
breach of trust, the one who made it possible by his act of confidence must bear the loss." 4

We hold, therefore, that Eugenio Mintu is the rightful owner of the lot and house at No. 326 San Rafael
street since 8 November 1944 and entitled to collect the rentals due and unpaid from that date until
possession of the premises shall have been restored to him and the balance by Joaquin V. Bass of rentals
and moneys received by him imputable to such rentals as ordered by the trial court, subject to the
registered mortgage in favor of Co Chin Leng. What has been awarded to Rebecca Levin in the judgment
appealed from, in so far as the lot and house at No. 326 San Rafael street are concerned, is deemed
awarded to Eugenio Mintu.

The rest of the judgment appealed from not inconsistent herewith, is affirmed, with costs against Joaquin
V. Bass.
Let a copy of this decision be furnished the City Fiscal of Manila who is directed an investigation of Joaquin
V. Bass and attorney and notary public Eliezer A. Manikan in connection with the execution and
acknowledgment of the documents, involved and the testimony given by them in these cases and to take
such action as the result of the investigation may warrant.

G.R. No. L-3970 October 29, 1952

GURBAX SINGH PABLA & CO., GURBAX SINGH PABLA, BELA SINGH PABLA, OJAGAR SINGH, DHARAM
SINGH, TALOK SINGH and CIPRIANO TAN ENG KIAT, petitioners-appellees,
vs.
HERMOGENES REYES and TEODORA TANTOCO, respondents-appellants.

The facts are stated in the opinion of the Court.

Jose N. Buendia for appellants.
Eliseo Caunca for appellees.

LABRADOR, J.:

This is an appeal prosecuted by the respondents-appellants against an order of the Court of First Instance
of Manila dated November 29, 1949, compelling them to surrender owner's duplicates of Transfer
Certificates of Title Nos. 8071 and 8072, so that the contract of lease entered into between petitioners-
appellees and the owner of the land covered by said certificates of title be annotated thereon. John Tan
Chin Eng is the owner of the land covered by the above-mentioned certificates of title, and on July 23,
1948, he entered into a contract (Exhibit A) with the petitioner-appellees, under the terms of which
petitioners-appellees were to construct thereon a three-story building of concrete and of strong materials
valued at from P80,000 to P90,000. The contract also provided that the building shall become the
exclusive property of the owner of the land, but that the petitioner-appellees were to occupy, hold, or
possess it as lessees for a period of three years and six months from its completion, without paying any
rentals therefor, the sum spent in the construction being considered as the rentals; that after the above
period of three years and six months petitioners-appellees were to continue occupying the said building
for another two years at a monthly rental of P2,000. This contract of lease was filed and registered in the
office of the Register of Deeds of Manila on August 10, 1948, under Primary Entry No. 3352, Volume 15.
At the time that the contract was entered into there was an existing mortgage over the land in favor of
Jose Calvo and Carlos Calvo for the sum of P110,000. This mortgage in favor of the Calvos was cancelled,
and a new mortgage was executed by the owner in favor of respondents-appellants herein, Honorable
Hermogenes Reyes and his spouse Teodora Tantoco, dated March 8, 1949, which was registered on the
same date in the office of the Register of Deeds of Manila under Primary Entry No. 5014. On May 14, 1949,
the original contract of lease, Exhibit A, was amended by Exh. C, by virtue of which the period under which
the lessees were to hold any occupy the property without rentals was extended to seven years and four
months, and the rental for the additional two years thereafter reduced to P1,148. This amended contract
of lease, Exhibit C, was also registered in the office of the Register of Deeds of Manila under Primary Entry
No. 5014, Volume 16, on May 20, 1949.
On May 25, 1949, counsel for petitioners-appellees wrote respondents-appellants requesting them to
allow him to take the certificates of title to the office of the Register of Deeds of Manila for the annotation
of the contracts of lease entered into by the owner with them (Exhibit D), and on May 27, 1949, the son
of respondents-appellants acknowledged receipt of the said letter but informed counsel for the
petitioner-appellees that the request could not be granted without the written consent of the owner of
the certificates of title (Exhibit E). On June 16, 1949, respondents-appellants' son wrote the owner of the
land (Exhibit M) demanding the payment of the overdue interest on the mortgage with the following
statement:

. . . For this reason, I wish to request that you come over to my office before 12:00 noon to pay the said
interest before we can deliver your Transfer Certificate of Title to Atty. Manuel P. Calanog who will take
charge of registering the lease contract between Mr. Singh Pabla and your goodself.

On June 3, 1949, the petitioners-appellees filed a motion in the Court of First Instance of Manila praying
that an order issue to the owner for the delivery of the owner's duplicates of transfer certificates of title
Nos. 8071 and 8072 to the petitioners in order that the Register of Deeds of Manila may be able to make
the annotation thereon of the contract of lease, Exhibit A, and its amendment, Exhibit C. Against this
petition Hermogenes Reyes and Teodora Tantoco filed an opposition, alleging that they had no knowledge
whatsoever of the contract of lease, Exhibit A, or of its amendments, Exhibit C, and that the execution of
the amendment, Exhibit C, violated the express provision of the mortgage, to the effect that the owner
could not sell, assign, or encumber the mortgaged premises without the written consent of the mortgages.
It is to be noted that with respect to the original contract of lease, Exhibit A, no allegation is made in the
opposition of the respondents-appellants that they were not aware of the existence of the contract,
Exhibit A, their only allegation being that the only annotation on the certificates of title at the time they
entered into the contract of mortgage was the mortgage in favor of Jose Calvo and Carlos Calvo. It is also
to be noted that respondents-appellants do not deny an express allegation of paragraph 13 of the
amended petition to the effect that notice was given to the public by a big sign board placed on the
premises while the building was under construction that petitioners-appellees are the owners of the
building. The amended petition further states, without denial on the part of the respondents-appellants,
that as early as October 9, 1948, the Register of Deeds of Manila had demanded in writing from the owner
of the land the submission of his duplicate certificates of title Nos. 8071 and 8072 in order that the lease
executed by him in favor of the petitioners-appellees may be given due course. At the hearing of the
motion no oral evidence was submitted; only documentary evidence was presented.

Thereafter the Court of First Instance of Manila issued the order already mentioned above, directing
respondents to surrender the certificates of title to the Register of Deeds of Manila in order that
petitioners-appellees' contract of lease may be noted thereon. It expressly found that respondents-
appellants had knowledge of the lease contract, Exhibit A, but that respondents' deed of mortgage of
March 8, 1949, has priority over petitioner's amended contract of lease, Exhibit C. As regards the
(supposed) prohibition contained in the contract of mortgage, the court held that the prohibition gives a
right of foreclosure; in other words, that in spite of the prohibition the amended contract of lease, Exhibit
C, may not be considered as null and void.

In this court on appeal claim is made on behalf of the respondents-appellants that the court a quo erred
in holding that respondents-appellants had knowledge of the contract of lease, Exhibit A; that it erred in
holding that Tirso T. Reyes is the attorney-in-fact of the respondents-appellants; that it erred in ordering
the registration of the contract of lease, Exhibit A; and that it erred in not holding that the registration of
the contracts, Exhibits A and C, will prejudice the rights and interest of respondents-appellants.

It should be noted that all that the petitioners demand or pray for is the surrender of the titles to the
Register of Deeds so that their contracts of lease, Exhibits A and C, may be noted thereon. The only issue,
therefore, is whether petitioners have a right to have said deeds registered. It is not denied that the
contracts have been executed by the registered owner of the land, or that they have been lawfully
executed, or that they have all the qualities of registerable documents. Indeed, the owner is agreeable to
the registration. The objections interposed by respondents, who are mortgagees merely, that they had
no knowledge of the contract of lease, or that their mortgage has priority, or that they will be prejudiced,
are beside the issue.

The purpose of registering an instrument is to give notice thereof to all persons (section 51, Act No. 496);
it is not intended by the proceedings for registration to seek to destroy or otherwise affect already
registered rights over the land, subsisting or existing at the time of the registration. The rights of these
parties, who have registered their rights, are not put in issue when an instrument is subsequently
presented for registration; nor are its effects on other instruments previously registered put in issue by
the procedure of registration. Thus, the objections raised by respondents-appellants that they had no
knowledge of the contract of lease, Exhibit A, before the property was mortgaged to them, or that the
same violates their contract of mortgage with the owner of the land — these are not passed upon by the
order for the registration of petitioners-appellees' contract of lease. The objections, as well as the relative
rights of all parties who have registered their deeds, shall be decided in the proper suit or proceeding
when the opportune occasion arises; but they are not now in issue, nor may they be adjudicated upon,
simply because petitioners-appellees have applied for the registration of their contract of lease.

The impropriety and inconvenience of proceeding to determine completely and in advance all the possible
consequences of a document, upon all parties affected thereby, in the proceeding for its registration
becomes apparent when, as in this case, important and complicated questions of fact and of law were
presented by the respondents-appellants about their alleged lack of knowledge of the contracts of lease
and the invalidity thereof. The court a quo passed upon vital issues of fact upon the motion and the
opposition thereto, and upon the documents, letters, and receipts presented, without any other evidence
than the above. Yet the question of knowledge is mainly a question of fact and requires inquiry into many
and complicated circumstances, which can not be satisfactorily shown except by testimony.

On the other hand, the supposed invalidity of the contracts of lease is no valid objection to their
registration, because invalidity is no proof of their non-existence or a valid excuse for denying their
registration. The law on registration does not require that only valid instruments shall be registered. How
can parties affected thereby be supposed to know their invalidity before they become aware, actually or
constructively, of their existence or of their provisions? If the purpose of registration is merely to give
notice, then questions regarding the effect or invalidity of instruments are expected to be decided after,
not before, registration. It must follow as a necessary consequence that registration must first be allowed,
and validity or effect litigated afterwards.

The foregoing, however, must not be understood as an absolute and invariable rule of procedure, for
parties may, by mutual consent, submit issues for determination at the time of the proceeding to register
a document. But the court should only proceed therewith (determination of the issues) upon giving all the
parties concerned sufficient opportunity to present their respective sides and the evidence in support
thereof, and that if this can not be done, the determination of the issues should be reserved in a
subsequent proceeding and the registration of the document ordered.

In accordance with the above opinion, we find that the issues raised by respondents-appellants, namely,
that the contracts of lease, Exhibits A and C, are invalid because they violate the contracts of mortgage
executed in favor of the owner of the land, that Tirso T. Reyes is not the attorney-in-fact of the
respondents-appellants, and that the respondents-appellants had no knowledge of the execution of the
contract of lease, Exhibits A and C — these issues were not properly investigated because respondents-
appellants did not have the opportunity to present evidence thereon and did not even present copy of
their mortgage at the hearing, and the trial court decided the questions without full and complete
investigation. The ruling of the trial court on the above issues should, therefore, be set aside and their
determination reserved in a proper proceeding.

Wherefore, the opposition to the motion for the surrender of the certificates of title to the Register of
Deeds of Manila is overruled, and the order appealed from, in so far as it orders the surrender of the
certificates of title for the registration of the contracts of lease, is hereby affirmed, but the other rulings
are reversed, and the other issues raised by respondents-appellants reserved for determination in a
proper proceeding. With costs against the respondents-appellants.