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HEIRS OF JULIAN TIRO v. PHILIPPINE ESTATES CORPORATION

FACTS:

In this case, the petitioners filed a complaint for Quieting of Title against the respondent Philippine Estates Corporation. They claimed to be the children of the late Julian Tiro and the authorized representatives of the heirs of the late Pedro Tiro. They alleged that their ancestors were the registered owners of a parcel of land in Cebu as evidenced by Original Certificate of Title (OCT) No. RO-1121. The petitioners asserted that they and their predecessors-in-interest were in possession of the land until they were barred from entering by individuals who claimed to be the new owners.

However, the records from the Office of the Register of Deeds showed that OCT No. RO-1121 was cancelled in 1969. The disputed property was subsequently transferred to different owners, with the respondent being the current registered owner under Transfer Certificate of Title (TCT) No. 35672. The petitioners argued that the transfer of the land was invalid because the person who caused the transfer, Maxima Ochea, was not an heir of the original owners. They sought to have all transactions resulting from the transfer declared void and for the property to be restored and registered in their name.

On the other hand, the respondent contended that it acquired the land from the registered owners, the Spouses Velayo, who were also in possession of the property at the time of the sale. The respondent claimed that the petitioners' claim was barred by laches and prescription since they only asserted their rights over the land after 27 years and did not question the cancellation of their title while the original owners were still alive.

Ultimately, the trial court dismissed the petitioners' complaint. The court noted that their claims were unsupported by documents and inconsistent testimonies. Additionally, the court held that their claims had already prescribed.

ISSUES:

  1. Whether the act of the Register of Deeds of registering a clearly void and unregistrable document confers a valid title.

  2. Whether the doctrine in Spouses Santiago v. Court of Appeals is applicable in this case.

  3. Whether the respondent is an innocent purchaser for value.

  4. Whether the certificates of title of Pacific Rehouse Corporation and the Spouses Velayo were clean and appeared valid on their face.

RULING:

  1. The Court held that the act of the Register of Deeds of registering a clearly void and unregistrable document does not confer a valid title. The Torrens system of registration merely confirms or records title already existing and vested. It does not protect a usurper from the true owner nor can it be a shield in the commission of fraud. Where one does not have any rightful claim over a real property, the Torrens system of registration confirms or records nothing.

  2. The Court also held that an innocent purchaser for value who relies on the correctness of the certificate of title of the vendor can acquire a valid title, even if the title was derived from a fraudulent document. A person dealing with registered land may safely rely on the correctness of the certificate of title and the law will not obligate him to go behind the certificate to determine the condition of the property. The rights of innocent third persons should not be disregarded, as it would erode public confidence in the Torrens system of land registration.

  3. The respondent is considered an innocent purchaser for value. It purchased the disputed property for a valuable consideration from Pacific Rehouse Corporation, who had also purchased the property from the Spouses Velayo for valuable consideration. The certificates of title of both Pacific Rehouse Corporation and the Spouses Velayo were clean and appeared valid, and there was nothing to put the respondent on guard about any defect in the previous registered owners' title to the disputed property. Consequently, the attempt to annul the respondent's certificate of title to the disputed property must fail.

PRINCIPLES:

  • The Torrens system of registration confirms or records title already existing and vested. It does not protect a usurper from the true owner nor can it be a shield in the commission of fraud.

  • The doctrine of an innocent purchaser for value allows a person who buys property without notice of any claims or interests of other persons to acquire a valid title.

  • A title procured by fraud or misrepresentation can still be the source of a completely legal and valid title if it is in the hands of an innocent purchaser for value.

  • A complaint for annulment of title must allege that the purchaser was aware of the defect in the title in order to render a valid judgment against the purchaser. Failure to prove bad faith on the part of the purchaser who acquires title in their favor makes it impossible for the court to render a valid judgment due to the indefeasibility and conclusiveness of the title. (Spouses Chu, Sr. v. Benelda Estate Development Corporation)

  • A title issued to an innocent purchaser and for value cannot be revoked on the basis of a falsified deed of sale, if there was no knowledge of the fraud committed. The remedy of the person prejudiced is to bring an action for damages against the party who caused or employed the fraud, or file an action against the Treasurer of the Philippines for recovery of damages against the Assurance Fund. (Veloso v. Court of Appeals, Tenio-Obsequio v. Court of Appeals)

  • The cancellation of certificates of title may be warranted when a contract of sale is considered simulated for lack of consideration and when the defendants are not innocent purchasers for value. (Sps. Santiago v. Court of Appeals)