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SPS. ALFONSO v. LILIA V. DOMINGO

FACTS:

The property in dispute is a vacant lot in Quezon City covered by Transfer Certificate of Title (TCT) No. N-165606 issued in the name of respondent Lilia V. Domingo. In 1997, a certain Radelia Sy petitioned for the issuance of a new owner's copy of TCT No. N-165606, claiming that the original copy was lost. The petition was granted and a new owner's duplicate copy was issued in Sy's name. Sy subsequently subdivided the property and sold each half to different buyers. The existence of the contracts of sale was annotated on Sy's TCT. Domingo, the registered owner, only found out about the transactions when she discovered construction activities on her property without her consent. She filed a case seeking the annulment or cancellation of the titles, injunction, and damages against Sy, the buyers, and other parties involved. The Regional Trial Court initially rendered a decision declaring the sale between Domingo and Sy as void and the buyers as purchasers in good faith. However, the RTC later reconsidered and set aside its decision, ruling that the sale was void and the buyers were not purchasers in good faith. The RTC also ordered the cancellation of the titles issued to the buyers and directed the Register of Deeds to annotate the order on the titles.

The case involves a dispute over a property in Quezon City. Lilia Domingo is the registered owner of the property covered by Transfer Certificate of Title (TCT) No. 165606. Radelia Sy, one of the defendants, sold the property to the Cusis and De Veras. However, it was later discovered that Sy forged Domingo's signature in the deed of sale. As a result, the Regional Trial Court (RTC) declared the sale between Domingo and Sy null and void, and ordered the cancellation of TCT No. 186142 in Sy's name. The RTC also held the Cusis and De Veras liable for not being purchasers in good faith and for value. The RTC awarded damages to Domingo and ordered the annotation of the RTC's decision on the relevant titles. The Court of Appeals (CA) affirmed the RTC's decision with modifications on the damages awarded to Domingo. The Cusis and De Vera appealed to the Supreme Court.

The case involves two separate parcels of land, both registered in the name of petitioner Sy under Transfer Certificate of Title (TCT) No. 186142 and TCT No. 186143. The respondents, Dela Cruz, spouses Obidos, and spouses Guerrero, claimed ownership of portions of the said properties by virtue of separate deeds of sale executed by the registered owners prior to Sy. The respondents argue that they are purchasers in good faith and for value, believing that Sy's TCT No. 186142 did not show any liens or encumbrances that could have raised their suspicions. Despite this, the respondents were diligent enough to go beyond merely examining the face of Sy's TCT No. 186142.

ISSUES:

  1. Whether the petitioners are entitled to reimbursement of all the payments made to their co-defendants in addition to damages and attorney's fees.

  2. Whether the Cusis and the De Veras should have inquired beyond the face of Sy's reissued duplicate owner's copy of TCT No. 186142.

  3. Whether the Cusis and the De Veras should have been extra cautious in dealing with Sy on the property.

  4. Whether the Cusis and the De Veras dealt on the property in good faith.

  5. Whether the respondents were innocent purchasers for value.

  6. Whether the undervaluation of the property in the deeds of sale is a factor to consider in determining good faith.

RULING:

  1. The petitioners are not entitled to reimbursement of all the payments made to their co-defendants. The Court concurs with the finding that the petitioners were not purchasers for value and in good faith. The Torrens system of land registration provides that one does not need to go behind the certificate of title because it contains all the necessary information about the title of its holder. The avowed objective of the Torrens system is to obviate possible conflicts of title by giving the public the right to rely upon the face of the Torrens certificate and to dispense with the need of inquiring further. However, a person dealing in registered land still has the duty to exercise caution and due diligence. In this case, the petitioners were deficient in their vigilance as buyers and did not fulfill their obligation to purchase the property not only in good faith but also for value.

  2. The Cusis and the De Veras should have inquired beyond the face of Sy's reissued duplicate owner's copy of TCT No. 186142 and should have been extra cautious in dealing with Sy on the property. Their failure to do so resulted in their denial of innocence and good faith. Therefore, they did not deal on the property in good faith.

  3. The respondents were not innocent purchasers for value. They were aware of the suspicious circumstances surrounding the title of the property and failed to make deeper inquiries. Furthermore, the gross undervaluation of the property in the deeds of sale, despite their knowledge of the true market value, rendered them as parties to the fraud. Their passivity and acquiescence to the fraud perpetrated against the government indicated bad faith.

  4. The undervaluation of the property in the deeds of sale is a factor that contributes to the lack of good faith on the part of the respondents. The undervaluation, even if done to accommodate the seller's request to minimize tax liabilities, still rendered the respondents as parties to the wrongdoing. Their failure to rectify the undervaluation and insistence that they were not responsible for it further indicated their lack of good faith.

PRINCIPLES:

  • The nullity of a transfer of property is conclusive if affirmed by both the trial court and the appellate court.

  • The Torrens system of land registration allows reliance on the certificate of title, but a person dealing in registered land must still exercise caution and due diligence.

  • A buyer of property has an obligation to purchase the property not only in good faith but also for value.

  • A reissued duplicate owner's copy of a Transfer Certificate of Title (TCT) is treated as similar to a reconstituted certificate of title.

  • Anyone dealing with a subsequent copy of a TCT, whether reissued duplicate owner's copy or reconstituted title, is put on notice and warned to be extra careful.

  • Buyers of registered realty should inquire beyond the face of the title and be cautious when there are circumstances that raise suspicion or excitement.

  • Good faith is the honest intention to abstain from taking unconscientious advantage of another and includes freedom from knowledge and circumstances that ought to put a person on inquiry.

  • A purchaser in good faith is one who buys the property without notice that another person has a right to or interest in the property, and pays a full and fair price.