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HEIRS OF VICTORINO SARILI v. PEDRO F. LAGROSA

FACTS:

Respondent Pedro F. Lagrosa filed a complaint against petitioners, the heirs of Victorino Sarili, before the RTC alleging that he is the owner of a parcel of land in Caloocan City and that a new certificate of title was issued in the name of Victorino married to Isabel Amparo by virtue of a falsified Deed of Absolute Sale. Respondent claimed that Sps. Sarili and the Register of Deeds illegally acquired the subject property and prayed for the annulment of the title and delivery of possession, or alternatively, for payment of damages. Sps. Sarili maintained that they are innocent purchasers for value. The RTC ruled in favor of Sps. Sarili, but the CA reversed the decision, declaring the deeds of sale and the title as void and ordering the reinstatement of the original title in respondent's name. Petitioners filed a petition for review on certiorari assailing the CA's decision.

ISSUES:

  1. Whether or not there was a valid conveyance of the subject property from the respondent to the buyers, Sps. Sarili, despite the presence of a fictitious deed of sale.

  2. Whether the signatures in the subject Special Power of Attorney (SPA) were forged.

  3. Whether the sale of the subject property based on the forged SPA is void.

  4. Whether the award of moral damages, attorney's fees, and litigation expenses is justified.

  5. Whether the rights and obligations of the parties with respect to the house built on the subject property should be determined.

  6. Whether or not the spouses Sarili were aware of a flaw or defect in their title or mode of acquisition.

  7. Whether or not the spouses Sarili built the house on the subject property in bad faith.

RULING:

  1. The Court ruled that there was no valid conveyance of the subject property from the respondent to the buyers, Sps. Sarili. The buyers failed to show that they conducted an investigation beyond the subject special power of attorney (SPA) and into the circumstances of its execution, as required by prevailing jurisprudence. Thus, they cannot be considered as innocent purchasers for value. Furthermore, the defective notarization of the subject SPA reduced it to a private instrument, and its due execution and authenticity were not sufficiently established. Therefore, the sale between the buyers and Ramon, who claimed to be the agent of the purported seller, respondent, is void.

  2. The Court agrees with the conclusion of the Court of Appeals (CA) that the respondent was able to preponderate his claims of forgery against the subject SPA, as there was no evidence presented to authenticate the signatures of the other signatories of the document, and the respondent's signature in the subject SPA is not similar to his genuine signature in another document.

  3. The sale of the subject property based on the forged SPA is void. Since the petitioners' claim over the property is based on forged documents, no valid title had been transferred to them. The title in the name of the respondent should be reinstated, while the title in the name of the petitioners should be annulled.

  4. The award of moral damages, attorney's fees, and litigation expenses is justified. The dispute over the subject property caused the respondent serious anxiety, mental anguish, and sleepless nights. He was also constrained to engage the services of counsel to file the suit and defend his interests.

  5. The case is remanded to the trial court to determine the rights and obligations of the parties with respect to the house built on the subject property. The trial court should apply the relevant provisions of the Civil Code relating to builders or planters in bad faith and the reimbursement of necessary expenses.

  6. The petition is denied. The decision of the Court of Appeals is affirmed. However, the case is remanded to the lower court for the proper application of Article 449 in relation to Articles 450, 451, 452, and the first paragraph of Article 546 of the Civil Code with respect to the house built by the spouses Sarili on the subject property.

PRINCIPLES:

  • The procurement of a certificate of title tainted with fraud and misrepresentation may still be the source of a completely legal and valid title in the hands of an innocent purchaser for value.

  • Every person dealing with registered land may rely on the correctness of the certificate of title issued, and the law does not oblige him to go beyond the certificate to determine the condition of the property.

  • When buying from a person who is not the registered owner, the buyer has a duty to examine not only the certificate of title but also all factual circumstances necessary to determine any flaws in the transferor's title. The buyer must ascertain the identity of the person and the latter's legal authority to convey the property.

  • Proof of the seller's capacity or legal authority to sell depends on the proof of capacity of the seller. If a special power of attorney is provided, mere inspection of the face of the public document already constitutes sufficient inquiry. If no such special power of attorney is provided or there are flaws in its notarial acknowledgment, the buyer must prove that his investigation went beyond the document and into the circumstances of its execution.

  • An instrument with defective notarization loses its public character and is treated as a private instrument, and its validity is subject to preponderance of evidence.

  • A sale of a piece of land or any interest therein through an agent requires the authority of the agent to be in writing; otherwise, the sale is void.

  • When an instrument presented is forged, even if accompanied by the owner's duplicate certificate of title, the registered owner does not lose his title, and the assignee in the forged deed does not acquire any right or title to the property.

  • The award of moral damages is justified when a party suffers serious anxiety, mental anguish, and sleepless nights due to a dispute.

  • The award of attorney's fees and litigation expenses is sustained when a party was compelled to engage the services of counsel to file a suit and defend his interests.

  • To be deemed a builder in good faith, a person must assert title to the land on which he builds and be unaware of any flaw that invalidates his title.

  • Good faith implies honesty of intention and freedom from knowledge of circumstances that should put the possessor on inquiry.

  • Actual knowledge of a flaw or defect in the title or mode of acquisition constitutes bad faith.

  • Bad faith is a state of mind affirmatively operating with furtive design or with some motive of self-interest or ill-will, or with the dishonest purpose of taking an undue or unconscionable advantage of another.

  • Article 449 of the Civil Code provides that the builder in good faith has the right to retain possession of the land until he is reimbursed for his necessary and useful expenses, while Article 450 provides that the builder in bad faith is not entitled to any reimbursement for his expenses, but is entitled to remove the improvements if it can be done without injury to the land.

  • Article 451 states that the possessor in bad faith loses any right to indemnity for expenses made on the property, but still has a right of retention until the reimbursement is made, while Article 452 provides that if the bad faith possessor cannot remove the improvements without causing damage to the land, he will be indemnified for the value of the improvements.

  • The first paragraph of Article 546 states that necessary and useful expenses shall be refunded to the possessor in good faith, but only to the extent that the value of the land is increased.