THIRD DIVISION
NAAWAN COMMUNITY
RURAL BANK INC.,
Petitioner,
G.R.
No.
128573
January 13, 2003
-versus-
THE COURT OF
APPEALS
AND SPOUSES
ALFREDO
AND ANNABELLE LUMO,
Respondents.
D E C I S I O N
CORONA, J.:
Under the established principles
of land registration, a person dealing with registered land may
generally
rely on the correctness of a certificate of title and the law will in
no
way oblige him to go beyond it to determine the legal status of the
property.chanrobles virtuallaw libraryred
Before us is a Petition
for Review on Certiorari challenging the February 7, 1997 Decision[1]
of the Court of Appeals in CA-G.R. CV No. 55149, which in turn affirmed
the decision[2]
of the Regional Trial Court of Misamis Oriental, Branch 18 as follows:chanrobles virtuallaw libraryred
WHEREFORE, the plaintiffs-spouses
are adjudged the absolute owners and possessors of the properties in
question
(Lot 18583, under TCT No. T-50134, and all improvements thereon) and
quieting
title thereto as against any and all adverse claims of the defendant.
Further,
the sheriff’s certificate of sale, Exhibit 4; 4-A; Sheriff’s deed of
final
conveyance, Exhibit 5, 5-A; Tax Declarations No. 71211, Exhibit 7, and
any and all instrument, record, claim, encumbrance or proceeding in
favor
of the defendant, as against the plaintiffs, and their
predecessor-in-interest,
which may be extant in the office of the Register of Deeds of Province
of Misamis Oriental, and of Cagayan de Oro City, and in the City
Assessor’s
Office of Cagayan de Oro City, are declared as invalid and ineffective
as against the plaintiffs’ title.chanrobles virtuallaw libraryred
The counterclaim is
dismissed for lack of merit.cralaw:red
SO ORDERED.[3]chanrobles virtuallaw libraryred
The facts of the case,
as culled from the records, are as follows:
On April 30, 1988, a
certain Guillermo Comayas offered to sell to private respondent-spouses
Alfredo and Annabelle Lumo, a house and lot measuring 340 square meters
located at Pinikitan, Camaman-an, Cagayan de Oro City.chanrobles virtuallaw libraryred
Wanting to buy said
house and lot, private respondents made inquiries at the Office of the
Register of Deeds of Cagayan de Oro City where the property is located
and the Bureau of Lands on the legal status of the vendor’s title. They
found out that the property was mortgaged for P8,000 to a certain Mrs.
Galupo and that the owner’s copy of the Certificate of Title to said
property
was in her possession.chanrobles virtuallaw libraryred
Private respondents
directed Guillermo Comayas to redeem the property from Galupo at their
expense, giving the amount of P10,000 to Comayas for that purpose.cralaw:red
On May 30, 1988, a release
of the adverse claim of Galupo was annotated on TCT No. T-41499 which
covered
the subject property.cralaw:red
In the meantime, on
May 17, 1988, even before the release of Galupo’s adverse claim,
private
respondents and Guillermo Comayas, executed a deed of absolute sale.
The
subject property was allegedly sold for P125,000 but the deed of sale
reflected
the amount of only P30,000 which was the amount private respondents
were
ready to pay at the time of the execution of said deed, the balance
payable
by installment.chanrobles virtuallaw libraryred
On June 9, 1988, the
deed of absolute sale was registered and inscribed on TCT No. T-41499
and,
on even date, TCT No. T-50134 was issued in favor of private
respondents.cralaw:red
After obtaining their
TCT, private respondents requested the issuance of a new tax
declaration
certificate in their names. However, they were surprised to learn from
the City Assessor’s Office that the property was also declared for tax
purposes in the name of petitioner Naawan Community Rural Bank Inc.
Records
in the City Assessor’s Office revealed that, for the lot covered by TCT
No. T-50134, Alfredo Lumo’s T/D # 83324 bore the note: "This lot is
also
declared in the name of Naawan Community Rural Bank Inc. under T/D #
71210".chanrobles virtuallaw libraryred
Apparently, on February
7, 1983, Guillermo Comayas obtained a P15,000 loan from petitioner Bank
using the subject property as security. At the time said contract of
mortgage
was entered into, the subject property was then an unregistered parcel
of residential land, tax-declared in the name of a certain Sergio A.
Balibay
while the residential one-storey house was tax-declared in the name of
Comayas.cralaw:red
Balibay executed a special
power of attorney authorizing Comayas to borrow money and use the
subject
lot as security. But the Deed of Real Estate Mortgage and the Special
Power
of Attorney were recorded in the registration book of the Province of
Misamis
Oriental, not in the registration book of Cagayan de Oro City. It
appears
that, when the registration was made, there was only one Register of
Deeds
for the entire province of Misamis Oriental, including Cagayan de Oro
City.
It was only in 1985 when the Office of the Register of Deeds for
Cagayan
de Oro City was established separately from the Office of the Register
of Deeds for the Province of Misamis Oriental.cralaw:red
For failure of Comayas
to pay, the real estate mortgage was foreclosed and the subject
property
sold at a public auction to the mortgagee Naawan Community Rural Bank
as
the highest bidder in the amount of P16,031.35. Thereafter, the
sheriff’s
certificate of sale was issued and registered under Act 3344 in the
Register
of Deeds of the Province of Misamis Oriental.chanrobles virtuallaw libraryred
On April 17, 1984, the
subject property was registered in original proceedings under the Land
Registration Act. Title was entered in the registration book of the
Register
of Deeds of Cagayan de Oro City as Original Certificate of Title No.
0-820,
pursuant to Decree No. N-189413.chanrobles virtuallaw libraryred
On July 23, 1984, Transfer
Certificate of Title No. T-41499 in the name of Guillermo P. Comayas
was
entered in the Register of Deeds of Cagayan de Oro City.cralaw:red
Meanwhile, on September
5, 1986, the period for redemption of the foreclosed subject property
lapsed
and the MTCC Deputy Sheriff of Cagayan de Oro City issued and delivered
to petitioner bank the sheriff’s deed of final conveyance. This time,
the
deed was registered under Act 3344 and recorded in the registration
book
of the Register of Deeds of Cagayan de Oro City.cralaw:red
By virtue of said deed,
petitioner Bank obtained a tax declaration for the subject house and
lot.cralaw:red
Thereafter, petitioner
Bank instituted an action for ejectment against Comayas before the MTCC
which decided in its favor. On appeal, the Regional Trial Court
affirmed
the decision of the MTCC in a decision dated April 13, 1988.chanrobles virtuallaw libraryred
On January 27, 1989,
the Regional Trial Court issued an order for the issuance of a writ of
execution of its judgment. The MTCC, being the court of origin,
promptly
issued said writ.cralaw:red
However, when the writ
was served, the property was no longer occupied by Comayas but herein
private
respondents, the spouses Lumo who had, as earlier mentioned, bought it
from Comayas on May 17, 1988.chanrobles virtuallaw libraryred
Alarmed by the prospect
of being ejected from their home, private respondents filed an action
for
quieting of title which was docketed as Civil Case No. 89-138. After
trial,
the Regional Trial Court rendered a decision declaring private
respondents
as purchasers for value and in good faith, and consequently declaring
them
as the absolute owners and possessors of the subject house and lot.cralaw:red
Petitioner appealed
to the Court of Appeals which in turn affirmed the trial court’s
decision.chanrobles virtuallaw libraryred
Hence, this petition.cralaw:red
Petitioner raises the
following issues:
I. WHETHER OR NOT THE
SHERIFF’S DEED OF FINAL CONVEYANCE WAS DULY EXECUTED AND REGISTERED IN
THE REGISTER OF DEEDS OF CAGAYAN DE ORO CITY ON DECEMBER 2, 1986;chanrobles virtuallaw libraryred
II. WHETHER OR NOT REGISTRATION
OF SHERIFF’S DEED OF FINAL CONVEYANCE IN THE PROPER REGISTRY OF DEEDS
COULD
BE EFFECTIVE AS AGAINST SPOUSES LUMO.chanrobles virtuallaw libraryred
Both parties cite Article
1544 of the Civil Code which governs the double sale of immovable
property.cralaw:red
Article 1544 provides:chanrobles virtuallaw libraryred
"x x x. Should it be
immovable property, the ownership shall belong to the person acquiring
it who in good faith first recorded it in the Registry of Property."
Petitioner bank
contends
that the earlier registration of the sheriff’s deed of final conveyance
in the day book under Act 3344 should prevail over the later
registration
of private respondents’ deed of absolute sale under Act 496,[4]
as amended by the Property Registration Decree, PD 1529.cralaw:red
This contention has
no leg to stand on. It has been held that, where a person claims to
have
superior proprietary rights over another on the ground that he derived
his title from a sheriff’s sale registered in the Registry of Property,
Article 1473 (now Article 1544) of the Civil Code will apply only if
said
execution sale of real estate is registered under Act 496.[5]
Unfortunately, the subject
property was still untitled when it was acquired by petitioner bank by
virtue of a final deed of conveyance. On the other hand, when private
respondents
purchased the same property, it was already covered by the Torrens
System.chanrobles virtuallaw libraryred
Petitioner also relies
on the case of Bautista vs. Fule[6]
where the Court ruled that the registration of an instrument involving
unregistered land in the Registry of Deeds creates constructive notice
and binds third person who may subsequently deal with the same property.cralaw:red
However, a close scrutiny
of the records reveals that, at the time of the execution and delivery
of the sheriff’s deed of final conveyance on September 5, 1986, the
disputed
property was already covered by the Land Registration Act and Original
Certificate of Title No. 0-820 pursuant to Decree No. N189413 was
likewise
already entered in the registration book of the Register of Deeds of
Cagayan
De Oro City as of April 17, 1984.chanrobles virtuallaw libraryred
Thus, from April 17,
1984, the subject property was already under the operation of the
Torrens
System. Under the said system, registration is the operative act that
gives
validity to the transfer or creates a lien upon the land.chanrobles virtuallaw libraryred
Moreover, the issuance
of a certificate of title had the effect of relieving the land of all
claims
except those noted thereon. Accordingly, private respondents, in
dealing
with the subject registered land, were not required by law to go beyond
the register to determine the legal condition of the property. They
were
only charged with notice of such burdens on the property as were noted
on the register or the certificate of title. To have required them to
do
more would have been to defeat the primary object of the Torrens System
which is to make the Torrens Title indefeasible and valid against the
whole
world.cralaw:red
Private respondents
posit that, even assuming that the sheriff’s deed of final conveyance
in
favor of petitioner bank was duly recorded in the day book of the
Register
of Deeds under Act 3344, ownership of the subject real property would
still
be theirs as purchasers in good faith because they registered the sale
first under the Property Registration Decree.chanrobles virtuallaw libraryred
The rights created by
the above-stated statute of course do not and cannot accrue under an
inscription
in bad faith. Mere registration of title in case of double sale is not
enough; good faith must concur with the registration.[7]chanrobles virtuallaw libraryred
Petitioner contends
that the due and proper registration of the sheriff’s deed of final
conveyance
on December 2, 1986 amounted to constructive notice to private
respondents.
Thus, when private respondents bought the subject property on May 17,
1988,
they were deemed to have purchased the said property with the knowledge
that it was already registered in the name of petitioner bank.cralaw:red
Thus, the only issue
left to be resolved is whether or not private respondents could be
considered
as buyers in good faith.cralaw:red
The "priority in time"
principle being invoked by petitioner bank is misplaced because its
registration
referred to land not within the Torrens System but under Act 3344. On
the
other hand, when private respondents bought the subject property, the
same
was already registered under the Torrens System. It is a well-known
rule
in this jurisdiction that persons dealing with registered land have the
legal right to rely on the face of the Torrens Certificate of Title and
to dispense with the need to inquire further, except when the party
concerned
has actual knowledge of facts and circumstances that would impel a
reasonably
cautious man to make such inquiry.[8]chanrobles virtuallaw libraryred
Did private respondents
exercise the required diligence in ascertaining the legal condition of
the title to the subject property so as to be considered as innocent
purchasers
for value and in good faith?
We answer in the affirmative.chanrobles virtuallaw libraryred
Before private respondents
bought the subject property from Guillermo Comayas, inquiries were made
with the Registry of Deeds and the Bureau of Lands regarding the status
of the vendor’s title. No liens or encumbrances were found to have been
annotated on the certificate of title. Neither were private respondents
aware of any adverse claim or lien on the property other than the
adverse
claim of a certain Geneva Galupo to whom Guillermo Comayas had
mortgaged
the subject property. But, as already mentioned, the claim of Galupo
was
eventually settled and the adverse claim previously annotated on the
title
cancelled. Thus, having made the necessary inquiries, private
respondents
did not have to go beyond the certificate of title. Otherwise, the
efficacy
and conclusiveness of the Torrens Certificate of Title would be
rendered
futile and nugatory.cralaw:red
Considering therefore
that private respondents exercised the diligence required by law in
ascertaining
the legal status of the Torrens title of Guillermo Comayas over the
subject
property and found no flaws therein, they should be considered as
innocent
purchasers for value and in good faith.cralaw:red
Accordingly, the appealed
judgment of the appellate court upholding private respondents Alfredo
and
Annabelle Lumo as the true and rightful owners of the disputed property
is affirmed.chanrobles virtuallaw libraryred
WHEREFORE, petition
is hereby DENIED.cralaw:red
SO ORDERED.chanrobles virtuallaw libraryred
Puno, (Chairman),
Panganiban, Sandoval-Gutierrez, and Morales, JJ., concur.chanrobles virtuallaw libraryred
____________________________
Endnotes:
[1]
Penned by Associate Justice Oswaldo D. Agcaoili and concurred in by
Associate
Justices Jorge S. Imperial and Buenaventura J. Guerrero of the Ninth
Division.
[2]
Penned by Judge Senen C. Peñaranda; Records pp. 134-141.
[3]
Rollo, pp. 47-48.
[4]
Land Registration Act.
[5]
Julian Mediante and Nicodemus Garcia vs. Valentin Rosabal, 73 Phil 694
[1942].
[6]
85 Phil 391 [1949].chanrobles virtuallaw libraryred
[7]
Bargado vs. Court of Appeals, 173 SCRA 497 [1989].
[8]
Seno et al. vs. Mangabate, 156 SCRA 113 [127]. |