FACTS:

Petitioner Locsin was the registered owner of a lot covered by TCT No. 235094. In 1992, she filed an ejectment case against one Billy Aceron (Aceron) to recover possession over the land in issue. Eventually, the two entered into a compromise agreement, which the MTC approved.

Locsin later went to the US without knowing whether Aceron has complied with his part of the bargain under the compromise agreement. In spite of her absence, however, she continued to pay the real property taxes on the subject lot.

In 1994, after discovering that her copy of TCT No. 235094 was missing, Locsin filed a petition for administrative reconstruction in order to secure a new one.

However, she discovered that one Marylou Bolos had TCT No. RT-97467 cancelled and then secured a new one in her favor by registering a Deed of Absolute Sale allegedly executed by Locsin.

Bolos later sold the subject lot to Bernardo Hizon, but it was titled under Carlos Hizon’s name. Carlos is Bernardo’s son. Later, Bernardo, claiming to be the owner of the property, filed a Motion for Issuance of Writ of Execution for the enforcement of the court-approved compromise agreement.  Furthermore, the property was already occupied and was, in fact, up for sale.

Locsin, sent Carlos a letter requesting the return of the property since her signature in the purported deed of sale in favor of Bolos was a forgery. Carlos denied Locsin’s request, claiming that he was unaware of any defect or flaw in Bolos’ title and he is, thus, an innocent purchaser for value and good faith.

Locsin learned that Carlos had already sold the property for PhP 1.5 million to his sister and her husband (spouses Guevara), who had a new certificate of title issued in their names. The spouses Guevara then immediately mortgaged the said property to secure a PhP 2.5 million loan/credit facility with Damar Credit Corporation (DCC).

Locsin filed an action for reconveyance, annulment of TCT No. N-237083, the cancellation of the mortgage lien annotated thereon, and damages, against Bolos, Bernardo, Carlos, the Sps. Guevara, DCC, and the Register of Deeds, Quezon City. The charges against DCC, however, were dropped on joint motion of the parties. This is in view of the cancellation of the mortgage for failure of the spouses Guevara to avail of the loan/credit facility DCC extended in their favor.

The RTC dismissed the complaint.

The CA ruled that it was erroneous for the RTC to hold that Locsin failed to prove that her signature was forged.

The CA, however, affirmed the RTC’s finding that respondents are innocent purchasers for value.

The CA ruled that Locsin can no longer recover the subject lot. Hence this petition.

 

ISSUE:

Whether or not Carlos and Spouses Guerrero are innocent purchasers for value.

 

RULING:

An innocent purchaser for value is one who buys the property of another without notice that some other person has a right to or interest in it, and who pays a full and fair price at the time of the purchase or before receiving any notice of another person’s claim.

As such, a defective title–– or one the procurement of which is tainted with fraud and misrepresentation––may be the source of a completely legal and valid title, provided that the buyer is an innocent third person who, in good faith, relied on the correctness of the certificate of title, or an innocent purchaser for value.

Complementing this is the mirror doctrine which echoes the doctrinal rule that every person dealing with registered land may safely rely on the correctness of the certificate of title issued therefor and is in no way obliged to go beyond the certificate to determine the condition of the property.

The recognized exceptions to this rule are stated as follows:

[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 of sufficient facts to induce a reasonably prudent man to inquire into the 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.

Thus, in Domingo Realty, Inc. v. CA, we emphasized the need for prospective parties to a contract involving titled lands to exercise the diligence of a reasonably prudent person in ensuring the legality of the title, and the accuracy of the metes and bounds of the lot embraced therein, by undertaking precautionary measures, such as:

 1. Verifying the origin, history, authenticity, and validity of the title with the Office of the Register of Deeds and the Land Registration Authority;

2. Engaging the services of a competent and reliable geodetic engineer to verify the boundary,metes, and bounds of the lot subject of said title based on the technical description in the said title and the approved survey plan in the Land Management Bureau;

3. Conducting an actual ocular inspection of the lot;

4. Inquiring from the owners and possessors of adjoining lots with respect to the true and legal ownership of the lot in question;

5. Putting up of signs that said lot is being purchased, leased, or encumbered; and

6. Undertaking such other measures to make the general public aware that said lot will be subject to alienation, lease, or encumbrance by the parties.

 

In the case at bar, Bolos’ certificate of title was concededly free from liens and encumbrances on its face. However, the failure of Carlos and the spouses Guevara to exercise the necessary level of caution in light of the factual milieu surrounding the sequence of transfers from Bolos to respondents bars the application of the mirror doctrine and inspires the Court’s concurrence with petitioner’s proposition.