Bar Q and A #41

1.) Macario bought a titled lot from Ramon, got the title and took possession of the lot. Since Macario did not have the money to pay the taxes, fees and registration expenses, he was not able to register the Deed of Absolute Sale. Upon advice, he merely executed an Affidavit of Adverse Claim and had it annotated at the back of the title. A few years after, he received a Notice of Levy on Attachment and Writ of Execution in favor of Alex. The notice, writ and certificate of sale were annotated at the back of the title still in Ramon's name. Alex contends that since the Affidavit of Adverse Claim is effective only for 30 days from the date of its registration, then its validity has expired. Macario posits that the annotation of his adverse claim is notice to the whole world of his purchase of the lot in question. Who has the superior right over the disputed property - Macario or Alex? Explain.

Macario is preferred since the registration of his adverse claim was made ahead of the notice of levy and writ of execution in favor of Alex. Macario’s adverse claim, coupled with the fact that he was in possession of the disputed property, are circumstances which should have put Alex on constructive notice that the property being offered to him had already been sold to another. (Ching v. Enrile, G.R. No. 156076 [2008]) The contention that the adverse claim is effective only for 30 years is puerile. In Sajonas v. Court of Appeals, 258 SCRA 79, (1996), the Court held that the adverse claim does not ipso facto lose its validity since an independent action is still necessary to render it ineffective. Until then, the adverse claim shall continue as a prior lien on the property.

2.) Section 70 of Presidential Decree No. 1529, concerning adverse claims on registered land, provides a 30-day period of effectivity of an adverse claim, counted from the date of its registration. Suppose a notice of adverse claim based upon a contract to sell was registered on March 1, 1997 at the instance of the BUYER, but on June 1, 1997, or after the lapse of the 30- day period, a notice of levy on execution in favor of a JUDGMENT CREDITOR was also registered to enforce a final judgment for money against the registered owner. Then, on June 15, 1997 there having been no formal cancellation of his notice of adverse claim, the BUYER pays to the seller-owner the agreed purchase price in full and registers the corresponding deed of sale. Because the annotation of the notice of levy is carried over to the new title in his name, the BUYER brings an action against the JUDGMENT CREDITOR to cancel such annotation, but the latter claims that his lien is superior because it was annotated after the adverse claim of the BUYER had ipso facto ceased to be effective. Will the suit prosper?

The suit will prosper. While an adverse claim duly annotated at the back of a title under Sec. 7O of P.D. 1529 is good only for 30 days, cancellation thereof is still necessary to render it ineffective, otherwise, the inscription thereof will remain annotated as a lien on the property. While the life of adverse claim is 3O days under P.D. 1529, it continuous to be effective until it is cancelled by formal petition filed with the Register of Deeds. The cancellation of the notice of levy is justified under Sec. 108 of P.D.1529 considering that the levy on execution cannot be enforced against the buyer whose adverse claim against the registered owner was recorded ahead of the notice of levy on execution.

3.) Mario sold his house and lot to Carmen for P1 million payable in five (5) equal annual installments. The sale was registered and title was issued in Carmen's name. Carmen failed to pay the last three installments and Mario filed an action for collection, damages and attorney’s fees against her. Upon filing of the complaint, he caused a notice of lis pendens to be annotated on Carmen's title. Is the notice of lis pendens proper or not? Why?

The notice of lis pendens is not proper for the reason that the case filed by Mario against Carmen is only for collection, damages, and attorney's fees. Annotation of a lis pendens can only be done in cases involving recovery of possession of real property, or to quiet title or to remove cloud thereon, or for partition or any other proceeding affecting title to the land or the use or occupation thereof. The action filed by Mario does not fall on anyone of these.

4.) Regina has been leasing foreshore land from the Bureau of Fisheries and Aquatic Resources for the past 15 years. Recently, she learned that Jorge was able to obtain a free patent from the Bureau of Agriculture, covering the same land, on the basis of a certification by the District Forester that the same is already "alienable and disposable". Moreover, Jorge had already registered the patent with the Register of Deeds of the province, and he was issued an Original Certificate of Title for the same. Regina filed an action for annulment of Jorge's title on the ground that it was obtained fraudulently. Will the action prosper?

An action for the annulment of Jorge's Original Certificate of Title will prosper on the following grounds:

1. Under Chapter IX of C.A., No. 141, otherwise known as the Public Land Act, foreshore lands are disposable for residential, commercial, industrial, or similar productive purposes, and only by lease when not needed by the government for public service.

2. If the land is suited or actually used for fishpond or aquaculture purposes, it comes under the Jurisdiction of the Bureau of Fisheries and Aquatic Resources (BFAR) and can only be acquired by lease. (P.D. 705)

3. Free Patent is a mode of concession under Section 41, Chapter VII of the Public Land Act, which is applicable only for agricultural lands.

4. The certificate of the district forester that the land is already "alienable and disposable" simply means that the land is no longer needed for forest purposes, but the Bureau of Lands could no longer dispose of it by free patent because it is already covered by a lease contract between BFAR and Regina. That contract must be respected.

5. The free patent of Jorge is highly irregular and void ab initio, not only because the Bureau has no statutory authority to issue a free patent over a foreshore area, but also because of the false statements made in his sworn application that he has occupied and cultivated the land since July 4, 1945, as required by the free patent law. Under Section 91 of the Public Land Act, any patent concession or title obtained thru false representation is void ab initio. In cases of this nature, it is the government that shall institute annulment proceedings considering that the suit carries with it a prayer for the reversion of the land to the estate. However, Regina is a party in interest and the case will prosper because she has a lease contract for the same land with the government.

5.) In 1979, Nestor applied for and was granted a Free Patent over a parcel of agricultural land with an area of 30 hectares, located in General Santos City. He presented the Free Patent to the Register of Deeds, and he was issued a corresponding Original Certificate of Title (OCT) No. 375, Subsequently, Nestor sold the land to Eddie. The deed of sale was submitted to the Register of Deeds and on the basis thereof, OCT No. 375 was cancelled and Transfer Certificate of Title (TCT) No. 4576 was issued in the name of Eddie. In 1986, the Director of Lands filed a complaint for annulment of OCT No, 375 and TCT No. 4576 on the ground that Nestor obtained the Free Patent through fraud. Eddie filed a motion to dismiss on the ground that he was an innocent purchaser for value and in good faith and as such, he has acquired a title to the property which is valid, unassailable and indefeasible. Decide the motion.

The motion of Nestor to dismiss the complaint for annulment of O.C.T. No. 375 and
T.C.T. No. 4576 should be denied for the following reasons:

1. Eddie cannot claim protection as an innocent purchaser for value nor can he interpose the defense of indefeasibility of his title, because his TCT is rooted on a void title. Under Section 91 of CA No. 141, as amended, otherwise known as the Public Land Act, statements of material facts in the applications for public land must be under oath. Section 91 of the same act provides that such statements shall be considered as essential conditions and parts of the concession, title, or permit issued any false statement therein, or omission of facts shall ipso facto produce the cancellation of the concession. The patent issued to Nestor in this case is void ab initio not only because it was obtained by fraud but also because it covers 30 hectares which is far beyond the maximum of 24 hectares provided by the free patent law.

2. The government can seek annulment of the original and transfer certificates of title and the reversion of the land to the state. Eddie's defense is untenable. The protection afforded by the Torrens System to an innocent purchaser for value can be availed of only if the land has been titled thru judicial proceedings where the issue of fraud becomes academic after the lapse of one year from the issuance of the decree of registration. In public land grants, the action of the government to annul a title fraudulently obtained does not prescribe such action and will not be barred by the transfer of the title to an innocent purchaser for value.

6.) Rod, the owner of an FX taxi, found in his vehicle an envelope containing TCT No. 65432 over a lot registered in Cesar's name. Posing as Cesar, Rod forged Cesar's signature on a Deed of Sale in Rod's favor. Rod registered the said document with the Register of Deeds, and obtained a new title in his name. After a year, he sold the lot to Don, a buyer in good faith and for value, who also registered the lot in his name. 1. Did Rod acquire title to the land? Explain. 2. Discuss the rights of Don, if any, over the property.

1. No, Rod did not acquire title to the land. The inscription in the registry, to be effective, must be made in good faith. The defense of indefeasibility of a Torrens Title does not extend to a transferee who takes the certificate of title with notice of a flaw. A holder in bad faith of a certificate of title is not entitled to the protection of the law, for the law cannot be used as a shield for frauds. (Samonte v. Court of Appeals, G.R. No. 104223, July 12, 2001) In the case at bar, Rod only forged Cesar's signature on the Deed of Sale. It is very apparent that there was bad faith on the part of Rod from the very beginning. As such, he is not entitled to the protection of the Land Registration Act.

2. 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. (Naawan Community Rural Bank v. Court of Appeals, G.R. No. 128573, January 13, 2003) In the given problem, the property was already registered in the name of Rod when he bought the same from the latter. Thus, Don could be considered as a buyer in good faith and for value. However, since Rod did not actually sell any property to him, Don has no right to retain ownership over the property. He has only the right to recover the purchase price plus damages.

7.) In 1950, the Bureau of Lands issued a Homestead patent to A. Three years later, A sold the homestead to B. A died in 1990, and his heirs filed an action to recover the homestead from B on the ground that its sale by their father to the latter is void under Section 118 of the Public Land Law. B contends, however, that the heirs of A cannot recover the homestead from him anymore because their action has prescribed and that furthermore, A was in pari delicto. Decide.

The sale of the land by A to B 3 years after issuance of the homestead patent, being in violation of Sec. 118 of the Public Land Act, is void from its inception. The action filed by the heirs of B to declare the nullity or inexistence of the contract and to recover the land should be given due course. B's defense of prescription is untenable because an action which seeks to declare the nullity or inexistence of A contract does not prescribe. On the other hand, B's defense of in pari delicto is equally untenable. While as a rule, parties who are in pari delicto have no recourse against each other on the principle that a transgressor cannot profit from his own wrongdoing, such rule does not apply to violations of Sec. 118 of the Public Land Act because of the underlying public policy in the said Act "to conserve the land which a homesteader has acquired by gratuitous grant from the government for himself and his family".

In keeping with this policy, it has been held that one who purchases a homestead within the five-year prohibitory period can only recover the price which he has paid by filing a claim against the estate of the deceased seller (Labrador v. Delos Santos, G.R. No. 44947, November 26, 1938) under the principle that no one shall enrich himself at the expense of another. Applying the pari delicto rule to violation of Section 118 of the Public Land Act, the Court of Appeals has ruled that "the homesteader suffers the loss of the fruits realized by the vendee who in turn forfeits the improvement that he has introduced into the land". (Obot v. Sandadiuas, 69 OG, April 35, 1966)

8.) Cesar bought a residential condominium unit from High Rise Co. and paid the price in full. He moved into the unit, but somehow, he was not given the Condominium Certificate of Title covering the property. Unknown to him, High Rise Co. subsequently mortgaged the entire condominium building to Metrobank as security for a loan of P500 million. High Rise Co. failed to pay the loan and the bank foreclosed the mortgage. At the foreclosure sale, the bank acquired the building, being the highest bidder. When Cesar learned about this, he filed an action to annul the foreclosure sale insofar as his unit was concerned. The bank put up the defense that it relied on the condominium certificates of title presented by High Rise Co., which were clean. Hence, it was a mortgagee and buyer in good faith. Is this defense tenable or not? Why?

Metrobank's defense is untenable. As a rule, an innocent purchaser for value acquires a good and a clean title to the property. However, it is settled that one who closes his eyes to facts that should put a reasonable man on guard is not an innocent purchaser for value. In the present problem the bank is expected, as a matter of standard operating procedure, to have conducted an ocular inspection, of the promises before granting any loan. Apparently, Metrobank did not follow this procedure. Otherwise, it should have discovered that the condominium unit in question was occupied by Cesar and that fact should have led it to make further inquiry. Under the circumstances, Metrobank cannot be considered a mortgagee and buyer in good faith.

9.) In 1950's, the Government acquired a big landed estate in Central Luzon from the registered owner for subdivision into small farms and redistribution of bona fide occupants, F was a former lessee of a parcel of land, five hectares in area. After completion of the resurvey and subdivision, F applied to buy the said land in accordance with the guidelines of the implementing agency. Upon full payment of the price in 1957, the corresponding deed of absolute sale was executed in his favor and was registered, and in 1961, a new title was issued in his name. In 1963, F sold the said land to X; and in 1965 X sold it to Y, new titles were successively issued in the names of the said purchasers. In 1977, C filed an action to annul the deeds of sale to F, X and Y and their titles, on the ground that he had been in actual physical possession of the land, and that the sale to F and the subsequent sales should be set aside on the ground of fraud. Upon motion of defendants, the trial court dismissed the complaint, upholding their defenses of their being innocent purchasers for value, prescription and laches. Plaintiff appealed. 1. Is the said appeal meritorious? Explain your answer. 2. Suppose the government agency concerned joined C in filing the said action against the defendants, would that change the result of the litigation? Explain.

1. No, the appeal is not meritorious. The trial court ruled correctly in granting defendant's motion to dismiss for the following reasons:

a) While there is the possibility that F, a former lessee of the land was aware of the fact that C was the bona fide occupant thereof and for this reason his transfer certificate of title may be vulnerable, the transfer of the same land and the issuance of new TCTs to X and Y who are innocent purchasers for value render the latter's titles indefeasible. A person dealing with registered land may safely rely on the correctness of the certificate of title and the law will not in any way oblige him to go behind the certificate to determine the condition of the property in search for any hidden defect or inchoate right which may later invalidate or diminish the right to the land. This is the mirror principle of the Torrens System of land registration.

b) The action to annul the sale was instituted in 1977 or more than (10) years from the date of execution thereof in 1957, hence, it has long prescribed.

c) Under Sec 45 of Act 496, “the entry of a certificate of title shall be regarded as an agreement running with the land, and binding upon the applicant and all his successors in title that the land shall be and always remain registered land. A title under Act 496 is indefeasible and to preserve that character, the title is cleansed anew with every transfer for value. (De Jesus v. City of Manila,
G.R. No. 9337, December 24, 1914; Laperal v. City of Manila, G.R. No. L-42792, October 23, 1935; Penullar v. PNB, G.R. No. L-32762, January 27, 1983)

2. Even if the government joins C, this will not alter the outcome of the case so much because of estoppel as an express provision in Sec. 45 of Act 496 and Sec. 31 of PD 1529 that a decree of registration and the certificate of title issued in pursuance thereof “shall be conclusive upon and against all persons, including the national government and all branches thereof, whether mentioned by name in the application or not.”

10.) The spouses X and Y mortgaged a piece of registered land to A, delivering as well the OCT to the latter, but they continued to possess and cultivate the land, giving 1/2 of each harvest to A in partial payment of their loan to the latter, A, however, without the knowledge of X and Y, forged a deed of sale of the aforesaid land in favor of himself, got a TCT in his name, and then sold the land to B, who bought the land relying on A's title, and who thereafter also got a TCT in his name. It was only then that the spouses X and Y learned that their land had been titled in B's name. May said spouses file an action for reconveyance of the land in question against b? Reason.

The action of X and Y against B for reconveyance of the land will not prosper because B has acquired a clean title to the property being an innocent purchaser for value. A forged deed is an absolute nullity and conveys no title. The fact that the forged deed was registered and a certificate of title was issued in his name, did not operate to vest upon an ownership over the property of X and Y. The registration of the forged deed will not cure the infirmity. However, once the title to the land is registered in the name of the forger and title to the land thereafter falls into the hands of an innocent purchaser for value, the latter acquires a clean title thereto. A buyer of a registered land is not required to explore beyond what the record in the registry indicates on its face inquest for any hidden defectorinchoate right which may subsequently defeat his right thereto. This is the "mirror principle” of the Torrens system which makes it possible for a forged deed to be the root of a good title. Besides, it appears that spouses X and Y are guilty of contributory negligence when they delivered this OCT to the mortgagee without annotating the mortgage thereon. Between them and the innocent purchaser for value, they should bear the loss.