Aguirre vs. Bombaes

A buyer of registered land who purchases from a vendor holding a clean certificate of title, without any annotation of adverse claim or encumbrance at the time of sale, is an innocent purchaser for value and may rely on the correctness of the title; the original owner's remedy is compensation from the Assurance Fund under Section 95 of PD 1529.

Respondent Cristina B. Bombaes was the registered owner of Lot No. 782 in Roxas City under TCT No. T-41765, while petitioner Ma. Kristel B. Aguirre later held the same lot under TCT No. 097-2010000326. The statutory backdrop is the Torrens system under Presidential Decree No. 1529, including Section 95's Assurance Fund, which indemnifies a person deprived of land through the operation of registration.

Lot No. 782, located in Roxas City, was previously covered by Transfer Certificate of Title No. T-41765 in the name of respondent Cristina B. Bombaes. On March 17, 2008, respondent mortgaged Lot No. 782 to Vicente Atlas Catalan to secure a loan in the amount of P1,350,000.00 with 5% monthly interest payable on September 24, 2008. Respondent defaulted in the payment of her loan obligation when it fell due. Consequently, the parties executed a Deed of Absolute Sale dated October 19, 2009 over the subject lot in Catalan's favor. On November 26, 2009, title to the property was accordingly transferred in Catalan's name under TCT No. T-58922.

On April 9, 2010, petitioner Ma. Kristel B. Aguirre offered to purchase Lot No. 782 from Catalan. Catalan readily agreed and thereafter executed a Deed of Conditional Sale on the same day. Later, the parties entered into a Deed of Absolute Sale dated May 4, 2010 upon petitioner's full payment of the purchase price. The subject lot is now registered under TCT No. 097-2010000326 in petitioner's name. This prompted respondent to file a complaint for quieting of title against Catalan and petitioner before Branch 15, RTC, Roxas City.

Respondent alleged that Catalan coerced her to sign a simulated Deed of Absolute Sale over the subject property in his favor when she failed to settle her loan obligation. She claimed that the real purpose of the simulated sale was for Catalan to mortgage the subject lot to a lending institution and apply the proceeds thereof to her unpaid loan obligation. As proof of their true intention, she and Catalan executed a deed of assignment, which guaranteed her right to redeem the property. However, instead of mortgaging the subject lot, Catalan sold the property to petitioner. For his part, Catalan averred that when respondent failed to pay her outstanding debt, he told the latter that he might sell or mortgage the subject lot to a lending institution as he needed the money to campaign for the position of Mayor in Maayon, Capiz. He and respondent then executed a deed of assignment so that the latter would be able to redeem the subject lot should he decide to mortgage the property to a lending institution. Catalan further pointed out that aside from the Deed of Absolute Sale dated October 19, 2009, respondent also signed an acknowledgment receipt and a deed of confirmation of the sale of the subject lot to him.

Petitioner, for her part, contended that when she entered into the Deed of Conditional Sale dated April 9, 2010 with Catalan, she had no prior notice that some other persons had a right or interest over the subject lot. Thus, petitioner asserted that she was an innocent purchaser for value having relied on Catalan's clean title over the property at the time of execution of the Deed of Absolute Sale dated May 4, 2010. Consequently, respondent had no cause of action against her. The RTC found the Deed of Absolute Sale dated October 19, 2009 valid and binding between respondent and Catalan in the absence of proof of fraud or vitiation of consent in its execution, noted that the deed was a notarized document enjoying the presumption of regularity and validity, and ruled that petitioner was a buyer in good faith and for value because Catalan was already the owner of the subject lot when she purchased the property as evidenced by TCT No. T-58922, which had no adverse claim or any lis pendens annotated thereon at the time of the sale. The CA initially agreed, but in its Amended Decision it found the Deed of Absolute Sale absolutely simulated and petitioner not a buyer in good faith because respondent had an adverse claim annotated on the title on May 12, 2010, eight days after the May 4, 2010 sale, and the fact that the deed of absolute sale was dated May 4, 2010 was of no moment with regard to third persons.

• Timeliness of Motion for Reconsideration: Petitioner argued that respondent's Motion for Reconsideration of the CA Decision dated May 31, 2016 should have been denied due to belated filing.
• Innocent Purchaser for Value: Petitioner maintained that she was an innocent purchaser in good faith and for value, having had no prior notice of any other person's right or interest over the subject lot and having relied on Catalan's clean title at the time of the Deed of Absolute Sale dated May 4, 2010.

• Timeliness of Motion for Reconsideration: Whether respondent's Motion for Reconsideration of the CA Decision dated May 31, 2016 should have been denied due to belated filing.
• Innocent Purchaser for Value: Whether petitioner was an innocent purchaser in good faith and for value.

• Timeliness of Motion for Reconsideration: No. The Motion for Reconsideration was timely filed; under Section 3, Rule 13, the date of mailing shown by the registry receipt is the date of filing, and respondent filed it on July 25, 2016 after the 15-day period ended on July 23, 2016, a Saturday.
• Innocent Purchaser for Value: Yes. Petitioner was an innocent purchaser for value; Catalan's title was clean and free of encumbrance when petitioner bought the lot, and respondent's adverse claim was annotated only on May 12, 2010, eight days after the May 4, 2010 sale.

• Timeliness of Motion for Reconsideration: Section 3, Rule 13 of the Rules of Court provides that the date of mailing of motions, pleadings, or other papers, as shown by the post office stamp on the envelope or the registry receipt, shall be considered as the date of filing in court. Respondent received a copy of the CA Decision on July 8, 2016, so she had until July 25, 2016 within which to file a motion for reconsideration because the last day of the 15-day reglementary period fell on July 23, 2016, a Saturday. Respondent filed her Motion for Reconsideration via registered mail on July 25, 2016, as evidenced by the registry receipt and the Postmaster's Certification dated September 26, 2017. There is no question that the Motion for Reconsideration was timely filed.

• Innocent Purchaser for Value: Although questions of fact cannot ordinarily be entertained in a Rule 45 petition, the SC may review the factual findings of the CA when it appears that the assailed judgment is based on a misapprehension of facts, as in this case. 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 a general rule, every person dealing with registered land may safely rely on the correctness of the certificate of title, and the law will not oblige him or her to go behind the certificate to determine the condition of the property; when the certificate of title is clean and free from any encumbrance, a potential buyer has every right to rely on the correctness of the certificate. Conversely, the buyer will not be considered an innocent purchaser in good faith and for value if he or she had actual knowledge of a defect or the lack of title of the vendor over the property or anything on the title that would reasonably arouse suspicion, and he or she failed to inquire or take the necessary steps to ensure that there was no cloud on the title, right, or ownership of the property subject of the sale. Here, title to the subject lot had already been transferred to Catalan's name under TCT No. T-58922 a couple of months prior to the sale of the property to petitioner, and at the time of the sale, the certificate of title did not bear any annotation of a lien or encumbrance on the subject lot. Respondent had caused an adverse claim to be annotated on the title only on May 12, 2010, or eight days after the fact of sale of the property to petitioner as evidenced by the Deed of Absolute Sale dated May 4, 2010, and respondent failed to present any sufficient proof that petitioner had actual knowledge of her ownership and possession of the subject lot at the time of the sale. Because the certificate of title was clean and free of any encumbrance at the time of the sale, petitioner had every right to rely on the correctness of the title and was under no legal obligation to go beyond the certificate and to conduct any further inquiry as to the condition of the property. Under Cruz vs. Court of Appeals, where innocent third persons, relying on the correctness of the certificate of title, acquire rights over the property, the SC cannot disregard such rights and order total cancellation of the certificate, because that would impair public confidence in the certificate of title and compel everyone dealing with Torrens-registered property to inquire in every instance whether the title was regularly or irregularly issued. Petitioner, being an innocent purchaser in good faith and for value of registered land, holds an indefeasible title to the subject lot under the Torrens system, and the CA committed a serious error when it ordered the Register of Deeds to cancel petitioner's title under TCT No. 097-2010000326. Respondent is not without recourse; she may opt to file an action for compensation from the Assurance Fund under Section 95 of Presidential Decree No. 1529, given the registration of the subject lot in the name of an innocent purchaser in good faith and for value.

• Innocent purchaser for value — 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 purchase or before receiving notice of another person's claim. The SC applied this to Aguirre because she bought from Catalan while his TCT was clean and before Bombaes annotated an adverse claim.
• Torrens system and indefeasibility of title of an innocent purchaser — Every person dealing with registered land may safely rely on the correctness of the certificate of title, and the law does not oblige him or her to go behind the certificate; when the title is clean and free from encumbrance, a potential buyer has every right to rely on it. The SC held that cancelling the title of an innocent purchaser would impair public confidence in the Torrens system, so Aguirre's title under TCT No. 097-2010000326 was indefeasible.
• Assurance Fund — Under Section 95 of Presidential Decree No. 1529, a person who, without negligence on his part, sustains loss or damage, or is deprived of land or any estate or interest therein, in consequence of the bringing of the land under the Torrens system or arising after original registration, through fraud or in consequence of any error, omission, mistake, or misdescription in any certificate of title or in any entry or memorandum in the registration book, and who is barred or otherwise precluded by law from bringing an action for recovery of the land, may bring an action for damages from the Assurance Fund. The SC applied this by holding that Bombaes may seek compensation from the Assurance Fund because the lot was registered in the name of an innocent purchaser for value.
• Rule 45 factual review exception — Questions of fact cannot ordinarily be entertained in a Rule 45 petition, but the SC may review the CA's factual findings when the assailed judgment is based on a misapprehension of facts. The text lists the exceptional circumstances: (1) the conclusion is grounded entirely on speculation, surmises, or conjectures; (2) the inference made is manifestly absurd, mistaken, or impossible; (3) there is grave abuse of discretion in the appreciation of facts; (4) the judgment is premised on a misapprehension of facts; (5) the findings of fact are conflicting; (6) the CA's findings are beyond the issues of the case and contrary to the admissions of both appellant and appellee; (7) the CA's findings are contrary to those of the trial court; (8) the findings of fact are conclusions without citation of specific evidence on which they are based; (9) the facts set forth in the petition and in the petitioners' main and reply briefs are not disputed by the respondents; and (10) the CA's finding of fact is premised on the supposed absence of evidence and is contradicted by the evidence on record. The SC applied the fourth exception.
• Date of filing by registered mail — Under Section 3, Rule 13 of the Rules of Court, the date of mailing of motions, pleadings, or other papers, as shown by the post office stamp on the envelope or the registry receipt, is considered the date of filing in court. The SC applied this to hold that Bombaes's Motion for Reconsideration, filed via registered mail on July 25, 2016, was timely.

• "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," — The SC used this definition to frame the issue and then applied it to Aguirre's purchase from Catalan.
• "As a general rule, every person dealing with registered land, as in this case, may safely rely on the correctness of the certificate of title and the law will not, in any way, oblige him or her to go behind the certificate to determine the condition of the property." — This is the general rule the SC applied to excuse Aguirre from further inquiry beyond Catalan's clean TCT.
• "Where innocent third persons, relying on the correctness of the certificate of title thus issued, acquire rights over the property [,] the [C]ourt cannot disregard such rights and order the total cancellation of the certificate: The effect of such an outright cancellation would be to impair the public confidence in the certificate of title, for everyone dealing with property registered under the Torrens system would have to inquire in every instance whether the title has been regularly or irregularly issued. This is contrary to the evident purpose of the law." — Quoting Cruz vs. Court of Appeals, the SC used this to explain why the CA erred in cancelling Aguirre's title.
• "Public policy, after all, dictates that those unjustly deprived of their rights over real property by reason of our registration laws must be afforded legal remedies." — The SC used this to preserve Bombaes's remedy, pointing her to the Assurance Fund under Section 95 of PD 1529.

• Cruz vs. Court of Appeals, 346 Phil. 506 (1997) — Instructive precedent; quoted for the rule that innocent third persons relying on the certificate of title acquire rights that cannot be disregarded by cancelling the title, which would impair public confidence in the Torrens system.
• Rufloe, et al. vs. Burgos, et al., 597 Phil. 261, 270 (2009) — Source of the definition of innocent purchaser for value applied by the SC.
• Stilianopoulos vs. Register of Deeds for Legaspi City, G.R. No. 224678, July 3, 2018, 870 SCRA 215 — Cited for the general rule that a buyer may rely on a clean certificate of title and for the Assurance Fund remedy.
• Far Eastern Surety and Insurance Co., Inc. vs. People, 721 Phil. 760, 770 (2013) — Cited for the rule that a Rule 45 petition is generally limited to questions of law.
• Remalante vs. Tibe, 241 Phil. 930 (1988) and Pascual vs. Burgos, et al., 776 Phil. 167 (2016) — Cited for the exceptions allowing factual review, including misapprehension of facts.
• Sandoval vs. CA, 329 Phil. 48 (1996) and Heirs of Gregorio Lopez vs. Development Bank of the Phils., 747 Phil. 42 (2014) — Cited for the converse rule that a buyer with actual knowledge or suspicion and failure to inquire is not innocent.

• Section 3, Rule 13, Rules of Court — The date of mailing of motions, pleadings, or other papers, as shown by the post office stamp on the envelope or the registry receipt, is considered the date of filing in court; applied to hold Bombaes's July 25, 2016 Motion for Reconsideration timely.
• Rule 45, Rules of Court — A petition for review on certiorari is generally limited to errors of law; the SC applied the exception for a judgment premised on a misapprehension of facts.
• Section 95, Presidential Decree No. 1529 (Property Registration Decree) — An action for compensation from the Assurance Fund lies for a person deprived of land through the operation of the Torrens system and barred from recovery; applied to hold that Bombaes may seek compensation because the lot was registered in the name of an innocent purchaser for value.