Amodia vs. Aznar Brothers Realty Company

Registration of a sale involving registered land under Act 3344, instead of the Land Registration Act, is not considered registration under Article 1544 of the Civil Code and cannot serve as constructive notice to defeat the right of a subsequent buyer in good faith who registers under the Torrens system.

Esteban Bonghanoy owned a parcel of land brought under the Torrens System, the title to which was lost during the Second World War. His sole heir, Juana Bonghanoy-Amodia, was the mother of the Amodia siblings. In 1964, the Amodias executed an Extra-Judicial Partition of Real Estate with Deed of Absolute Sale conveying the property to AZNAR for ₱10,200.00, which AZNAR registered under Act 3344 due to the absence of a title on file. In 1989, the Amodias executed another Deed of Extra-Judicial Settlement with Absolute Sale conveying the same property to Go Kim Chuan for ₱70,000.00. Go Kim Chuan caused the reconstitution of the lost title and the issuance of a new Transfer Certificate of Title in his name under the Land Registration Act.

• The Property and First Sale: The subject property is a 30,351-square-meter parcel of land in Lapu-Lapu City, originally owned by Esteban Bonghanoy and brought under the Torrens System before his title was lost during the Second World War. On July 10, 1964, the Amodias—the heirs of Bonghanoy—executed an Extra-Judicial Partition of Real Estate with Deed of Absolute Sale, conveying the property to AZNAR for ₱10,200.00. Because no title was on file at the Register of Deeds, AZNAR registered the deed under Act 3344 on August 10, 1964, and subsequently constructed a beach house on the land.
• The Second Sale: On February 18, 1989, the Amodias executed a Deed of Extra-Judicial Settlement with Absolute Sale, conveying the same property to Go Kim Chuan for ₱70,000.00. Go Kim Chuan caused the reconstitution of the lost title pursuant to Republic Act No. 26, resulting in the issuance of OCT No. RO-2899 in Bonghanoy's name. Subsequently, a derivative title, TCT No. 20626, was issued in Go Kim Chuan's name on December 1, 1989.
• Adverse Claim and Lawsuit: On February 14, 1990, AZNAR wrote to the Amodias demanding the nullification of the sale to Go Kim Chuan and annotated a Notice of Adverse Claim on TCT No. 20626 on the same date. After the Amodias ignored the demand, AZNAR filed a complaint for Annulment of Sale and Cancellation of TCT No. 20626, alleging that the sale to Go Kim Chuan was an invalid second sale. The Amodias denied executing the 1964 deed in favor of AZNAR, claiming their signatures thereon were forged.
• Substitution of Parties: During the pendency of the petition before the Supreme Court, Go Kim Chuan died. His heirs were subsequently substituted as petitioners, while the Amodias were dropped from the petition because they could no longer be located.

• Proper Registry: Petitioners argued that because the subject property was registered land under Act 496, AZNAR's registration of the 1964 deed under Act 3344 produced no legal effect and cannot serve as a basis for priority under Article 1544 of the Civil Code.
• Good Faith: Petitioners maintained that Go Kim Chuan was a buyer in good faith who had no notice of any defect in the vendor's title, emphasizing that AZNAR's adverse claim was annotated only after the issuance of TCT No. 20626 in Go Kim Chuan's name.
• Forgery Evidence: Petitioners asserted that the Court of Appeals misapplied Heirs of Severa Gregorio v. CA, as the original copy of the disputed 1964 deed was presented before the trial court in this case, unlike in Gregorio where the original was not produced.
• Procedural Compliance: Petitioners invoked substantial compliance regarding the verification and certification against forum shopping, arguing that the signatory heir shared a commonality of interest with the other petitioners.

• Procedural Defect: Respondent argued that the petition should be dismissed because the verification and certification against forum shopping were not signed by all petitioners, rendering the amended petition an attempt to cure a fatal defect.
• Constructive Notice: Respondent contended that the registration of the 1964 sale under Act 3344 served as constructive notice to Go Kim Chuan, negating his claim of good faith. Respondent insisted that because the title was lost in 1964, Act 3344 was the only available mode of registration at the time.
• Forgery: Respondent maintained that the document examiner's finding of forgery was not conclusive and was belied by the testimony of petitioner Veneranda Amodia, who admitted that negotiations for the 1964 sale occurred even if the full consideration was not received.

• Validity of Forgery Finding: Whether the Court of Appeals erred in applying the doctrine of Heirs of Severa Gregorio v. CA to reject the trial court's finding of forgery based solely on a document examiner's testimony.
• Priority of Rights: Whether Go Kim Chuan or AZNAR has the better right over the subject property in a double sale scenario where the first sale was registered under Act 3344 and the second under the Torrens System.

• Validity of Forgery Finding: The Court of Appeals correctly rejected the trial court's finding of forgery. Forgery cannot be presumed and must be proved by clear, positive, and convincing evidence. A finding of forgery does not depend entirely on handwriting experts; the trial judge must conduct an independent examination of the questioned signature. Because the RTC relied wholly on the document examiner's testimony without any independent evaluation, its conclusion of forgery was insufficient.
• Priority of Rights: Go Kim Chuan has the better right. The registration contemplated in Article 1544 refers to registration under the Torrens System. If land is registered under the Land Registration Act, registration of a sale under Act 3344 is deemed not registered for purposes of Article 1544 and cannot operate as constructive notice to third persons. The fact that a certificate of title is lost does not convert registered land into unregistered land; AZNAR should have availed itself of the remedy of reconstitution instead of registering under the improper registry. Furthermore, Go Kim Chuan was a registrant in good faith. The adverse claim was annotated only after the issuance of his title, and registration under Act 3344 does not bind a subsequent purchaser of registered land. Go Kim Chuan's due diligence—verifying with the Assessor and Register of Deeds, visiting the premises, paying arrears, and causing the publication of the deed—confirmed his good faith.

• Double Sale (Article 1544, Civil Code) — If the same immovable property is sold to different vendees, ownership belongs to the person acquiring it who in good faith first recorded it in the Registry of Property. The registration contemplated must be done in the proper registry to bind third parties and give validity to the transfer.
• Registration under Act 3344 vs. Act 496 — Act 3344 provides a system of recording for unregistered real estate. If land is registered under the Land Registration Act (Torrens System) and the sale is registered under Act 3344 instead, the sale is not considered registered under Article 1544 and cannot serve as constructive notice to subsequent purchasers.
• Proof of Forgery — Forgery cannot be presumed; it must be proved by clear, positive, and convincing evidence. A trial court must conduct an independent examination of a questioned signature and cannot rely solely on the testimony of handwriting experts to declare a document forged.
• Substantial Compliance with Verification and Certification against Forum Shopping — When petitioners share a commonality of interest, the signature of only one petitioner on the verification and certification against forum shopping may be deemed substantial compliance, particularly when strict application of the rules would result in a denial of substantial justice.

• "But if the land is registered under the Land Registration Act (and therefore has a Torrens Title), and it is sold and the sale is registered not under the Land Registration Act but under Act 3344, as amended, such sale is not considered registered, as the term is used under Art. 1544 of the New Civil Code."
• "The fact that the certificate of title over the registered land is lost does not convert it into unregistered land. After all, a certificate of title is merely an evidence of ownership or title over the particular property described therein."
• "Vigilantibus, non dormientibus, jura subveniunt. Laws must come to the assistance of the vigilant, not of the sleepy."

• Heirs of Severa Gregorio v. CA, 300 SCRA 565 — Followed. Reiterated the principle that a trial judge must independently examine questioned documents rather than rely solely on handwriting experts to prove forgery. Applied to overturn the RTC's forgery finding.
• Santiago v. Court of Appeals, 317 Phil. 400 — Distinguished. AZNAR invoked Santiago to argue that registration under Act 3344 constitutes constructive notice. The Court distinguished it because in Santiago, the first buyers actually registered under the Torrens System, unlike AZNAR, who registered under Act 3344 despite knowing the land was under the Torrens System.
• Iglesia ni Cristo v. Ponferrada, 505 SCRA 828 — Followed. Cited to justify relaxing the rules on verification and certification against forum shopping where petitioners share a commonality of interest.
• Abrigo v. De Vera, 432 SCRA 544 — Followed. Cited for the proposition that registration of registered land under Act 3344 does not constitute constructive notice to a second buyer.

• Article 1544, Civil Code — Governs double sales. Applied to determine priority of rights between AZNAR and Go Kim Chuan; held to require registration under the Torrens System for immovable property.
• Act No. 3344 — System of recording for unregistered real estate. Held inapplicable to registered land; registration thereunder does not constitute valid registration or constructive notice for Article 1544 purposes.
• Act No. 496 (Land Registration Act / PD 1529) — The Torrens System. Held to be the proper registry for the subject property, making Go Kim Chuan's registration valid and effective.
• Republic Act No. 26 — Special procedure for reconstitution of lost or destroyed Torrens certificates of title. Noted as the proper remedy AZNAR should have availed of instead of registering under Act 3344.

Ynares-Santiago, Austria-Martinez, Chico-Nazario, Reyes