Chua vs. Soriano

A purchaser who relies on a duly notarized Special Power of Attorney presented by an agent is a purchaser in good faith even if the signature in the SPA is later declared a forgery, because the notarial acknowledgment creates a presumption of regularity that dispenses with the need for further inquiry beyond the face of the document.

Msgr. Virgilio Soriano owned a 1,600-square-meter parcel of land in Quezon City covered by TCT No. 363471. In early 1988, Soriano lent the owner's duplicate title to his cousin and godson, Emmanuel Celestino, Sr., executing an SPA authorizing Celestino to mortgage the property. After a fire destroyed the original title on file with the Registry of Deeds, Soriano executed another SPA authorizing Celestino to initiate reconstitution proceedings. During the pendency of the reconstitution, rumors reached Soriano that Celestino had sold the property. Celestino denied the rumor but admitted mortgaging the property to a foreign bank. Soriano inquired with the Registry of Deeds and discovered that his title had been canceled and replaced with a new one in the names of the Chuas, stemming from a sale executed by Celestino via a new SPA dated March 9, 1989, bearing Soriano's purported signature.

• The SPAs and the Title: Soriano entrusted his owner's duplicate title to Celestino, executing an SPA in March 1988 to mortgage the property. After the June 1988 Quezon City Hall fire destroyed the original title, Soriano executed another SPA in August 1988 for administrative reconstitution. The reconstituted title was issued in April 1990.
• The Sale to the Chuas: Using an SPA dated March 9, 1989 bearing Soriano's purported signature, Celestino sold the property to the Chuas via an Absolute Deed of Sale dated July 4, 1989 for ₱500,000.00. The Chuas inspected the property, found three squatter occupants, paid off two, and appointed the third as caretaker. Because verification with the original title at the Registry of Deeds was impossible due to the fire, the Chuas checked the tax declaration, which bore an annotation of the SPA.
• Discovery of the Fraud: Upon hearing rumors of the sale, Soriano confronted Celestino, who denied it. Soriano subsequently discovered the cancellation of his title. An NBI handwriting expert testified that the signature on the March 9, 1989 SPA was a forgery. Soriano filed a complaint for annulment of the deed of sale and SPA, cancellation of title, and reconveyance with damages.

• Good Faith and Due Diligence: The Chuas argued they were purchasers in good faith because they dealt with Celestino, who possessed the owner's duplicate title and a notarized SPA, which was inscribed and annotated on the title and tax declaration.
• Presumption of Regularity: The Chuas maintained that they had the right to assume the notarized and annotated SPA was perfectly legal, and the subsequent declaration of forgery by an NBI expert should not prejudice them, as they are not handwriting experts.
• Estoppel: The Chuas contended that Soriano was responsible for his predicament because he entrusted the owner's duplicate title to Celestino.

• Failure to Verify: Soriano countered that the Chuas were not purchasers in good faith because they failed to check the veracity of Celestino's alleged authority to sell the property.
• Duty to Inquire: Soriano averred that had the Chuas conferred with him about the sale transaction proposed by Celestino, they would have readily discovered the fraud.

• Purchaser in Good Faith: Whether the Chuas are purchasers in good faith despite the subsequent finding of forgery in the SPA.

• Purchaser in Good Faith: The Chuas were declared purchasers in good faith. While a buyer dealing with an agent must examine the agent's authority, if the proof of capacity consists of a duly notarized SPA, mere inspection of the face of such public document constitutes sufficient inquiry. The notarial acknowledgment provides a presumption of due execution and authenticity, relieving the purchaser of the burden to investigate whether a forger lurks beneath the signature. The registration and annotation of the SPA on the owner's duplicate title further bolstered the appearance of regularity. The Torrens system protects innocent third parties who rely on the correctness of the certificate of title, and the general rule that a void contract cannot produce valid results is inapplicable when it contravenes the sanctity of the Torrens system.

• Purchaser in Good Faith — One who buys property without notice of adverse claims and pays a fair price. When dealing with a registered owner, a buyer need not look beyond the certificate of title. When dealing with an agent (non-registered owner), the buyer must examine the factual circumstances and the agent's authority. However, if the proof of capacity is a duly notarized SPA, mere inspection of the document suffices; the buyer need not look beyond it.
• Presumption of Regularity of Notarized Documents — Documents acknowledged before a notary public possess evidentiary weight regarding their due execution and regularity. A purchaser relying on a notarized SPA is entitled to presume the affiant appeared before the notary and executed the document, precluding liability for relying on this legal fiction.
• Indefeasibility of a Torrens Title — The general rule that a void contract cannot produce valid results is inapplicable when it contravenes the Torrens system. Where innocent third persons rely on the correctness of a certificate of title and acquire rights over the property, courts cannot disregard such rights and order cancellation, as this would impair public confidence in the Torrens system.

• "When the document under scrutiny is a special power of attorney that is duly notarized, we know it to be a public document where the notarial acknowledgment is prima facie evidence of the fact of its due execution. A purchaser presented with such a document would have no choice between knowing and finding out whether a forger lurks beneath the signature on it."
• "The strength of buyer’s inquiry on the seller’s capacity or legal authority to sell depends on the proof of capacity of the seller. If the proof of capacity consists of a special power of attorney duly notarized, mere inspection of the face of such public document already constitutes sufficient inquiry."

• Bautista v. Silva, G.R. No. 157434, September 19, 2006 — Followed. Reliance on a notarized SPA is sufficient evidence of good faith; the purchaser need not prove anything more because the notarial acknowledgment establishes due execution and authenticity.
• Heirs of Spouses Benito Gavino and Juana Euste v. Court of Appeals, 353 Phil. 686 (1998) — Followed. The general rule that a void contract cannot produce valid results is inapplicable when it contravenes the Torrens system and the rights of innocent third parties.
• Abad v. Guimba, G.R. No. 157002, July 29, 2005 — Distinguished. While a person dealing with registered land through someone who is not the registered owner is expected to look behind the certificate of title, the required degree of prudence is satisfied by inspecting a duly notarized SPA.
• Lim v. Chuatoco, G.R. No. 161861, March 11, 2005 — Followed. Defined good faith as the possessor’s belief that the person from whom title was received was the owner and could convey it.

• 2004 Rules of Notarial Practice, Rule II, Section 13 and Rule VII, Section 2 — Cited regarding the definition and function of a notarial seal, which indicates that the notary public has officially signed the document, bolstering the presumption of regularity.
• Section 39, Act 496 (The Land Registration Act) — Cited to support the preservation of the sanctity of the Torrens system, emphasizing that innocent third persons relying on the correctness of a certificate of title must be protected to maintain public confidence.

Ynares-Santiago, Callejo, Sr., Chico-Nazario, Nachura