Cruz vs. Court of Appeals

Although a sale between common-law spouses is void under Article 1490 of the Civil Code, the property may not be recovered from an innocent purchaser for value in good faith who acquired it from the common-law spouse, the Torrens title being indefeasible against such a purchaser.

Gloria R. Cruz was the registered owner of Lot 10, BLK. 565, PSD-38911, a 747.7-square-meter parcel of land with improvements at 22 Bituan Street, Barangay Doña Imelda, Quezon City, covered by TCT No. 242553. In 1977, she and Romeo V. Suzara began living together as husband and wife without the benefit of marriage. The dispute arose from a deed of absolute sale she executed in favor of Suzara in September 1982, and the subsequent sale of the property by Suzara to Manuel R. Vizconde. The legal question centers on the interplay between the prohibition on sales between common-law spouses under Article 1490 of the Civil Code and the protection afforded to innocent purchasers for value under the Torrens system of registration.

Gloria R. Cruz was the registered owner of Lot 10, BLK. 565, PSD-38911, a 747.7-square-meter parcel of land with improvements at 22 Bituan Street, Barangay Doña Imelda, Quezon City, covered by TCT No. 242553. In 1977, she and Romeo V. Suzara began living together as husband and wife without the benefit of marriage.

In September 1982, solely out of love and affection for Suzara, Cruz executed a deed of absolute sale over Lot 10 in his favor without any monetary consideration. Suzara thereafter registered the deed in his name and used the property as collateral for a bank loan of P350,000.00. He failed to pay the loan, and after four years the mortgage was foreclosed. Cruz paid the bank P40,638.88 to restructure the loan, resulting in an extension of the redemption period to two years. However, without her knowledge and before the expiration of the extended period, Suzara redeemed the property. Cruz tried to talk to him but he avoided her.

To protect her interest, Cruz executed an Affidavit of Adverse Claim which she filed with the Register of Deeds of Quezon City on 22 January 1990, asserting that her sale in favor of Suzara was null and void for lack of consideration and being contrary to law and public policy. Meanwhile, on 22 December 1989, Suzara had already executed a deed of absolute sale over the property in favor of Manuel R. Vizconde, acknowledged before a notary public. At the time of the sale, Suzara was the registered owner appearing in the certificate of title, and nothing was annotated to indicate any adverse claim of a third person or that the property was subject to pending litigation. A second deed of sale between Suzara and Vizconde was executed on 5 February 1990 and registered on 6 March 1990, allegedly to avoid payment of fines and penalties for late registration.

On 22 February 1990, Cruz filed a complaint with the Regional Trial Court of Manila against Suzara for quieting of title, declaration of nullity of documents, and damages with prayer for a writ of preliminary injunction. The trial court issued a temporary restraining order on 22 March 1990. Cruz later filed an ex parte motion to admit her amended complaint impleading Vizconde as additional defendant and praying for annotation of a notice of lis pendens on Suzara's title. Vizconde answered that there was no privity of contract between him and petitioner, that he was a purchaser for value in good faith, that the sale between him and Suzara was executed on 22 December 1989 before the adverse claim was filed, and that the action was barred by laches, estoppel, and prescription.

The trial court rendered a decision on 24 May 1993 dismissing the complaint and the counterclaims, ruling that the sale between Cruz and Suzara was valid with "love, affection and accommodation" as consideration, and finding Vizconde an innocent purchaser for value because at the time of purchase he was unaware of Cruz's adverse claim. The Court of Appeals affirmed this judgment.

• Void Sale Under Article 1490: Petitioner insisted that since the trial court and Court of Appeals found her and Suzara to be common-law husband and wife, the sale between them was void and inexistent under Article 1490 of the Civil Code, and the issue of its illegality cannot be waived or ratified.
• Invalid Consideration: Petitioner argued that "love, affection and accommodation" was not a valid cause for the conveyance of the property as there was no price paid in money or its equivalent.
• Nullity of Subsequent Sale: Since her sale to Suzara was null and void, the sale by Suzara to Vizconde must also be declared null and void, Vizconde being a purchaser in bad faith.
• Second Deed of Sale: Petitioner contended that although she filed her adverse claim on 22 January 1990, after the deed of sale between respondents on 22 December 1989, the sale was nevertheless nullified when it was substituted by a second deed of sale dated 5 February 1990, registered 6 March 1990, executed to avoid payment of fines and penalties for late registration.

• Registered Owner (Suzara): Respondent Suzara claimed he was already the registered owner as evidenced by TCT No. 295388, having acquired the property from petitioner through a notarized deed of absolute sale for valuable consideration, not tainted with fraud or executed under duress, and that petitioner was estopped from impugning the validity of the sale and questioning his title.
• Good Faith Purchaser (Vizconde): Respondent Vizconde answered that there was no privity of contract between him and petitioner, that he was a purchaser for value in good faith, that the sale between him and Suzara was executed on 22 December 1989 before the adverse claim was filed, and that the action was barred by laches, estoppel, and prescription.

• Validity of Sale Between Common-Law Spouses: Whether the sale between petitioner and respondent Suzara was void under Article 1490 of the Civil Code given their common-law relationship.
• Innocent Purchaser for Value: Whether respondent Vizconde was a purchaser for value in good faith entitled to the protection of the Torrens system.
• Right to Reconveyance: Whether petitioner is entitled to reconveyance of the property despite Vizconde's status as a good faith purchaser.

• Validity of Sale Between Common-Law Spouses: The prohibition in Article 1490 applies to common-law relationships, but petitioner can no longer seek reconveyance as the property has already been acquired by an innocent purchaser for value from her own transferee.
• Innocent Purchaser for Value: Yes. Vizconde was a purchaser for value in good faith, having bought the property when Suzara was the registered owner and no adverse claim was annotated on the certificate of title.
• Right to Reconveyance: No. Vizconde holds an indefeasible title to the land as a purchaser of registered land for value in good faith, though petitioner retains any appropriate remedy against Suzara.

• Validity of Sale Between Common-Law Spouses: The Court acknowledged that under Article 1490, the prohibition on sales between husband and wife applies to common-law relationships, for policy considerations and the dictates of morality. However, this acknowledgment did not avail petitioner because the property had already passed to Vizconde, a good faith purchaser, from her own transferee Suzara. The void character of the initial sale could not defeat the rights of an innocent third party who relied on the Torrens certificate of title.
• Innocent Purchaser for Value: Both lower courts found that at the time Suzara executed the deed of sale on 22 December 1989 in favor of Vizconde, Suzara was the registered owner appearing in the certificate of title, and nothing was annotated to indicate any adverse claim or pending litigation. Petitioner filed her adverse claim only on 22 January 1990, after the sale to Vizconde. Vizconde paid a full and fair price for the property at the time of purchase and before he had any notice of petitioner's claim. The allegation of a second deed of sale dated 5 February 1990 was immaterial because petitioner herself admitted that the actual sale occurred on 22 December 1989, and a contract of sale is consensual, perfected once agreement is reached on the subject matter and consideration.
• Right to Reconveyance: The real purpose of the Torrens system is to quiet title to land and put a stop to any question of legality of title except claims recorded at the time of registration or arising subsequent thereto. Every registered owner and subsequent purchaser for value in good faith holds title free from all encumbrances except those noted in the certificate. A purchaser is not required to explore further what the Torrens title on its face indicates. Where innocent third persons rely on the correctness of the certificate, the court cannot disregard their rights and order cancellation, as this would impair public confidence in the Torrens system. Vizconde's title being indefeasible, reconveyance could not be ordered, though petitioner retains any appropriate remedy against Suzara.

• Innocent Purchaser for Value in Good Faith — A purchaser in good faith is one who buys property of another without notice that some other person has a right to or interest in such property and pays a full and fair price for the same at the time of such purchase or before he has notice of the claim of another person. The Court applied this definition to Vizconde, who purchased the property when Suzara was the registered owner and no adverse claim was annotated, and who paid a full and fair price before any notice of petitioner's claim.
• Indefeasibility of Torrens Title — Every registered owner and every subsequent purchaser for value in good faith holds title to the property free from all encumbrances except those noted in the certificate of title. A purchaser is not required to explore beyond what the Torrens title on its face indicates. The Court held that Vizconde's title was indefeasible, precluding reconveyance to petitioner, because allowing cancellation would impair public confidence in the certificate of title.
• Prohibition on Sales Between Spouses (Article 1490) — The prohibition on sales between husband and wife applies to common-law relationships for policy considerations and the dictates of morality. However, the void nature of the sale between common-law spouses does not defeat the rights of an innocent purchaser for value who relied on the Torrens certificate of title.

• "Although under Art. 1490 the husband and wife cannot sell property to one another as a rule which, for policy consideration and the dictates of morality require that the prohibition apply to common-law relationships, petitioner can no longer seek reconveyance of the property to her as it has already been acquired by respondent Vizconde in good faith and for value from her own transferee." — This passage states the ratio decidendi: the void sale between common-law spouses cannot defeat the rights of a good faith purchaser who acquired from the common-law spouse.
• "The real purpose of the Torrens system of registration is to quiet title to land and to put a stop to any question of legality of the title except claims which have been recorded in the certificate of title at the time of registration or which may arise subsequent thereto." — This defines the purpose of the Torrens system, a formulation frequently cited in Philippine property law jurisprudence.
• "A purchaser in good faith is one who buys the property of another without notice that some other person has a right to or interest in such property and pays a full and fair price for the same at the time of such purchase or before he has notice of the claim of another person." — This is the canonical definition of a purchaser in good faith as applied by the Court to Vizconde's acquisition.

• Calimlim-Canullas vs. Fortun, G.R. No. 57499, 22 June 1984, 129 SCRA 675 — Followed for the proposition that the prohibition in Article 1490 on sales between husband and wife applies to common-law relationships.
• Republic vs. Umali, G.R. No. 80687, 10 April 1989, 171 SCRA 647 — Followed for the principle that the purpose of the Torrens system is to quiet title to land.
• PNB vs. Intermediate Appellate Court, G.R. No. 71753, 25 August 1989, 176 SCRA 736 — Followed for the principle that a purchaser is not required to explore further what the Torrens title on its face indicates.
• Pino vs. Court of Appeals, G.R. No. 94114, 19 June 1991, 198 SCRA 434 — Followed for the principle that where innocent third persons relying on the correctness of the certificate of title acquire rights over property, the court cannot disregard such rights.
• Lopez vs. Court of Appeals, No. L-49739, 20 January 1989, 169 SCRA 271 — Followed for the principle that every person dealing with registered land may safely rely on the correctness of the certificate of title.

• Article 1490, Civil Code — Prohibits sales between husband and wife, applied by extension to common-law relationships. The Court acknowledged the sale between Cruz and Suzara was void under this provision but held that the void character could not defeat Vizconde's rights as a good faith purchaser under the Torrens system.
• Section 39, Act 496 (The Land Registration Act) — Cited for the principle that outright cancellation of a certificate of title would impair public confidence in the Torrens system, as everyone dealing with registered property would have to inquire in every instance whether the title was regularly or irregularly issued.

Davide, Jr., Vitug, and Kapunan, JJ., concurred.