Grand Planters International, Inc. vs. Maine City Property Holdings Corp.

Summary judgment is improper where the parties' stipulations and documentary evidence fail to eliminate genuine issues of material fact, particularly the nature of the underlying transaction, the payment of the purchase price, and the good-faith status of subsequent purchasers — all of which require the presentation of evidence in a full-blown trial.

Respondent MCPHC, through its president and CEO Joel G. Yap, purchased a 369,463-square-meter parcel of land in Limay, Bataan (Lot No. 638) from the surviving heirs of Leonardo Serios, who held the property under OCT No. 16. After the heirs later executed an affidavit of loss for the owner's duplicate copy — despite its actual delivery to Yap — and resold the property to Arlene Bernardo, who in turn sold it to petitioner GPII, MCPHC and Yap filed a complaint for nullification of the subsequent transfers and reinstatement of their title. The case was litigated before RTC-Branch 94, Mariveles, Bataan as Civil Case No. 1141-ML.

The disputed property is a 369,463-square-meter parcel of land in Limay, Bataan, known as Lot No. 638, originally registered in the name of Leonardo Serios under Original Certificate of Title (OCT) No. 16. Following Leonardo's death, his surviving heirs — his wife Leonarda and children Solita, Rosemarie, Maximo, Luzviminda, Danilo, and Herlina — sold the property to respondent MCPHC for ₱35,000,000.00 under a Deed of Absolute Sale dated February 16, 2006. The owner's duplicate copy of OCT No. 16 was turned over to MCPHC's president, respondent Joel G. Yap, after the contract-signing.

According to the Heirs of Leonardo, however, their real agreement with respondents was a contract to sell, not a contract of sale. They alleged that they received only ₱5,000,000.00 — an initial ₱2,000,000.00 in Yap's office, for which they were made to sign blank documents, and ₱3,000,000.00 a week later — and were instructed to surrender the owner's duplicate copy of OCT No. 16 and sign a deed of absolute sale on Yap's representation that this would facilitate respondents' intended sale of the property to the Philippine National Oil Company (PNOC). Yap never made further payment despite repeated demands, and in 2012, six years later, their lawyer informed them that both Yap and the title could no longer be found.

On November 4, 2014, Leonarda executed an Affidavit of Loss declaring the owner's copy of OCT No. 16 lost "beyond recovery," notwithstanding that it was actually in Yap's possession. She then filed a petition for issuance of a second owner's copy under CAD Case No. 1-2545-14 before RTC-Branch 1, Balanga City, Bataan, which granted the petition on December 16, 2014. On July 28, 2014, the Heirs of Leonardo executed an Extrajudicial Settlement of Estate with Sale adjudicating the property to themselves and selling it to Arlene Bernardo for ₱5,000,000.00. OCT No. 16 was cancelled and TCT No. 038-2015000040 was issued in Bernardo's name. Bernardo then sold the property to petitioner GPII for ₱110,982,900.00 under a Deed of Absolute Sale dated September 24, 2015, resulting in the cancellation of Bernardo's title and the issuance of TCT No. 038-2016000719 in GPII's name.

MCPHC and Yap filed a complaint before RTC-Branch 94, Mariveles, Bataan, seeking nullification of the 2014 Extrajudicial Settlement of Estate with Sale and the 2015 Deed of Sale, affirmation of the 2006 Deed of Sale, cancellation of Bernardo's and GPII's TCTs, and reinstatement of OCT No. 16. Bernardo claimed to be a buyer in good faith, having verified the property's status with the BIR, the Register of Deeds, and the Provincial and Municipal Assessor of Bataan, none of which bore any notice of the alleged 2006 Deed of Sale. GPII similarly asserted it was an innocent purchaser for value, noting that the 2006 sale was never annotated on OCT No. 16 or on Bernardo's TCT, and that the entries in the Memorandum of Encumbrances on OCT No. 16 were not carried over to Bernardo's title.

During pre-trial, the parties stipulated on the existence of the 2006 Deed of Sale, the authenticity of the signatures therein (with the qualification that they were signed in blank), the due execution and authenticity of OCT No. 16, the turnover of the original owner's copy of OCT No. 16 to Yap, and that the property was originally covered by OCT No. 16. Based on these stipulations, respondents moved for summary judgment, arguing that no genuine issue remained. The trial court granted the motion and rendered summary judgment declaring the 2006 Deed of Sale valid, nullifying the 2014 and 2015 transfers, cancelling Bernardo's and GPII's TCTs, and reinstating OCT No. 16. The Court of Appeals affirmed.

• Propriety of Summary Judgment: GPII argued that having raised as an affirmative defense its status as an innocent purchaser for value, it engendered a genuine issue relating to a material fact requiring the presentation of evidence, rendering the case unfit for summary judgment. The pre-trial stipulations did not obliterate this issue nor suffice to resolve it.
• Innocent Purchaser for Value: GPII maintained that the alleged 2006 sale between the Heirs of Leonardo and MCPHC was never annotated on OCT No. 16 or on Bernardo's TCT No. 038-2015000040, such that no notice was given to the public, including GPII, of its existence. All entries in the Memorandum of Encumbrances on OCT No. 16 were never carried over to Bernardo's title.
• Validity of Subsequent Transfer: GPII asserted that the sale between Bernardo and GPII was legitimate and above board, all requisites of a valid contract being present, and that a void reconstituted title does not necessarily render subsequent transfers to innocent purchasers for value automatically void.
• Denial of Knowledge: GPII specifically denied any knowledge of the 2006 sale, the proceedings for issuance of a second owner's copy of OCT No. 16, MCPHC's possession of the original owner's duplicate copy, or any conspiracy among the defendants.

• Absence of Genuine Issue: Respondents argued that based on the pre-trial stipulations vis-à-vis the documentary evidence on record, GPII's defense of being an innocent purchaser for value was already deemed obliterated, as the same could be resolved from the stipulations and documentary evidence thus far submitted, making summary judgment proper.
• Void Reconstituted Title: Respondents contended that since the original owner's copy of OCT No. 16 was never lost and remained in Yap's possession, the judicial reconstitution of the title was void, and it was irrelevant whether Bernardo and GPII were innocent purchasers in good faith since no rights could emanate from a void title.
• Notice via Annotation: Respondents underscored that the affidavit of loss was annotated on OCT No. 16, which should have put Bernardo and GPII on guard, precluding them from being considered innocent purchasers in good faith.
• Undisputed Facts Negating Good Faith: Respondents pointed out that as early as November 2014, Bernardo had already offered to sell the property to GPII at ₱1,000.00 per square meter when the property was still registered in Leonardo Serios's name; that Bernardo submitted to GPII documents including the 2014 Extrajudicial Settlement of Estate with Sale; and that the certified true copy of OCT No. 16 presented to GPII bore liens and encumbrances including the Affidavit of Loss.

• Propriety of Summary Judgment: Whether, based on the factual stipulations of the parties and the documentary evidence on record, there was no longer any genuine issue of material fact left to be resolved, such that summary judgment was proper.
• Innocent Purchaser for Value: Whether GPII's affirmative defense of being an innocent purchaser for value constituted a genuine issue of material fact requiring the presentation of evidence in a full-blown trial.
• Nature of the 2006 Transaction: Whether the 2006 Deed of Sale between the Heirs of Leonardo and respondents was a contract of sale or a contract to sell, and whether this issue could be resolved on the basis of stipulations and documentary evidence alone.
• Effect of Notarized but Unregistered Deed: Whether the unregistered but notarized 2006 Deed of Sale was binding on third persons such as Bernardo and GPII, and whether this issue could be resolved without a trial.

• Propriety of Summary Judgment: No. The stipulations and documentary evidence did not eliminate genuine issues of material fact, particularly the nature of the 2006 transaction, the payment of the purchase price, and the good-faith status of subsequent purchasers. Summary judgment was therefore improper, and the case required a full-blown hearing.

• Innocent Purchaser for Value: No. The presence or absence of good faith is a factual issue requiring evidence; it is a state of mind that cannot be objectively drawn from pleadings, stipulations, or documentary evidence alone. GPII's claim as an innocent purchaser for value must be independently resolved in a full-dressed hearing.

• Nature of the 2006 Transaction: No. The notarized 2006 Deed of Sale enjoys a presumption of regularity, but this presumption is rebuttable. The Heirs of Leonardo's affirmative defenses — that the real transaction was a contract to sell, that the full purchase price was not paid, and that the deed was executed merely to accommodate Yap's intended sale to PNOC — tendered genuine factual issues that could not be resolved on stipulations alone.

• Effect of Notarized but Unregistered Deed: No. Whether the unregistered but notarized 2006 Deed of Sale binds third persons like Bernardo and GPII, who both denied knowledge thereof, is a genuine issue requiring the presentation of evidence and cannot be determined solely from the documents on record.

• Propriety of Summary Judgment: Under Rule 35 of the Rules of Court, summary judgment is proper only when the pleadings, supporting affidavits, depositions, and admissions show that, except as to the amount of damages, there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. A "genuine issue" is an issue of fact requiring the presentation of evidence; when facts as pleaded are disputed or contested, summary judgment cannot take the place of trial. Here, the stipulations — acknowledging the existence of the 2006 Deed of Sale, the authenticity of the signatures, the due execution of OCT No. 16, and the turnover of the owner's copy to Yap — did not resolve the genuine issues tendered by the answers of the Heirs of Leonardo, Bernardo, and GPII. The trial court and the Court of Appeals erred in concluding that these stipulations sufficed to eliminate all factual controversies.

• Innocent Purchaser for Value: The presence or absence of good faith is a factual issue that requires evidence. It is a state of mind which cannot be objectively drawn from the cold case records alone, even where those records include stipulations, admissions, or documentary evidence. Citing Republic vs. Sundiam, the Court held that the party claiming innocent purchaser status bears the burden of proving it, and the ordinary presumption of good faith is insufficient. GPII's claim cannot be prejudiced by the acts or declarations of the Heirs of Leonardo or Bernardo, following the principle of res inter alios acta alteri nocere non debet under Section 28, Rule 130 of the Rules of Court. Even assuming Bernardo was not a buyer in good faith, this does not ipso facto negate GPII's independent defense, which must be resolved based on the evidence adduced for or against it.

• Nature of the 2006 Transaction: The 2006 Deed of Sale, as a notarized document, enjoys the presumption of regularity and is prima facie evidence of the facts stated therein. However, this presumption is rebuttable. The Heirs of Leonardo raised affirmative defenses that the real transaction was a contract to sell, that the full purchase price was not paid, and that the deed was executed only to facilitate Yap's intended sale to PNOC. Neither the trial court nor the appellate court could objectively and conclusively determine, based on the stipulations and documentary evidence alone, whether the Heirs of Leonardo received and respondents paid the full ₱35,000,000.00 purchase price. These subsisting issues require a full-blown hearing.

• Effect of Notarized but Unregistered Deed: Whether the unregistered but notarized 2006 Deed of Sale binds third persons Bernardo and GPII, who both denied knowledge of it when they transacted with the property, is a genuine issue incapable of resolution on the basis of the stipulations and documentary evidence alone. The interplay between the presumption of regularity accorded to notarized documents and the Torrens system's registration requirement — which protects third persons dealing with registered land — necessitates the presentation of evidence on whether Bernardo and GPII had actual or constructive notice of the prior sale.

• Summary Judgment — Summary judgment is proper only when there is no genuine issue as to any material fact, except for the amount of damages, and the moving party is entitled to judgment as a matter of law. A "genuine issue" is an issue of fact requiring the presentation of evidence. When the facts as pleaded are disputed or contested, summary judgment cannot take the place of trial. The party moving for summary judgment bears the burden of clearly demonstrating the absence of any genuine issue of fact; any doubt is resolved against the movant. The Court applied this doctrine by finding that the stipulations did not eliminate genuine issues on the nature of the 2006 transaction, payment of the purchase price, and the good-faith status of Bernardo and GPII.

• Innocent Purchaser for Value — The party who claims the status of an innocent purchaser for value has the burden of proving such assertion; the ordinary presumption of good faith is not enough. Good faith is a state of mind that cannot be objectively determined from pleadings, stipulations, or documentary evidence alone and requires a full-blown hearing. The Court applied this by holding that GPII's defense of good faith must be independently resolved through the presentation of evidence, unaffected by the acts or declarations of the Heirs of Leonardo or Bernardo.

• Res Inter Alios Acta Alteri Nocere Non Debet — The individual acts of persons are binding only upon themselves and are evidence against them only; parties ought not to be bound by the acts of mere unauthorized strangers. Codified in Section 28, Rule 130 of the Rules of Court, this principle was applied to hold that GPII's claim as an innocent purchaser for value cannot be prejudiced by the acts, declarations, or omissions of the Heirs of Leonardo or Bernardo.

• Presumption of Regularity of Notarized Documents — A notarized document is entitled to full faith and credit upon its face, enjoys the presumption of regularity, and is prima facie evidence of the facts stated therein. This presumption may only be overcome by clear, convincing, and more than merely preponderant evidence. The Court recognized this presumption but held it rebuttable, noting that the Heirs of Leonardo were entitled to present countervailing evidence in a full-blown hearing.

• "The stipulations on the existence of the 2006 Deed of Sale between the Plaintiffs [MCPHC and Yap] and Defendants [Heirs of Leonardo]; and the existence of the original owner's copy of OCT No. 16 and its turnover to Yap by the Heirs of Leonardo did not resolve or eliminate the genuine issues tendered by the Heirs of Leonardo, Bernardo, and GPII in their respective answers." — This passage states the ratio decidendi: that pre-trial stipulations did not extinguish the genuine factual issues raised by the defendants' affirmative defenses, making summary judgment improper.

• "Verily, the presence or absence of good faith is a factual issue which requires evidence. It is a state of mind which cannot be objectively drawn from the cold case records alone, even though these records include stipulations or admissions or some documentary evidence." — This defines the controlling doctrine on why good faith cannot be determined on summary judgment and must be litigated in a full-blown hearing.

• "GPII's claim as an innocent purchaser for value, therefore, cannot be prejudiced by an act, declaration, or omission of another following the principle of res inter alios acta alteri nocere non debet expressed in Section 28, Rule 130 of the Rules of Court." — This articulates the application of the res inter alios acta principle to insulate GPII's independent defense of good faith from the conduct of its predecessors-in-interest.

• YKR Corporation, et al. vs. Yulo, et al., 745 Phil. 666 (2014) — Cited for the rule that summary judgment is premised on the assumption that a scrutiny of the facts will disclose that the issues need not be tried because they are patently devoid of substance or there is no genuine issue as to any pertinent fact. Followed.

• Pepsi-Cola Products Philippines, Inc. vs. Isabela Leaf Tobacco Co., Inc., G.R. No. 237840 (Notice), June 10, 2019 — Cited for the twin requisites of summary judgment for a claimant: (1) no genuine issue as to any material fact, except for the amount of damages; and (2) the moving party must be entitled to judgment as a matter of law. Followed.

• Republic vs. Sundiam, G.R. No. 236381, August 27, 2020 — Cited for the rule that the party claiming innocent purchaser status bears the burden of proving it, and that the presumption of good faith is insufficient. Applied to hold that GPII's defense of good faith requires a full-blown hearing for the reception of evidence.

• Piccio vs. HRET and Vergara, G.R. No. 248985, October 5, 2021 — Cited for the explanation of the maxim res inter alios acta alteri nocere non debet, that individual acts of persons are binding only upon themselves and ought not to be used as evidence against strangers. Applied to hold that GPII's defense cannot be prejudiced by the acts of the Heirs of Leonardo or Bernardo.

• Section 1, Rule 35, Rules of Court — Provides that a party seeking to recover upon a claim may move for summary judgment with supporting affidavits, depositions, or admissions. Applied to determine the procedural propriety of respondents' motion for summary judgment.

• Section 3, Rule 35, Rules of Court — Provides that judgment shall be rendered forthwith if the pleadings, supporting affidavits, depositions, and admissions show that, except as to the amount of damages, there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Applied as the controlling standard; the Court found that genuine issues subsisted, rendering summary judgment improper.

• Section 28, Rule 130, Rules of Court — Codifies the principle res inter alios acta alteri nocere non debet, providing that the rights of a party cannot be prejudiced by an act, declaration, or omission of another. Applied to hold that GPII's claim as an innocent purchaser for value stands independently of the conduct of the Heirs of Leonardo and Bernardo.

Leonen, SAJ. (Chairperson), M. Lopez, J. Lopez, and Kho, Jr., JJ., concurred.