Heirs of Victorino Sarili vs. Lagrosa

A purchaser from a non-registered owner must exercise a higher degree of prudence by investigating beyond the face of the certificate of title and any power of attorney; where a special power of attorney contains irregularities in its notarization, the buyer must investigate the circumstances of its execution to claim status as an innocent purchaser for value. Moreover, a forged deed of sale, even when accompanied by the owner's duplicate certificate of title, does not transfer valid title to the property.

Pedro Lagrosa acquired a parcel of land in Caloocan City covered by TCT No. 55979 on November 29, 1974, and subsequently immigrated to the United States in 1968. During a vacation in the Philippines in 2000, he discovered that TCT No. 262218 had been issued in the name of Victorino Sarili based on a falsified Deed of Absolute Sale dated February 16, 1978, purportedly executed by Lagrosa and his wife. Victorino Sarili claimed he purchased the property from Ramon Rodriguez in 1992 based on a Special Power of Attorney allegedly executed by Lagrosa in 1988 and notarized in 1992.

• Pedro Lagrosa acquired the subject property in Caloocan City covered by TCT No. 55979 on November 29, 1974, and had been paying real estate taxes thereon since acquisition.
• Lagrosa and his wife Amelia immigrated to the United States in 1968 and resided in California.
• On February 17, 2000, Lagrosa (represented by attorney-in-fact Lourdes Labios Mojica under a Special Power of Attorney dated November 25, 1999) filed a complaint against Spouses Victorino and Isabel Sarili and the Register of Deeds of Caloocan City.
• Lagrosa alleged that during his vacation in the Philippines, he discovered that TCT No. 262218 had been issued in the name of Victorino Sarili (married to Isabel Amparo) by virtue of a falsified Deed of Absolute Sale dated February 16, 1978, purportedly executed by Lagrosa and his wife Amelia.
• Spouses Sarili claimed they were innocent purchasers for value, having purchased the property from Ramon B. Rodriguez on November 20, 1992 based on a Special Power of Attorney allegedly executed by Lagrosa in December 1988 and notarized on September 4, 1992.
• The subject SPA contained no Community Tax Certificate (CTC) number in its notarial acknowledgment, contrary to the requirement under Section 163(a) of the Local Government Code of 1991.
• Ramon Rodriguez executed the November 20, 1992 Deed of Absolute Sale conveying the property to Victorino Sarili.
• During the pendency of the proceedings, Victorino Sarili died and was substituted by his heirs (petitioners).
• The Affidavit of Late Registration executed by Isabel Sarili indicated that the February 16, 1978 Deed of Absolute Sale (not the 1992 sale) was the basis for the issuance of TCT No. 262218.
• Comparison of the signatures on the subject SPA and the November 25, 1999 SPA (genuine signature) showed they were not similar, particularly the signature on the left margin of the first page.
• The notary public who notarized the subject SPA (Atty. Ramon S. Untalan) admitted he did not personally know Lagrosa, met him for the first time during notarization, and failed to require presentation of Lagrosa's CTC or other competent proof of identity.
• Spouses Sarili built a house on the subject property.

• Regardless of the falsified February 16, 1978 Deed of Absolute Sale, there was a valid conveyance of the subject property to Spouses Sarili who relied on Ramon Rodriguez's authority to sell under the subject SPA.
• The due execution of the subject SPA between respondent and Ramon Rodriguez, and the subsequent November 20, 1992 Deed of Absolute Sale between Victorino Sarili and Ramon Rodriguez, were duly established facts.
• From the authenticity and genuineness of these documents, a valid conveyance of the subject land from respondent to Victorino Sarili had been established.
• Spouses Sarili were innocent purchasers for value who relied on the correctness of the certificate of title.

• The February 16, 1978 Deed of Absolute Sale was falsified and his signature and that of his wife Amelia were forged.
• The subject SPA was also forged and his signature thereon was not genuine.
• He and his wife had been residing in the United States since 1968 and could not have executed the subject SPA or the 1978 deed in the Philippines.
• The signatures appearing on the subject SPA and the 1978 deed do not match his genuine signature as appearing in the November 25, 1999 SPA.

• Procedural Issues: Whether the Supreme Court may review factual findings when the Court of Appeals' findings conflict with those of the Regional Trial Court in a petition for review under Rule 45 of the Rules of Court.
• Substantive Issues: Whether there was a valid conveyance of the subject property to Spouses Sarili; whether Spouses Sarili qualify as innocent purchasers for value; whether TCT No. 262218 should be annulled and TCT No. 55979 reinstated; and whether the awards of moral damages and attorney's fees were proper.

• Procedural: The Supreme Court held that it may review factual findings when such findings are conflicting between the Court of Appeals and the Regional Trial Court, which is a recognized exception to the general rule that only questions of law may be raised in a petition for review on certiorari under Rule 45.
• Substantive: The Court ruled that there was no valid conveyance of the subject property to Spouses Sarili. The Court held that a higher degree of prudence is required from one who buys from a person who is not the registered owner; the buyer must examine not only the certificate of title but all factual circumstances necessary to determine flaws in the title. Where the proof of capacity consists of a special power of attorney with flaws in its notarial acknowledgment (such as the omission of the CTC number), mere inspection of the document is insufficient; the buyer must show that his investigation went beyond the document and into the circumstances of its execution. The defective notarization stripped the SPA of its public character, reducing it to a private instrument requiring proof of due execution and authenticity under Section 20, Rule 132 of the Rules of Court. The due execution and authenticity of the subject SPA were not sufficiently established, and the November 20, 1992 sale relied thereon was void. Moreover, the February 16, 1978 deed (which was the actual basis for the issuance of TCT No. 262218) was admitted to be a forgery. A forged instrument, even accompanied by the owner's duplicate certificate of title, does not transfer valid title. Consequently, TCT No. 262218 was ordered cancelled and TCT No. 55979 reinstated. The awards of moral damages and attorney's fees were sustained. The case was remanded to determine the rights of the parties regarding the house built by Spouses Sarili, who were deemed builders in bad faith.

• Innocent Purchaser for Value Doctrine — A person dealing with registered land may rely on the correctness of the certificate of title issued therefor, and the law does not oblige him to go beyond the certificate to determine the condition of the property. However, a higher degree of prudence is required when buying from a non-registered owner, requiring examination of all factual circumstances necessary to determine flaws in the title.
• Effect of Defective Notarization — A defective notarization strips a document of its public character and reduces it to a private instrument, requiring proof of due execution and authenticity under Section 20, Rule 132 of the Rules of Court based on preponderance of evidence.
• Forgery as Void Instrument — When the instrument presented is forged, even if accompanied by the owner's duplicate certificate of title, the registered owner does not lose his title, and the assignee in the forged deed acquires no right or title to the property.
• Builder in Bad Faith — A person builds in bad faith when he constructs on land knowing or being aware of circumstances that ought to put him on inquiry regarding flaws in his title or mode of acquisition; such builder loses what is built without right to indemnity, and the landowner may demand demolition or compel the builder to pay the price of the land.

• "such defective title may be the source of a completely legal and valid title in the hands of an innocent purchaser for value"
• "a higher degree of prudence is required from one who buys from a person who is not the registered owner, although the land object of the transaction is registered"
• "the buyer must show that his investigation went beyond the document and into the circumstances of its execution"
• "When the instrument presented is forged, even if accompanied by the owner's duplicate certificate of title, the registered owner does not thereby lose his title, and neither does the assignee in the forged deed acquire any right or title to the property"
• "Good faith is an intangible and abstract quality with no technical meaning or statutory definition, and it encompasses, among other things, an honest belief, the absence of malice and the absence of design to defraud or to seek an unconscionable advantage"

• Cabuhat v. Court of Appeals — Cited for the principle that a defective title may be the source of a completely legal and valid title in the hands of an innocent purchaser for value.
• Sigaya v. Mayuga — Cited for the rule that every person dealing with registered land may safely rely on the correctness of the certificate of title.
• Bautista v. Court of Appeals — Cited for the principle that a higher degree of prudence is required from one who buys from a person who is not the registered owner.
• Abad v. Guimba — Cited for the duty of the buyer to ascertain the identity of the person with whom he is dealing and the latter's legal authority to convey the property.
• Spouses Bautista v. Silva — Cited for the standard that when there are flaws in the notarial acknowledgment of a special power of attorney, the buyer must show that his investigation went beyond the document and into the circumstances of its execution.
• Martires v. Chua — Cited for the rule that defective notarization strips a document of its public character and reduces it to a private instrument.
• Bernales v. Heirs of Julian Sambaan — Cited for the principle that a forged instrument, even accompanied by the owner's duplicate certificate of title, does not transfer title.
• Mercado v. Court of Appeals — Cited for the definition of a builder in good faith as one who is unaware of any flaw in his title or mode of acquisition.
• Ochoa v. Apeta — Cited for the definition of good faith as freedom from knowledge of circumstances which ought to put the holder upon inquiry.

• Article 1874 of the Civil Code — Requires that the authority of an agent to sell land must be in writing; otherwise the sale is void.
• Articles 449, 450, 451, 452 of the Civil Code — Provisions governing builders in bad faith, including loss of improvements without indemnity, the landowner's right to demand demolition or payment of land price, and entitlement to damages.
• Article 546 of the Civil Code — Provides for reimbursement of necessary expenses to the possessor, with the good faith possessor having the right to retain the thing until reimbursed.
• Article 2217 of the Civil Code — Basis for the award of moral damages.
• Article 2208(2) of the Civil Code — Basis for the award of attorney's fees when the defendant's act or omission has compelled the plaintiff to litigate.
• Section 163(a) of Republic Act No. 7160 (Local Government Code of 1991) — Requires notaries public to require individuals acknowledging documents to exhibit community tax certificates.
• Section 20, Rule 132 of the Rules of Court — Governs the proof of due execution and authenticity of private documents.
• Section 22, Rule 132 of the Rules of Court — Governs the proof of handwriting by comparison or by witnesses familiar with the person's writing.