Orquiola vs. Court of Appeals

A writ of execution and demolition cannot be enforced against persons who were not impleaded as parties to the case, where such persons are innocent purchasers for value and builders in good faith whose rights are protected by the Torrens system. A person dealing with registered property need not go beyond the certificate of title and is charged with notice only of such burdens and claims as are annotated on the title; strangers to a case are not bound by any judgment rendered by the court, and a writ of execution can be issued only against a party who had his day in court.

Petitioners, spouses Victor and Honorata Orquiola, purchased a portion of Lot 707-A-2, Lot 5, Block 1 of the subdivision plan (LRC) Psd-42965, now #33 Doña Regina St., Regina Village, Tandang Sora, Quezon City, from Mariano Lising, who had acquired the property from Herminigilda Pedro and registered it under the Torrens system. The property was adjacent to Lot 689, owned by Pura Kalaw Ledesma, who later assigned her rights to Tandang Sora Development Corporation. The dispute arose from an encroachment claim over Lot 689, which was litigated in Civil Case No. Q-12918, a case to which petitioners were never made parties.

Pura Kalaw Ledesma was the registered owner of Lot 689, covered by TCT Nos. 111267 and 111266, in Tandang Sora, Quezon City. This parcel of land was adjacent to certain portions of Lot 707 of the Piedad Estates, namely, Lot 707-A and 707-B, registered in the name of Herminigilda Pedro under TCT Nos. 16951 and 16952, respectively. On October 29, 1964, Herminigilda sold Lot 707-A and 707-B to Mariano Lising, who then registered both lots and Lot 707-C in the name of M.B. Lising Realty and subdivided them into smaller lots.

Certain portions of the subdivided lots were sold to third persons, including herein petitioners, spouses Victor and Honorata Orquiola, who purchased a portion of Lot 707-A-2, Lot 5, Block 1 of the subdivision plan (LRC) Psd-42965. The parcel is now #33 Doña Regina St., Regina Village, Tandang Sora, Quezon City. The other portions were registered in the name of the heirs of Pedro, heirs of Lising, and other third persons.

Sometime in 1969, Pura Kalaw Ledesma filed a complaint, docketed as Civil Case No. Q-12918, with the Regional Trial Court of Quezon City against Herminigilda Pedro and Mariano Lising for allegedly encroaching upon Lot 689. During the pendency of the action, Tandang Sora Development Corporation replaced Pura Kalaw Ledesma as plaintiff by virtue of an assignment of Lot 689 made by Ledesma in favor of said corporation. Trial continued for three decades.

On August 21, 1991, the trial court finally adjudged defendants Pedro and Lising jointly and severally liable for encroaching on plaintiff's land and ordered them to solidarily pay actual damages of P20,000 with interest, to remove all construction including barbed wires and fences illegally constructed on plaintiff's property, to replace removed concrete monuments, to pay attorney's fees of P5,000 with interest, and to relocate the boundaries to conform with the Commissioners' Report. As a result, in February 1998, the Deputy Sheriff of Quezon City directed petitioners, through an alias writ of execution, to remove the house they constructed on the land they were occupying.

On April 2, 1998, petitioners received a Special Order dated March 30, 1998, from the trial court directing the defendants to remove, at their expense, all constructions on plaintiff's property within fifteen days from notice, otherwise a writ of demolition would issue. To prohibit Judge Vivencio Baclig from issuing a writ of demolition and the sheriff from implementing the alias writ of execution, petitioners filed with the Court of Appeals a petition for prohibition with prayer for a restraining order and preliminary injunction on April 17, 1998. Petitioners alleged that they bought the subject parcel of land in good faith and for value, hence they were parties in interest, and since they were not impleaded in Civil Case No. Q-12918, the writ of demolition could not be enforced against them without depriving them of property without due process of law.

The Court of Appeals dismissed the petition, holding that as buyers and successors-in-interest of Mariano Lising, petitioners were considered privies who derived their rights from Lising by virtue of the sale and could be reached by the execution order. The appellate court relied heavily on Vda. de Medina vs. Cruz. Petitioners' motion for reconsideration was denied, prompting the petition before the Supreme Court.

• Enforcement of Alias Writ of Execution: Petitioners argued that the alias writ of execution cannot be enforced against them because they were not impleaded as parties in Civil Case No. Q-12918, and the appellate court erred in relying on Vda. de Medina vs. Cruz to hold that they were successors-in-interest of Mariano Lising who could be reached by the order of execution.
• Inapplicability of Medina: Petitioners submitted that Medina is not applicable because the circumstances therein differ from the present case — in Medina, the petitioner acquired the property after the original action was commenced and became final and executory, while petitioners here acquired the lot before the commencement of Civil Case No. Q-12918; the predecessor's right in Medina was based on a title of doubtful authenticity, while petitioners' predecessors held a fully recognized Torrens title; and petitioners acquired the registered title in their own names, while the petitioner in Medina merely relied on her predecessor's title and tax declarations.
• Good Faith and Innocent Purchaser Status: Petitioners argued that they were builders in good faith and innocent purchasers for value, having purchased the property without notice of any adverse claim, and that their title should be upheld.
• Injunctive Relief: Petitioners argued that they are entitled to injunctive relief because they stand to suffer grave and irreparable injury if the alias writ of execution and the Special Order for demolition were enforced against them, as they were not given their day in court.

• Privity of Interest: The Court of Appeals held, and private respondent effectively maintained, that as buyers and successors-in-interest of Mariano Lising, petitioners were considered privies who derived their rights from Lising by virtue of the sale and could be reached by the execution order in Civil Case No. Q-12918, notwithstanding that they were not impleaded as parties.

• Enforcement of Alias Writ of Execution: Whether the alias writ of execution may be enforced against petitioners who were not impleaded as parties in Civil Case No. Q-12918.
• Status as Innocent Purchasers and Builders in Good Faith: Whether petitioners were innocent purchasers for value and builders in good faith.

• Enforcement of Alias Writ of Execution: No. The alias writ of execution cannot be enforced against petitioners. A writ of execution can be issued only against a party and not against one who did not have his day in court; strangers to a case are not bound by any judgment rendered by the court. The Medina case was distinguished on major points, and the Torrens system protects persons dealing with registered property who need not go beyond the certificate of title.
• Status as Innocent Purchasers and Builders in Good Faith: Yes. Petitioners were innocent purchasers for value and builders in good faith. They purchased the subject land in 1964 from Mariano Lising, before Civil Case No. Q-12918 was commenced in 1969, and could reasonably rely on Lising's Certificate of Title which at the time of purchase was still free from any third party claim. As builders in good faith and innocent purchasers for value, petitioners have rights over the subject property and are proper parties in interest in any case thereon.

• Enforcement of Alias Writ of Execution: The Court distinguished Vda. de Medina vs. Cruz on three major points. First, the petitioner in Medina acquired the right over the disputed property after the original action was commenced and became final and executory, whereas petitioners here acquired the lot before the commencement of Civil Case No. Q-12918. Second, the right over the disputed land of the predecessors-in-interest of the petitioner in Medina was based on a title of doubtful authenticity, allegedly a Titulo de Composicion Con El Estado, while the right over the land of the predecessors-in-interest of petitioners is based on a fully recognized Torrens title. Third, petitioners acquired the registered title in their own names, while the petitioner in Medina merely relied on the title of her predecessor-in-interest and tax declarations. The Court stressed that where a case involves a sale of a parcel of land under the Torrens system, the applicable rule is that a person dealing with the registered property need not go beyond the certificate of title; he can rely solely on the title and is charged with notice only of such burdens and claims as are annotated on the title. Petitioners are fully entitled to the legal protection of their lot by the Torrens system, unlike the petitioner in Medina who merely relied on a mere Titulo de Composicion. The Court further held that no man shall be affected by any proceeding to which he is a stranger, and strangers to a case are not bound by any judgment rendered by the court. A writ of execution can be issued only against a party and not against one who did not have his day in court. Only real parties in interest in an action are bound by the judgment therein and by writs of execution and demolition issued pursuant thereto.

• Status as Innocent Purchasers and Builders in Good Faith: The Court defined a buyer in good faith as one who buys the property of another without notice that some other person has a right to or interest in such property, and a buyer for value as one who pays a full and fair price at the time of the purchase or before he has notice of the claim or interest of some other person in the property. The determination of whether one is a buyer in good faith is generally a factual issue outside the province of the Court in a petition for review, but an exception exists when the Court of Appeals failed to take into account certain relevant facts which, if properly considered, would justify a different conclusion. The Court found this exception applicable because the Court of Appeals overlooked the fact that the purchase of the land took place prior to the institution of Civil Case No. Q-12918. The sale to petitioners was made before Pura Kalaw Ledesma claimed the lot, and petitioners could reasonably rely on Mariano Lising's Certificate of Title which at the time of purchase was still free from any third party claim. As to the issue of whether petitioners were builders in good faith, the Court noted that this was raised for the first time on appeal, which generally cannot be done, but deemed it proper to resolve the issue to avoid circuitous litigation and further delay. A builder in good faith is one who builds with the belief that the land he is building on is his, and is ignorant of any defect or flaw in his title. Petitioners acquired the land without knowledge of any defect in the title of Mariano Lising, and shortly afterwards built their conjugal home on said land. It was only in 1998, when the sheriff tried to execute the judgment, that they had notice of private respondent's adverse claim. The institution of Civil Case No. Q-12918 cannot serve as notice of such adverse claim to petitioners since they were not impleaded therein as parties. Consequently, private respondents should have impleaded petitioners in Civil Case No. Q-12918, and since they failed to do so, petitioners cannot be reached by the decision in said case. The demolition of their house on their own titled lot would be tantamount to a deprivation of property without due process of law.

• Torrens System Protection — A person dealing with registered property under the Torrens system need not go beyond the certificate of title; he can rely solely on the title and is charged with notice only of such burdens and claims as are annotated on the title. The Court applied this doctrine to hold that petitioners, who purchased the property before any adverse claim was annotated or any case was filed, were entitled to the legal protection of their lot by the Torrens system, unlike the petitioner in Vda. de Medina vs. Cruz who relied on a Titulo de Composicion of doubtful authenticity.

• Buyer in Good Faith — A buyer 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; he is a buyer for value if he pays a full and fair price at the time of the purchase or before he has notice of the claim or interest of some other person in the property. The Court applied this doctrine to conclude that petitioners acquired the land in good faith and for value because they purchased it in 1964, before Civil Case No. Q-12918 was commenced in 1969, and could reasonably rely on the seller's certificate of title which was then free from any third party claim.

• Builder in Good Faith — A builder in good faith is one who builds with the belief that the land he is building on is his, and is ignorant of any defect or flaw in his title. The Court applied this doctrine to find that petitioners were builders in good faith because they acquired the land without knowledge of any defect in the title of their predecessor, built their conjugal home shortly thereafter, and only had notice of the adverse claim in 1998 when the sheriff tried to execute the judgment.

• Binding Effect of Judgments on Parties Only — No man shall be affected by any proceeding to which he is a stranger, and strangers to a case are not bound by any judgment rendered by the court; a writ of execution can be issued only against a party and not against one who did not have his day in court. The Court applied this doctrine to hold that since private respondents failed to implead petitioners in Civil Case No. Q-12918, petitioners cannot be reached by the decision in said case, and only real parties in interest in an action are bound by the judgment therein and by writs of execution and demolition issued pursuant thereto.

• "We must stress that where a case like the present one involves a sale of a parcel of land under the Torrens system, the applicable rule is that a person dealing with the registered property need not go beyond the certificate of title; he can rely solely on the title and he is charged with notice only of such burdens and claims as are annotated on the title." — This passage articulates the controlling Torrens system doctrine that protected petitioners, who relied on a clean certificate of title at the time of their purchase in 1964.

• "No man shall be affected by any proceeding to which he is a stranger, and strangers to a case are not bound by any judgment rendered by the court. In the same manner, a writ of execution can be issued only against a party and not against one who did not have his day in court." — This passage states the fundamental due process principle that a judgment binds only parties to the action, forming the basis for the Court's conclusion that the writ of execution could not be enforced against petitioners.

• "In our view, the spouses Victor and Honorata Orquiola have valid and meritorious cause to resist the demolition of their house on their own titled lot, which is tantamount to a deprivation of property without due process of law." — This passage summarizes the Court's ultimate conclusion that enforcing the demolition against petitioners would violate their constitutional right to due process.

• Vda. de Medina vs. Cruz, No. L-39272, 161 SCRA 36 (1988) — Distinguished. The Court identified three major points of difference: the timing of acquisition relative to the original action, the authenticity of the predecessor's title, and whether the party acquired a registered title in their own name. The case was held inapplicable because petitioners here acquired the lot before the commencement of the case, their predecessors held a fully recognized Torrens title, and they acquired the registered title in their own names.

• Caviles, Jr. vs. Bautista, G.R. No. 102648, 319 SCRA 24, 31 (1999) — Cited as authority for the rule that a person dealing with registered property under the Torrens system need not go beyond the certificate of title and is charged with notice only of annotated burdens and claims.

• Rosencor Development Corporation vs. Inquing, et. al., G.R. No. 140479, March 8, 2001, p. 14-15; Modina vs. Court of Appeals, G.R. No. 109355, 317 SCRA 696, 705-706 (1999) — Cited for the definitions of a buyer in good faith and a buyer for value.

• Baricuatro, Jr. vs. Court of Appeals, G.R. No. 105902, 325 SCRA 137, 146 (2000) — Cited for the general rule that the determination of whether one is a buyer in good faith is a factual issue outside the province of the Court in a petition for review, with an exception when the Court of Appeals failed to take into account relevant facts.

• Reburiano vs. Court of Appeals, G.R. No. 102965, 301 SCRA 342, 351 (1999) — Cited for the general rule that parties should not raise for the first time on appeal issues that they could have raised during trial and before the Court of Appeals.

• Evadel Realty and Development Corporation vs. Antero, et. al., G.R. No. 144291, April 20, 2001, p. 11, citing Pleasantville Development Corporation vs. CA, G.R. No. 79688, 253 SCRA 10 (1996); Tecnogas Philippines Manufacturing Corp. vs. Court of Appeals, G.R. No. 108894, 268 SCRA 5, 15 (1997) — Cited for the definition of a builder in good faith as one who builds with the belief that the land he is building on is his, and is ignorant of any defect or flaw in his title.

• Matuguina Integrated Wood Products, Inc. vs. Court of Appeals, G.R. No. 98310, 263 SCRA 490, 505 (1996) citing Lorenzana vs. Cayetano, G.R. No. L-37051, 78 SCRA 485 (1977) — Cited for the principle that a writ of execution can be issued only against a party and not against one who did not have his day in court, and that only real parties in interest are bound by the judgment.

• Rule 3, Section 2, Rules of Court — Defines a real party in interest as the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit. The Court applied this provision to conclude that petitioners, as builders in good faith and innocent purchasers for value, have rights over the subject property and are proper parties in interest in any case thereon, and thus should have been impleaded in Civil Case No. Q-12918.

Bellosillo, Mendoza, and Corona, JJ., concurred.