Spouses Domingo and Quiteves vs. Reed

Purchasers of registered conjugal property who have knowledge of facts that should put a reasonable person on guard cannot claim to be innocent purchasers for value if they fail to investigate the vendor's authority to sell, even if the Torrens certificate on its face appears clean. The presumption of regularity accorded to a notarized document is rebutted where the circumstances of its execution — including the principal's absence from the notarization, the document's absence from notarial records, and its ante-dating of the title it references — demonstrate its spurious character.

Guillermo Reed was an overseas contract worker from 1978 to 1986, during which period his wife Lolita Reed managed the household and paid the installments on a 166-square-meter property in Mangahan, Pasig, purchased from the Government Service Insurance System. On July 9, 1986, TCT No. 58195 was issued in the name of "Lolita Reed, married to Guillermo Reed," reflecting the property as part of their conjugal partnership. Guillermo had allowed his brother Dominador and the latter's wife Luz to reside in the house constructed on the property. The Reed spouses eventually became estranged, with Guillermo working abroad and Lolita remaining in the Philippines.

Guillermo Reed worked as an overseas contract worker from 1978 to 1986, returning home only for short vacations. During this period, he purchased on installment basis a 166-square-meter property located at MRR Road, Mangahan, Pasig, from the Government Service Insurance System. Because he was abroad, his wife Lolita Reed paid the consideration to the GSIS. On July 9, 1986, TCT No. 58195 was issued by the Registry of Deeds for the Province of Rizal, Metro Manila — District II, in the name of "Lolita Reed, married to Guillermo Reed." Guillermo allowed his brother Dominador and the latter's wife Luz to stay in the house constructed on the property.

At some point, the Reed spouses became estranged. Without Guillermo's knowledge or consent, Lolita caused the preparation of a Special Power of Attorney dated July 8, 1986, purportedly executed by Guillermo, authorizing her to sell the subject property or a portion thereof. Lolita admitted that she merely sent an already typewritten SPA to her husband in the Middle East, and that when it was brought back by her brother-in-law, it had already been signed by Guillermo — though she never witnessed him sign it. The acknowledgment portion of the SPA stated that only Lolita Reed appeared before Notary Public Macario C. Cruz. Furthermore, the SPA was not among the documents submitted by Atty. Cruz to the RTC of Pasig, as confirmed by a letter dated April 1, 1993 from Clerk of Court Grace S. Belvis. Notably, the SPA was dated July 8, 1986 — one day before TCT No. 58195 was even issued.

Relying on this SPA, Lolita executed three separate deeds of sale over portions of the conjugal property. On July 14, 1986, she sold a 41.50-square-meter portion to Spouses Danilo and Alberta Domingo. On July 22, 1987, she sold another 41.50-square-meter portion to Spouses Ardaniel and Natividad Villanera. On January 10, 1989, she sold an 86-square-meter portion to Eduardo Quiteves. As a result, TCT Nos. 84565, 84566, and 84567 were issued in the names of Quiteves, the Villanera spouses, and the Domingo spouses, respectively.

In December 1991, Dominador and Luz Reed were summoned to the barangay in connection with an ejectment complaint filed by Eduardo Quiteves, who claimed ownership of the lot where their house stood. Dominador and Luz informed Guillermo, who accompanied them to the barangay and there met Quiteves and Alberta Domingo, both of whom claimed ownership of the subject property. Guillermo denied having sold his property. He thereafter verified with the Register of Deeds of Pasig and discovered that his title had been cancelled and that the deeds of sale and the SPA had been executed.

On March 8, 1994, Guillermo filed a complaint for reconveyance against Lolita Reed, the Villanera spouses, the Domingo spouses, Eduardo Quiteves, and the Register of Deeds of Pasig, alleging that the SPA was forged, that he had not signed it or appeared before the notary public because he was working abroad, and that the vendees were purchasers in bad faith because they knew at the time of the transactions that he was working abroad and estranged from Lolita. The vendees answered that the sale was valid because Guillermo had given written consent, as shown in a letter dated July 26, 1986, that he had admitted signing the SPA before the barangay chairman, that they were entitled to rely on the presumption of regularity of the notarized SPA, and that they were buyers in good faith and for value. Lolita Reed was not served with summons, as she was no longer residing at the given address. After trial, the RTC dismissed the complaint for lack of merit. The Court of Appeals reversed, finding the SPA to be a forgery and the vendees not to be purchasers in good faith.

• Jurisdiction over Lolita Reed: Petitioners contended that the RTC never acquired jurisdiction over the person of Lolita Reed, an allegedly indispensable party, because she had not been served with summons; consequently, the case for reconveyance could not prosper and should never have proceeded.
• Burden of Proof for Forgery: Petitioners maintained that the burden of proving forgery rested on respondent Guillermo Reed, who had asserted it in his complaint, and that an expert witness from the NBI should have been presented to establish that the signature on the SPA was forged.
• Presumption of Regularity: Petitioners argued that they had the right to rely on the presumption of regularity of the notarized Special Power of Attorney, which had not been sufficiently rebutted.
• Buyers in Good Faith: Petitioners asserted that they were buyers in good faith and for value, claiming there was no proof of any conspiracy between them and Lolita Reed in the forgery, and that their titles could not be revoked even if the SPA were forged.
• Application of Precedents: Petitioners questioned the applicability of Voluntad vs. Dizon and Veloso vs. Court of Appeals to the case at bench, as well as whether the CA properly applied the doctrine that trial courts are in a better position to determine questions of credibility.

• Forgery of the SPA: Respondent alleged that the SPA was a forgery, that he did not sign it, and that he did not appear before the notary public because he was working abroad at the time.
• Purchasers in Bad Faith: Respondent asserted that the vendees were purchasers in bad faith because they knew, at the time they transacted with Lolita Reed, that he was working abroad and estranged from her, and that they failed to investigate her authority to sell the conjugal property.
• Invalidity of the Notarization: Respondent pointed to the Certification from the Office of the Clerk of Court of the RTC of Pasig that the alleged SPA notarized by Atty. Macario Cruz was not the same document submitted to that office, undermining its presumed regularity.

• Jurisdiction: Whether the case for reconveyance could prosper despite the trial court's lack of jurisdiction over the person of Lolita Reed, an allegedly indispensable party.
• Authenticity of the SPA: Whether the Special Power of Attorney relied upon by the parties was authentic.
• Justification for the Sale: Whether Lolita Reed was justified in selling the conjugal property without her husband's consent on the ground that the proceeds were used for family support.
• Buyers in Good Faith: Whether petitioners Spouses Domingo and Eduardo Quiteves were purchasers in good faith and for value.

• Jurisdiction: Yes. Although the RTC may not have acquired jurisdiction over Lolita Reed through service of summons, she voluntarily appeared before the Supreme Court by filing a Petition-in-Intervention, which is equivalent to service of summons under Rule 14, Section 20 of the Rules of Court.
• Authenticity of the SPA: No. The SPA was a forgery, the presumption of regularity having been rebutted by the wife's admission that she never witnessed the husband sign it, the notary's acknowledgment showing only the wife appeared, the document's absence from the notary's official records, and its ante-dating of the title it referenced.
• Justification for the Sale: No. Lolita Reed's rights over the property were merely inchoate prior to liquidation of the conjugal partnership, and there was no proof that the proceeds were used for family support; she could not unilaterally bind conjugal assets.
• Buyers in Good Faith: No. Petitioners knew the property was conjugal, knew the Reed spouses were estranged, and yet failed to investigate Lolita's authority to sell — circumstances that should have put a reasonable person on guard and disqualified them from claiming good faith.

• Jurisdiction: The Court found it unnecessary to determine whether Lolita Reed was an indispensable party, because any jurisdictional defect was cured by her voluntary appearance. By filing a Petition-in-Intervention before the Supreme Court, she submitted herself to the Court's jurisdiction, rendering the alleged lack of jurisdiction moot. Rule 14, Section 20 of the Rules of Court provides that the defendant's voluntary appearance in the action is equivalent to service of summons. Lolita never questioned the Supreme Court's jurisdiction over her, and her participation in the appeal demonstrated her recognition and acceptance of it. The Court also found no need to remand the case to the trial court for additional evidence, as Lolita relied on the same documents already presented by the other parties, and the Court was in a position to rule on the merits.

• Authenticity of the SPA: The Court found a "plethora of factual details" pointing to the SPA's falsity, sufficient to overcome the presumption of regularity without need of expert testimony. First, Lolita admitted she merely sent a typewritten SPA to her husband in the Middle East and never saw him sign it, undermining the witnesses' attestations that the principal signed in their presence. Second, the notary's acknowledgment stated that only Lolita appeared before him — an anomaly for an SPA, which requires the personal appearance of both the principal and the agent. Third, the Certification from the RTC Clerk of Court confirmed that the SPA was not among the documents submitted by the notary public in his notarial report. Fourth, Guillermo consistently denied having signed the document, and the alleged admission before the barangay chairman was discredited by the testimony of Dominador Reed, whose signature appeared on the minutes, that no such admission was recorded. Fifth, the SPA was dated July 8, 1986, one day before TCT No. 58195 was issued on July 9, 1986 — meaning the SPA purported to authorize the sale of a title that did not yet exist. These circumstances collectively rebutted the presumption of regularity accorded to notarized documents.

• Justification for the Sale: Lolita Reed invoked Articles 161 and 162 of the Civil Code, arguing that the sale was valid because the proceeds were used for family support and that Guillermo had already donated his share to their children. The Court rejected both arguments. Her rights over the property were merely inchoate prior to liquidation of the conjugal partnership, and she adduced no proof that the proceeds were actually used for necessities. The Civil Code provisions she cited pertained to the liabilities of the conjugal partnership, not to the formalities required for validly binding the partnership through contracts entered into by either spouse. The allegation of a donation in favor of the children was irrelevant to the disputed sales and, if accepted, would have required her to sell the property not only in her name but on behalf of her children as co-owners.

• Buyers in Good Faith: The Court applied the principle that while buyers of registered land are not required to inquire beyond the face of the Torrens certificate, they cannot close their eyes to known facts that should put a reasonable person on guard. Both sets of vendees had knowledge of circumstances that should have prompted inquiry. Alberta Domingo admitted that the property belonged to the conjugal partnership of the Reed spouses, that the spouses were no longer living together, and that Guillermo was in Saudi Arabia. Yet the Domingo spouses did not ask to see any SPA; Lolita merely verbally claimed authorization, and the Deed of Sale itself made no mention of any SPA or of Guillermo's consent. Eduardo Quiteves, who claimed to be close to Guillermo as a classmate's father, was shown an SPA whose acknowledgment portion stated that only Lolita appeared before the notary — a red flag he ignored. The SPA was also two years old when the property was offered to him, and he made no effort to verify its continued validity or to contact Guillermo. The Court emphasized that what was required was not prying into the Reed spouses' personal affairs but simply the diligence of a prudent vendee: investigating the vendor's authority to sell and to bind the conjugal partnership. Because petitioners failed to meet this standard, they could not be deemed innocent purchasers for value, and their titles were subject to cancellation.

• Innocent Purchaser for Value — An innocent purchaser for value is one who buys property without notice that another person has a right to or interest in the same property, and who pays a full and fair price at the time of purchase or before receiving notice of the claim. Good faith requires a well-founded belief that the person from whom the property was received is the rightful owner who could convey title. In this case, the vendees' good faith was negated by their knowledge of facts — the conjugal nature of the property, the estrangement of the Reed spouses, and the husband's absence abroad — that should have prompted inquiry into the vendor's authority.

• Duty to Inquire Beyond the Torrens Title — While buyers of registered land are not required to inquire further than what the Torrens certificate indicates on its face, purchasers cannot close their eyes to known facts that should put a reasonable person on guard. The presence of anything that excites or arouses suspicion should prompt the vendee to look beyond the certificate and investigate. A vendee who fails to do so is neither an innocent purchaser for value nor a purchaser in good faith. The Court applied this doctrine to hold that the vendees' knowledge of the conjugal nature of the property and the spouses' estrangement imposed a duty to investigate Lolita's authority to sell.

• Presumption of Regularity of Notarized Documents — A notarized document enjoys the presumption of regularity and is admissible in evidence without preliminary proof of its authenticity and due execution. However, this presumption may be rebutted by circumstances showing the document's spurious character. The Court held that the presumption was rebutted by the wife's admission that she never witnessed the husband sign the SPA, the notary's acknowledgment showing only the wife appeared, the document's absence from notarial records, and its ante-dating of the title it referenced.

• Voluntary Appearance as Equivalent to Service of Summons — Under Rule 14, Section 20 of the Rules of Court, the defendant's voluntary appearance in the action is equivalent to service of summons. The Court held that Lolita Reed's filing of a Petition-in-Intervention before the Supreme Court constituted voluntary appearance, curing any jurisdictional defect from the lack of service of summons at the trial court level.

• Inchoate Rights of a Spouse over Conjugal Property — A spouse's rights over conjugal property are merely inchoate prior to the liquidation of the conjugal partnership, and neither spouse may unilaterally bind conjugal assets without the other's consent or proper authorization. The Court held that Lolita Reed could not validly sell the conjugal property without Guillermo's consent, especially absent proof that the proceeds were used for family support.

• "When dealing with registered land, prospective buyers are normally not required by law to inquire further than what appears on the face of the Torrens certificate of title on file with the Register of Deeds. Equally settled is the principle, however, that purchasers cannot close their eyes to known facts that should put a reasonable person on guard; they cannot subsequently claim to have acted in good faith, in the belief that there was no defect in the vendor's certificate of title." — This opening passage frames the central tension of the case between the Torrens system's reliance on the certificate's face and the duty of prudent inquiry, and articulates the doctrinal basis for denying good-faith status to the vendees.

• "Notarization is not an empty, meaningless and routinary act. It converts a private document into a public instrument, making it admissible in evidence without the necessity of preliminary proof of its authenticity and due execution." — This passage defines the legal significance of notarization and underpins the Court's analysis of why the SPA's notarial defects were so damaging to its presumed validity.

• "Their mere refusal to face up to that possibility will not make them innocent purchasers for value, if it later becomes apparent that the title was indeed defective, and that they would have discovered the fact, had they acted with the measure of precaution required of a prudent person in a like situation." — This formulation of the standard for good faith in the context of registered land is frequently cited in subsequent jurisprudence on the duty of inquiry imposed on purchasers.

• Voluntad vs. Dizon, 372 Phil. 82 (August 26, 1999) — Cited for the principle that buyers of registered land are not required to inquire beyond the face of the Torrens certificate. Petitioners questioned its applicability, but the Court affirmed its relevance, distinguishing the general rule from the exception requiring inquiry when circumstances arouse suspicion.

• Spouses Uy vs. CA, 411 Phil. 788 (June 21, 2001) — Cited for the principle that purchasers cannot close their eyes to known facts that should put a reasonable person on guard and cannot subsequently claim good faith.

• Sandoval vs. CA, 329 Phil. 48 (August 1, 1996) — Cited for the rule that the presence of anything that excites or arouses suspicion should prompt the vendee to look beyond the vendor's certificate and investigate the title.

• Abalos vs. Macatangay Jr., 439 SCRA 649 (September 30, 2004) — Cited for the proposition that a spouse's rights over conjugal property are merely inchoate prior to liquidation of the conjugal partnership.

• Wong vs. Intermediate Appellate Court, 200 SCRA 792 (August 19, 1991) — Cited in connection with the requirement of proof that proceeds of a sale of conjugal property were used for family support to justify a spouse's unilateral disposition.

• Gonzales vs. Ramos, A.C. No. 6649 (June 21, 2005) — Cited for the rule that affiants should be present before the notary public to attest to the truth of the contents of the document and to enable the notary to verify the genuineness of their signatures.

• Rule 14, Section 20, Rules of Court — Provides that the defendant's voluntary appearance in the action is equivalent to service of summons. Applied to hold that Lolita Reed's filing of a Petition-in-Intervention before the Supreme Court constituted voluntary appearance, thereby conferring jurisdiction over her person and curing any defect from the lack of service of summons at the trial court level.

• Article 161, Civil Code — Invoked by petitioner-intervenor Lolita Reed in relation to Article 115, arguing that the proceeds of the sale were used for the support of the family and education of the common children. The Court held that these provisions pertain to the liabilities of the conjugal partnership, not to the formalities required for validly binding the partnership through contracts, and that no proof of such use was adduced.

• Article 162, Civil Code — Invoked by Lolita Reed regarding an alleged donation by Guillermo of his share to their children. The Court held this matter irrelevant to the disputed sales.

Justice Angelina Sandoval-Gutierrez and Justice Renato C. Corona concurred in the decision.