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Precautionary Measures for Buyers of Real Property

In 1992, Petitioner Locsin filed an ejectment case against one Aceron before the Metropolitan Trial Court (MTC) to recover possession over the land in issue. Eventually, the two entered into a compromise agreement, which the MTC approved. In 1994, Locsin and her counsel discovered that one Marylou Bolos had the TCT cancelled and then secured a new one in her favor by registering a Deed of Absolute Sale allegedly executed by Locsin; Bolos later sold the subject lot to Bernardo Hizon but it was titled under Carlos Hizon’s name.

Locsin learned that Carlos had already sold the property to his sister and her husband, herein respondents spouses Guevara. The spouses Guevara then immediately mortgaged the said property to secure a loan/credit facility with Damar Credit Corporation (DCC).

Petitioner Locsin insists that Bernardo was well aware, at the time he purchased the subject property, of a possible defect in Bolos’ title since he knew that another person, Aceron, was then occupying the lot in issue. As regards Carlos and the Sps. Guevara’s admissions and testimonies, petitioner points out that when these are placed side-by-side with the concurrent circumstances in the case, it is readily revealed that the transfer from the former to the latter was only simulated and intended to keep the property out of petitioner’s reach.

For their part, respondents maintain that they had the right to rely solely upon the face of Bolos’ clean title, considering that it was free from any lien or encumbrance. They are not even required, so they claim, to check on the validity of the sale from which they derived their title. Too, respondents claim that their knowledge of Aceron’s possession cannot be the basis for an allegation of bad faith, for the property was purchased on an “asis where-is” basis.

 

ISSUE:

Are respondents innocent purchasers for value and in good faith of the subject property?

 

RULING:
No. An innocent purchaser for value is one who buys the property of another without notice that some other person has a right to or interest in it, and who pays a full and fair price at the time of the purchase or before receiving any notice of another person’s claim. As such, a defective title–– or one the procurement of which is tainted with fraud and misrepresentation––may be the source of a completely legal and valid title, provided that the buyer is an innocent third person who, in good faith, relied on the correctness of the certificate of title, or an innocent purchaser for value. (Philippine National Bank v. Heirs of Militar, et al., G.R. No. 164801, June 30, 2006)

Complementing this is the mirror doctrine which echoes the doctrinal rule that every person dealing with registered land may safely rely on the correctness of the certificate of title issued therefor and is in no way obliged to go beyond the certificate to determine the condition of the property. (Rufloe v. Burgos, G.R. No. 143573, January 30, 2009)The recognized exceptions to this rule are stated as follows:

A person dealing with registered land has a right to rely on the Torrens certificate of title and to dispense with the need of inquiring further except when the party has actual knowledge of facts and circumstances that would impel a reasonably cautious man to make such inquiry or when the purchaser has knowledge of a defect or the lack of title in his vendor or of sufficient facts to induce a reasonably prudent man to inquire into the status of the title of the property in litigation. The presence of anything which excites or arouses suspicion should then prompt the vendee to look beyond the certificate and investigate the title of the vendor appearing on the face of said certificate. One who falls within the exception can neither be denominated an innocent purchaser for value nor a purchaser in good faith and, hence, does not merit the protection of the law. (Sandoval v. Court of Appeals, G.R. No. 106657, August 1, 1996)

Thus, in Domingo Realty, Inc. v. CA (G.R. No. 126236, January 26, 2007), It was emphasized the need for prospective parties to a contract involving titled lands to exercise the diligence of a reasonably prudent person in ensuring the legality of the title, and the accuracy of the metes and bounds of the lot embraced therein, by undertaking precautionary measures, such as:

  1. Verifying the origin, history, authenticity, and validity of the title with the Office of the Register of Deeds and the Land Registration Authority;
  2. Engaging the services of a competent and reliable geodetic engineer to verify the boundary,metes, and bounds of the lot subject of said title based on the technical description in the said title and the approved survey plan in the Land Management Bureau;
  3. Conducting an actual ocular inspection of the lot;
  4. Inquiring from the owners and possessors of adjoining lots with respect to the true and legal ownership of the lot in question;
  5. Putting up of signs that said lot is being purchased, leased, or encumbered; and
  6. Undertaking such other measures to make the general public aware that said lot will be subject to alienation, lease, or encumbrance by the parties.

In the case at bar, Bolos’ certificate of title was concededly free from liens and encumbrances on its face. However, the failure of Carlos and the spouses Guevara to exercise the necessary level of caution in light of the factual milieu surrounding the sequence of transfers from Bolos to respondents bars the application of the mirror doctrine .

G.R. No. 204369, September 17, 2014
ENRIQUETA M. LOCSIN, Petitioner, vs. BERNARDO HIZON, CARLOS HIZON, SPS. JOSE MANUEL & LOURDES GUEVARA, Respondents.
VELASCO, JR., J.:

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