CUSI vs. DOMINGO

  

SPOUSES ALFONSO AND MARIA ANGELES CUSI, vs. LILIA V. DOMINGO

G.R. No. 195825 | February 27, 2013

RAMONA LIZA L. DE VERA vs. LILIA V. DOMINGO AND

SPOUSES RADELIA AND ALFRED SY

G.R. No. 195871 | February 27, 2013

FACTS

The property in dispute was a vacant unfenced lot situated in White Plains, Quezon City and covered by TCT No. N-165606 issued in the name of respondent Lilia V. Domingo by the ROD Quezon City.

In July 1999, Domingo learned that construction activities were being undertaken on her property without her consent. It was later found out that it was upon the initiative of the De Veras in the exercise of their dominical and possessory rights.

On July 18, 1997, Radelia Sy, representing herself as the owner, petitioned the RTC for the issuance of a new owner's copy of Domingo's TCT No. N-165606, appending to her petition a deed of absolute sale purportedly executed in her favor by Domingo; and an affidavit of loss, whereby she claimed that her bag containing the owner's copy of TCT had been snatched from her on July 13, 1997 while she was at the SM North EDSA. 

 The RTC granted Sy's petition.  The ROD then issued a new owner's duplicate copy, which was cancelled by virtue of the deed of absolute sale. It then issued TCT No. 186142 in Sy's name.

Sy subsequently subdivided the property into two, and sold each half by way of contract to sell to Sps. Edgardo and Ramona Liza De Vera and to Sps. Alfonso and Maria Angeles Cusi. The existence of the individual contracts to sell was annotated on the dorsal portion of Sy's TCT as Entry No. PE-8907/N-186142, stating that the consideration of the sale was 2M (1M for each set of buyers) for the entire property that had an actual worth of not less than 14M. Sy’s TCT No. was then cancelled, and Sps. De Vera, Sps. Cusi were respectively issued TCT No. 189568  and TCT No. 189569. These transactions were unknown to Domingo, whose TCT No. N-165606 remained in her undisturbed possession.

Domingo filed a complaint against Sy, Sps. De Veras and Sps. Cusi before the RTC. It sought the annulment or cancellation of titles, injunction and damages. Domingo applied for the issuance of a writ of preliminary prohibitory and mandatory injunction, and TRO. The RTC granted Domingo's application for the TRO enjoining the defendants from proceeding with the construction activities on the property. The RTC later granted her application for the writ of preliminary injunction.

Acting on the motions for reconsideration separately filed by Sy and Domingo,  the RTC declared the sale between Domingo and Sy as void; in effect, it also declared the Sps. De Vera and Sps. Cusi to be purchasers in good faith and for value.

The CA held that the sale of the property from Domingo to Sy was null and void and conveyed no title to the latter for being effected by forging the signature of Domingo; that Sy thereby acquired no right in the property that she could convey to the Cusis and De Veras as her buyers; that although acknowledging that a purchaser could rely on what appeared on the face of the certificate of title, the Cusis and De Veras did not have the status of purchasers in good faith and for value by reason of their being aware of Sy's TCT No. 186142 being a reconstituted owner's copy, thereby requiring them to conduct an inquiry or investigation into the status of the title of Sy in the property, and not simply rely on the face of Sy's TCT No. 186142; and that the Cusis and De Veras were also aware of other facts that should further put them on guard, particularly the several nearly simultaneous transactions respecting the property, and the undervaluation of the purchase price from P7,000,000.00/half to only P1,000,000.00/half to enable Sy to pay a lesser capital gains tax.

ISSUE: Whether or not the petitioners are buyers in good faith and for value.

RULING

No, the Sps. Cusi and Sps. De Vera are not purchasers for value and in good faith.

One of the guiding tenets underlying the Torrens system is the curtain principle, in that one does not need to go behind the certificate of title because it contains all the information about the title of its holder. This principle dispenses with the need of proving ownership by long complicated documents kept by the registered owner, which may be necessary under a private conveyancing system, and assures that all the necessary information regarding ownership is on the certificate of title.

There is no question that the petitioners exerted some effort as buyers to determine whether the property did rightfully belong to Sy. For one, they did not find any encumbrance, like a notice of lis pendens, being annotated on the TCT of Sy. Nonetheless, their observance of a certain degree of diligence within the context of the principles underlying the Torrens system was not their only barometer under the law and jurisprudence by which to gauge the validity of their acquisition of title. As the purchasers of the property, they also came under the clear obligation to purchase the property not only in good faith but also for value.

Therein lay the problem. The petitioners were shown to have been deficient in their vigilance as buyers of the property. It was not enough for them to show that the property was unfenced and vacant; otherwise, it would be too easy for any registered owner to lose her property, including its possession, through illegal occupation. Nor was it safe for them to simply rely on the face of Sy's TCT No. 186142 in view of the fact that they were aware that her TCT was derived from a duplicate owner's copy reissued by virtue of the loss of the original duplicate owner's copy. That circumstance should have already alerted them to the need to inquire beyond the face of Sy's TCT No. 186142. There were other circumstances, like the almost simultaneous transactions affecting the property within a short span of time, as well as the gross undervaluation of the property in the deeds of sale, ostensibly at the behest of Sy to minimize her liabilities for the capital gains tax, that also excited suspicion, and required them to be extra-cautious in dealing with Sy on the property.

The CA's treatment of Sy's TCT No. 186142 as similar to a reconstituted copy of a Torrens certificate of title was not unwarranted. The CA cited the ruling in Barstowe Philippines Corporation v. Republic, which states:

[T]he nature of a reconstituted Transfer Certificate of Title of registered land is similar to that of a second Owner's Duplicate Transfer Certificate of Title," in that "[b]oth are issued, after the proper proceedings, on the representation of the registered owner that the original of the said TCT or the original of the Owner's Duplicate TCT, respectively, was lost and could not be located or found despite diligent efforts exerted for that purpose;" and that both were "subsequent copies of the originals thereof," a fact that a "cursory examination of these subsequent copies would show" and "put on notice of such fact [anyone dealing with such copies who is] thus warned to be extra-careful.

The registered owner of the property was Domingo, who remained in the custody of her TCT all along; the impostor was Sy, who succeeded in obtaining a duplicate owner's copy; and the Cusis and the De Veras were similarly situated as the Spouses Lazaro, the mortgagees in Garcia. The Cusis and the De Veras did not investigate beyond the face of Sy's TCT No. 186142, despite the certificate derived from the reissued duplicate owner's copy being akin to a reconstituted TCT. Thereby, they denied themselves the innocence and good faith they supposedly clothed themselves with when they dealt with Sy on the property.

The records also show that the forged deed of sale from Domingo to Sy appeared to be executed on July 14, 1997; that the affidavit of loss by which Sy would later on support her petition for the issuance of the duplicate owner's copy of Domingo's TCT No. 165606 was executed on July 17, 1997, the very same day in which Sy registered the affidavit of loss in the Registry of Deeds of Quezon City; that Sy filed the petition for the issuance of the duplicate owner's copy of Domingo's TCT No. 165606; that the RTC granted her petition on August 26, 1997; and that on October 31, 1997, a real estate mortgage was executed in favor of one Emma Turingan, with the mortgage being annotated on TCT No. 165606 on November 10, 1997.

Being the buyers of the registered realty, the Cusis and the De Veras were aware of the aforementioned several almost simultaneous transactions affecting the property. Their awareness, if it was not actual, was at least presumed, and ought to have put them on their guard, for, as the CA pointed out, the RTC observed that "[t]hese almost simultaneous transactions, particularly the date of the alleged loss of the TCT No. 165606 and the purported Deed of Sale, suffice[d] to arouse suspicion on [the part of] any person dealing with the subject property." Simple prudence would then have impelled them as honest persons to make deeper inquiries to clear the suspiciousness haunting Sy's title. But they still went on with their respective purchase of the property without making the deeper inquiries. In that regard, they were not acting in good faith.

Another circumstance indicating that the Cusis and the De Veras were not innocent purchasers for value was the gross undervaluation of the property in the deeds of sale at the measly price of P1 million for each half when the true market value was then in the aggregate of at least P14 million for the entire property. Even if the undervaluation was to accommodate the request of Sy to enable her to minimize her liabilities for the capital gains tax, their acquiescence to the fraud perpetrated against the Government, no less, still rendered them as parties to the wrongdoing. They were not any less guilty at all.

In the ultimate analysis, their supposed passivity respecting the arrangement to perpetrate the fraud was not even plausible, because they knew as the buyers that they were not personally liable for the capital gains taxes and thus had nothing to gain by their acquiescence. There was simply no acceptable reason for them to have acquiesced to the fraud, or for them not to have rightfully insisted on the declaration of the full value of the realty in their deeds of sale. By letting their respective deeds of sale reflect the grossly inadequate price, they should suffer the consequences, including the inference of their bad faith in transacting the sales in their favor.

Good faith is the honest intention to abstain from taking unconscientious advantage of another. It means the "freedom from knowledge and circumstances which ought to put a person on inquiry.” Given this notion of good faith, therefore, a purchaser 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 and pays full and fair price for the same. As an examination of the records shows, the petitioners were not innocent purchasers in good faith and for value. Their failure to investigate Sy's title despite the nearly simultaneous transactions on the property that ought to have put them on inquiry manifested their awareness of the flaw in Sy's title. That they did not also appear to have paid the full price for their share of the property evinced their not having paid true value. 

Resultantly, the Court affirms the lower courts, and restores to Domingo her rights of dominion over the property.

 

WHEREFORE, the Court AFFIRMS the decision of the Court of Appeals promulgated on July 16, 2010; and ORDERS the petitioners to pay the costs of suit.