G.R. No.

158682 January 31, 2005

SPOUSES BIENVENIDO R. MACADANGDANG and VIRGINIA C. MACADANGDANG, petitioners

vs.
SPOUSES RAMON MARTINEZ and GLORIA F. MARTINEZ, respondents.

Facts

The Macadangdang spouses, as petitioners, assail the October 25, 2001 decision of the Court of Appeals
in modifying the November 13, 1990 decision of the Regional Trial Court.

The Macadangdang spouses bought a house and lot covered by TCT No. 146553 in the name of Emma A.
Omalin for the purchase price of P380,000, to be paid on installment basis. Downpayment of P5,000 and
subsequent payment of P175,000 was paid; afterwhich, Omalin executed a deed of sale with mortgage,
providing for the payment of the balance (P200,000) in three installments.

After the Macadangdang spouses paid a total of P270,000, both parties agreed that the remaining
P110,000 shall be paid upon Omalins delivery of the TCT. However, Omalin failed to deliver the same
because a certain Atty. Paterno Santos, acting as broker, offered to mortgage the subject property to
respondent Martinez spouses for P200,000, presenting a clean title. Said offer was accepted by the
Martinez spouses with interest at 36% p.a. and was duly recorded at the Registry of Deeds of Makati.
The proper annotation was made at the back of the title. Omalin defaulted in her payments to Martinez
spouses in the amount of P114,000, incurred over the span of 1.5 years.

The Macadangdang spouses filed a criminal case for estafa against Omalin and a combined action for
specific performance, annulment of contract and damages against the spouses Martinez and Omalin. The
Makati RTC ruled in favor of the Macadangdang spouses, and ordered the delivery of TCT No. 146553 to
Macadangdang spouses, free from encumbrance under Entry No. 30110 of the Register of Deeds of
Makati (mortgage to respondent), upon plaintiffs payment of the balance of P100,000. This was later
modified by the Court of Appeals, upholding the validity of the sale to Macadangdang spouses, subject to
the Martinezs spouses right to foreclose the property for failure of Omalin to pay her indebtedness.

Issue

Whether or not the Macadangdang spouses are entitled to the land despite the fact that a prior
registered mortgage was attached to it.

Ruling

No. The assailed decision of the appellate court is neither absurd nor unjust. The registered mortgage
contract of the Martinez spouses has given them the superior right, not as owners but only as
mortgagees. Consequently, they are entitled to be paid the amounts due them under the real estate
mortgage registered in their favor. In the event Omalin, as mortgagor, fails to pay the mortgage
obligation or, should any party, for that matter, who may have an interest in the mortgaged property like
the petitioners herein fail to redeem it from the mortgagees, the latter, as declared by the Court of
Appeals, may enforce their rights against the property by foreclosing on the mortgage, regardless of who
its owner may be, considering that the registered mortgage attaches to the property.

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Ratio

Between two transactions concerning the same parcel of land, the registered transaction prevails
over the earlier unregistered right. The act of registration operates to convey and affect the
registered land so that a bonafide purchaser of such land acquires good title as against a prior
transferee, if such prior transfer was unrecorded.

Registration of the deed is the effectual act which binds the land insofar as third persons are concerned.
Prior registration of a lien creates a preference as the act of registration is the operative act that conveys
and affects the land.

Considering that the prior sale of the subject property to the Macadangdang spouses was
not registered, it was the registered mortgage to the spouses Martinez that was valid and
effective. For sure, it was binding on Omalin and, for that matter, even on the Macadangdang spouses,
the parties to the prior sale.

The Martinez spouses were also considered as innocent mortgagees for value, and are
therefore not required to look beyond what appears on the face of the certificate of title of the vendor,
since the certificate of title is in the name of the mortgagor when the land was mortgaged.

Where innocent third persons rely on the lack of defect of a certificate of title and acquire rights over the
property, the Court cannot disregard such rights. Otherwise, public confidence in the certificate of title
and ultimately, in the entire Torrens system will be impaired, for every one dealing with registered
property will have to inquire at every instance whether the title has been regularly or irregularly issued.

On this note, being innocent registered mortgagees for value, the Martinez spouses acquired a
superior right over the property.

Principles Applied by the Supreme Court

Act of Registration is the Operative Act to Convey or Affect Registered Land

Sec. 51. Conveyance and other dealings by registered owner. An owner of

registered land may convey, mortgage, lease, charge or otherwise deal with the
same in accordance with existing laws. He may use such forms of deeds,
mortgages, lease or other voluntary instruments as are sufficient in law. But no
deed, mortgage, lease or other voluntary instrument, except a will purporting to
convey or affect registered land shall take effect as a conveyance or bind the land,
but shall operate only as a contract between the parties and as evidence of
authority to the Register of Deeds to make Registration.

The act of registration shall be the operative act to convey or affect the land
insofar as third persons are concerned, and in all cases under this Decree, the
registration shall be made in the office of the Register of Deeds for the province or
city where the land lies.

Sec. 52. Constructive notice upon registration. Every conveyance, mortgage,

lease, lien attachment, order, judgment, instrument or entry affecting registered
land shall, if registered, filed or entered in the office of the Register of Deeds for
the province or city where the land to which it relates lies, be constructive notice
to all persons from the time of such registering, filing or entering.

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 Rule on Good Faith Applicable to Lessees and Mortgagees

A certificate of title is conclusive and binding upon the whole world.

Consequently, a buyer need not look behind the certificate of title in order to
determine who the actual owner of the land is. The same rule applies to lessees
and mortgagees. Thus, where the certificate of title is in the name of the
mortgagor when the land is mortgaged, the innocent mortgagee for value has the
right to rely on what appears on the certificate of title

NAAWAN COMMUNITY RURAL BANK INC., petitioner, vs. THE COURT OF APPEALS and SPOUSES
ALFREDO AND ANNABELLE LUMO, respondents.
[G.R. No. 128573. January 13, 2003]

Under the established principles of land registration, a person dealing with registered land may
generally rely on the correctness of a certificate of title and the law will in no way oblige him to go
beyond it to determine the legal status of the property.

FACTS:

1. On April 30, 1988, a certain Guillermo Comayas offered to sell to private respondent-spouses
Alfredo and Annabelle Lumo, a house and lot measuring located at Pinikitan, Camaman-an, Cagayan
de Oro City.
2. Wanting to buy said house and lot, private respondents made inquiries at the Office of the Register
of Deeds of Cagayan de Oro City where the property is located and the Bureau of Lands on the legal
status of the vendors title. They found out that the property was mortgaged for P8,000 to a
certain Mrs. Galupo and that the owners copy of the Certificate of Title to said property was in
her possession.
3. Private respondents directed Guillermo Comayas to redeem the property from Galupo at their
expense, giving the amount of P10,000 to Comayas for that purpose.
4. On May 30, 1988, a release of the adverse claim of Galupo was annotated on TCT No. T-41499
which covered the subject property.
5. In the meantime, on May 17, 1988, even before the release of Galupos adverse claim, private
respondents and Guillermo Comayas, executed a deed of absolute sale. The subject property was
allegedly sold for P125,000 but the deed of sale reflected the amount of only P30,000 which was the

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 amount private respondents were ready to pay at the time of the execution of said deed, the
balance payable by installment.
6. On June 9, 1988, the deed of absolute sale was registered and inscribed on TCT No. T-41499 and, on
even date, TCT No. T-50134 was issued in favor of private respondents
7. After obtaining their TCT, private respondents requested the issuance of a new tax declaration
certificate in their names. However, they were surprised to learn from the City Assessors Office
that the property was also declared for tax purposes in the name of petitioner Naawan
Community Rural Bank Inc. Records in the City Assessors Office revealed that, for the lot covered
by TCT No. T-50134, Alfredo Lumos T/D # 83324 bore the note: This lot is also declared in the
name of Naawan Community Rural Bank Inc. under T/D # 71210.
Apparently, on February 7, 1983, Guillermo Comayas obtained a P15,000 loan from petitioner
Bank using the subject property as security. At the time said contract of mortgage was entered
into, the subject property was then an unregistered parcel of residential land, tax-declared in
the name of a certain Sergio A. Balibay while the residential one-storey house was tax-declared
in the name of Comayas.
Balibay executed a special power of attorney authorizing Comayas to borrow money and use the
subject lot as security. But the Deed of Real Estate Mortgage and the Special Power of
Attorney were recorded in the registration book of the Province of Misamis Oriental, not in
the registration book of Cagayan de Oro City.
It appears that, when the registration was made, there was only one Register of Deeds for the
entire province of Misamis Oriental, including Cagayan de Oro City. It was only in 1985 when
the Office of the Register of Deeds for Cagayan de Oro City was established separately from the
Office of the Register of Deeds for the Province of Misamis Oriental
For failure of Comayas to pay, the real estate mortgage was foreclosed and the subject property
sold at a public auction to the mortgagee Naawan Community Rural Bank as the highest bidder
in the amount of P16,031.35.
Meanwhile, on September 5, 1986, the period for redemption of the foreclosed subject
property lapsed and the MTCC Deputy Sheriff of Cagayan de Oro City issued and delivered to
petitioner bank the sheriffs deed of final conveyance. This time, the deed was registered under
Act 3344 and recorded in the registration book of the Register of Deeds of Cagayan de Oro City.
By virtue of said deed, petitioner Bank obtained a tax declaration for the subject house and lot.
8. Thereafter, petitioner Bank instituted an action for ejectment against Comayas before the MTCC
which decided in its favor. On appeal, the Regional Trial Court affirmed the decision of the MTCC in
a decision dated April 13, 1988.
9. On January 27, 1989, the Regional Trial Court issued an order for the issuance of a writ of execution
of its judgment. The MTCC, being the court of origin, promptly issued said writ.
10. However, when the writ was served, the property was no longer occupied by Comayas but herein
private respondents, the spouses Lumo who had, as earlier mentioned, bought it from Comayas on
May 17, 1988
11. Alarmed by the prospect of being ejected from their home, private respondents filed an action for
quieting of title. After trial, the Regional Trial Court rendered a decision declaring private

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 respondents as purchasers for value and in good faith, and consequently declaring them as the
absolute owners and possessors of the subject house and lot.

ISSUE:

1. WHETHER OR NOT REGISTRATION OF SHERIFFS DEED OF FINAL CONVEYANCE IN THE PROPER

REGISTRY OF DEEDS IS MORE SUPERIOR THAN THE TORRENS TITLE? NO.
2. WHETHER OR NOT PRIVATE RESPONDENTS COULD BE CONSIDERED AS BUYERS IN GOOD FAITH?
YES.

HELD:

Petitioner bank contends that the earlier registration of the sheriffs deed of final conveyance in the day
book under Act 3344 should prevail over the later registration of private respondents deed of absolute
sale under Act 496, as amended by the Property Registration Decree, PD 1529.

1. This contention has no leg to stand on.

2. It has been held that, where a person claims to have superior proprietary rights over another on the
ground that he derived his title from a sheriffs sale registered in the Registry of Property, Article
1473 (now Article 1544) of the Civil Code will apply only if said execution sale of real estate is
registered under Act 496.
3. Unfortunately, the subject property was still untitled when it was acquired by petitioner bank by
virtue of a final deed of conveyance. On the other hand, when private respondents purchased the
same property, it was already covered by the Torrens System.

Petitioner also relies on the case of Bautista vs. Fule where the Court ruled that the registration of an
instrument involving unregistered land in the Registry of Deeds creates constructive notice and binds
third person who may subsequently deal with the same property.

4. However, a close scrutiny of the records reveals that, at the time of the execution and delivery of
the sheriffs deed of final conveyance on September 5, 1986, the disputed property was already
covered by the Land Registration Act and Original Certificate of Title No. 0-820 pursuant to Decree
No. N189413 was likewise already entered in the registration book of the Register of Deeds of
Cagayan De Oro City as of April 17, 1984.
5. Thus, from April 17, 1984, the subject property was already under the operation of the Torrens
System. Under the said system, registration is the operative act that gives validity to the transfer
or creates a lien upon the land.
6. Moreover, the issuance of a certificate of title had the effect of relieving the land of all claims except
those noted thereon.
7. Accordingly, private respondents, in dealing with the subject registered land, were not required
by law to go beyond the register to determine the legal condition of the property. They were only
charged with notice of such burdens on the property as were noted on the register or the
certificate of title. To have required them to do more would have been to defeat the primary

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 object of the Torrens System which is to make the Torrens Title indefeasible and valid against the
whole world.
8. Mere registration of title in case of double sale is not enough; good faith must concur with the
registration.

Petitioner contends that the due and proper registration of the sheriffs deed of final conveyance on
December 2, 1986 amounted to constructive notice to private respondents. Thus, when private
respondents bought the subject property on May 17, 1988, they were deemed to have purchased the
said property with the knowledge that it was already registered in the name of petitioner bank.

1. The priority in time principle being invoked by petitioner bank is misplaced because its
registration referred to land not within the Torrens System but under Act 3344.
2. On the other hand, when private respondents bought the subject property, the same was already
registered under the Torrens System. It is a well-known rule in this jurisdiction that persons dealing
with registered land have the legal right to rely on the face of the Torrens Certificate of Title and to
dispense with the need to inquire further, except when the party concerned has actual knowledge
of facts and circumstances that would impel a reasonably cautious man to make such inquiry.
3. Private respondents exercise the required diligence in ascertaining the legal condition of the title to
the subject property so as to be considered as innocent purchasers for value and in good faith
Before private respondents bought the subject property from Guillermo Comayas, inquiries
were made with the Registry of Deeds and the Bureau of Lands regarding the status of the
vendors title. No liens or encumbrances were found to have been annotated on the certificate
of title. Neither were private respondents aware of any adverse claim or lien on the property
other than the adverse claim of a certain Geneva Galupo to whom Guillermo Comayas had
mortgaged the subject property. But, as already mentioned, the claim of Galupo was eventually
settled and the adverse claim previously annotated on the title cancelled. Thus, having made the
necessary inquiries, private respondents did not have to go beyond the certificate of
title. Otherwise, the efficacy and conclusiveness of the Torrens Certificate of Title would be
rendered futile and nugatory.

Considering therefore that private respondents exercised the diligence required by law in ascertaining
the legal status of the Torrens title of Guillermo Comayas over the subject property and found no flaws
therein, they should be considered as innocent purchasers for value and in good faith.

Accordingly, the appealed judgment of the appellate court upholding private respondents Alfredo and
Annabelle Lumo as the true and rightful owners of the disputed property is affirmed.

PRESCRIPTION DOES NOT RUN AGAINST THE STATE

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PAGKATIPUNAN VS. COURT OF APPEALS

G.R. No. 129682. March 21, 2002

Facts: On June 15, 1967, the Court of First Instance of Gumaca, Quezon promulgated a decision
confirming petitioners title to properties located in San Narciso, Quezon. Almost eighteen (18) years
later, the Republic of the Philippines filed with the Intermediate Appellate Court an action to declare the
proceedings in the LRC case null and void and to cancel the original certificate of title and to confirm the
subject land as part of the public domain. The Republic claimed that the subject land was classified as
timberland; hence, inalienable and not subject to registration. On the other hand, petitioners raised the
special defense of indefeasibility of title and res judicata.

Issues: 1) Whether or not prescription runs against the state.

2) Whether or not occupation will ripen into ownership.

Held: 1) Prescription does not run against the state. The lengthy occupation of the disputed land by
petitioners cannot be counted in their favor, as it remained part of the patrimonial property of the state
which is inalienable and not disposable.

2) Unless public land is shown to have been reclassified or alienated to a private person by the state it
remains part of the inalienable public domain. Occupation thereof in the concept of owner, no matter
how long, cannot ripen into ownership and be registered as a title.