David vs. Bandin

A buyer of unregistered land acquires the property at his peril and the defense of good faith is available only to a purchaser of registered land who relied on the clean Torrens title of the seller. Consequently, a sale of unregistered property by one who is not the absolute owner is invalid as against the true co-owners, even if the buyer had no actual knowledge of the adverse claim, whereas a sale of registered land to a purchaser who had no notice of a defect in the vendor’s title cannot be annulled.

The spouses Juan Ramos and Fortunata Calibo died intestate, leaving two parcels of land in Las Piñas, Rizal: the Talon property (39,887 square meters) and the Laong property (22,285 square meters after survey). They were survived by two daughters, Candida and Victoriana, and a granddaughter, Agapita, who inherited the properties in equal pro indiviso shares of one-third each. No judicial or extrajudicial settlement of the estates was ever effected. Candida administered the lands until her death. Over several decades, Candida and her heirs partitioned and sold various portions to third parties, eventually obtaining Torrens registrations. The heirs of Victoriana and Agapita, who had been excluded from the transactions, filed an action for recovery and partition in 1963.

The Original Estates. During their lifetime, spouses Juan Ramos and Fortunata Calibo owned two parcels in Las Piñas, Rizal: the Talon property (39,887 sq m, Tax Declaration No. 9614) and the Laong property (22,285 sq m upon survey, Tax Declaration No. 4005). Juan died on March 5, 1919; Fortunata predeceased him. They had no will and were survived by three heirs: daughters Candida Ramos and Victoriana Ramos, and a granddaughter Agapita Ramos, whose father Anastacio had predeceased the spouses. Each heir held an undivided one-third pro indiviso interest in both parcels. No judicial or extrajudicial settlement ever took place.

Administration and the Heirs’ Subsequent Estates. Candida administered the properties until her death on February 16, 1955. Victoriana died on December 12, 1931. Candida left seven heirs: Victoria Martin-Omanbac, Antonio Martin, Juanita Martin Vda. de Lucena, Maximina Martin Vda. de Cosme, Raymundo Martin, Aquilina de la Cruz, and Leonora de la Cruz (the last two being grandchildren through Candida’s son Meliton). Victoriana’s heirs were her children from two marriages: Eulogio Bandin, Gregorio Bandin, Raymunda Bandin, Valentin Briones, and Sofio Briones.

Dispositions of the Talon Property. In 1943, Candida, with the consent of Agapita and Eulogio, sold a portion of the Talon property to spouses Rufino O. Miranda and Natividad Guinto. That portion was divided into three parcels: - Parcel 1 (24,363 sq m) → sold by the Mirandas to Narciso Velasquez and Albino Miranda, later transferred to Velasquez Realty Company, Inc., which registered it under OCT No. 1756 (later TCT No. 165335). - Parcel 2 (752 sq m) → sold by the Mirandas to Jose Ramirez, who registered it under OCT No. 2027. - Parcel 3 (516 sq m) → sold by the Mirandas to Sotero Ramirez, registered under OCT No. 2029.

The remainder of the Talon property was extrajudicially partitioned on September 17, 1955 among Candida’s heirs, then subdivided into seven lots (PSU-173299) and adjudicated. Subsequent transfers included: Lot 1 to Consolacion de la Cruz, who obtained OCT No. 4731; Lot 2 to Juanita Martin, who obtained OCT No. 10002 in 1973; Lot 3 to Leonora de la Cruz, OCT No. 6102 in 1967; Lot 4 to Antonio Martin and later sold to Nemesio Martin; Lot 5 to Victoria Martin, who obtained OCT No. 3706 in 1963 and sold 300 sq m to Magno de la Cruz, resulting in TCT No. 116450; Lot 6 to Maximina Martin, OCT No. 3707 in 1963, and a 300 sq m portion sold to Magno de la Cruz under the same TCT; and Lot 7 to Aquilina de la Cruz, OCT No. 6103 in 1967.

Dispositions of the Laong Property. On December 19, 1943, Candida and her children sold the Laong property to Hermogenes Lucena, husband of Juanita Martin. On September 23, 1959, the widowed Juanita sold the same to spouses Gregorio and Mary Venturanza for P43,236, with a down payment and the balance payable upon obtaining a Torrens title. On January 21, 1965, the Venturanzas sold a 15,000 sq m portion to spouses Felipe and Antonia David in liquidation of the latter’s investment in a joint real estate venture. Juanita subsequently obtained OCT No. 8916 on July 1, 1971; the Davids’ portion was covered by TCT No. 372092.

The Trial Court’s Findings. The CFI declared that the Talon and Laong properties had devolved by intestate succession upon Candida, Victoriana, and Agapita in one-third pro indiviso shares, that no partition had been effected, and that the plaintiffs (heirs of Victoriana and Agapita) were entitled to a two-thirds share. It held the following to be purchasers in good faith: Rufino Miranda, Narciso Velasquez, Albina Miranda, Velasquez Realty (Parcel 1); Jose Ramirez and Ambrocia Vda. de Ramirez (Parcels 2 and 3); Consolacion de la Cruz (Lot 1); Nemesio Martin (Lot 2); Magno de la Cruz (portions of Lots 5 and 6); and spouses Felipe and Antonia David (15,000 sq m of Laong). Since reconveyance was no longer possible from those purchasers, the CFI ordered the defendant heirs of Candida to pay the plaintiffs two-thirds of the present value of those properties.

G.R. No. L-49716 (Heirs of Candida Ramos)

• Prescription and Laches: Petitioners asserted that respondents’ claim was barred by prescription because Juanita Martin had been in possession of the Laong property since 1943 to the exclusion of the co-heirs. They maintained that respondents slept on their rights and were guilty of laches, having filed the complaint only in 1963.
• Res Judicata: Petitioners invoked the final decree of registration in the land registration case that issued OCT No. 8916 in Juanita Martin’s name, which had been affirmed by the Court of Appeals in CA-G.R. No. 35191-R on July 16, 1969. They argued that the final judgment in that registration case barred the present action for recovery.

G.R. No. L-48322 (Spouses Felipe and Antonia David)

• Good Faith and Torrens Principles: Petitioners contended that they were buyers in good faith; they purchased the property after the issuance of OCT No. 8916 to Juanita Martin and relied on the clean Torrens title. They argued that the Court of Appeals erred in declaring them buyers in bad faith and in ordering cancellation of titles and reconveyance. They invoked the doctrines of incontrovertibility of the decree of registration after one year and of conclusiveness and indivisibility of Torrens titles.

G.R. No. L-49687 (Jose Ramirez and Heirs of Sotero Ramirez)

• Good Faith: Petitioners maintained that they were purchasers in good faith who had bought the parcels from Rufino Miranda, who himself appeared as the owner based on tax declarations.
• Estoppel and Laches: Petitioners argued that respondents were barred by estoppel and laches from recovering the property.
• Alternative Relief: Petitioners suggested that the portion ordered to be reconveyed from their properties should instead be taken from the remaining shares still held by the heirs of Candida Ramos, so as not to disturb their long-standing ownership.

G.R. No. L-49712 (Magno de la Cruz)

• Protected Buyer of Registered Land: Petitioner argued that the properties he purchased from Victoria and Maximina Martin were already registered under the Torrens system at the time of sale, that he acquired them as a purchaser in good faith for value relying on the clean certificates of title, and that there was no showing he had actual notice of any defect in the vendors’ titles. He sought reinstatement of the trial court’s ruling recognizing him as a buyer in good faith.

• No Repudiation of Co-ownership: Respondents contended that Candida Ramos never repudiated the co-ownership during her lifetime and in fact delivered shares of the fruits to the other co-heirs, however irregular the delivery was. Consequently, prescription never ran in their favor.
• No Laches: Respondents claimed they had not been negligent; they sent a letter of demand in April 1963 and filed suit in June 1963, all within a reasonable period after Candida’s death in 1955.
• No Res Judicata: Respondents maintained that they were not parties to the land registration proceeding that resulted in OCT No. 8916 and therefore could not be bound by that judgment. They argued that registration merely confirms, not creates, title.
• Unregistered Land Purchases at Peril: Respondents argued that all the transfers by Candida’s heirs were made without authority over the two-thirds share belonging to them; the purchasers of unregistered parcels acquired the land at their own risk and could not shield themselves with a claim of good faith.

G.R. No. L-49716 (Heirs of Candida)

• Prescription and Laches: Whether respondents’ claim to their pro indiviso shares in the estate was barred by prescription or laches.
• Res Judicata: Whether the final decree of registration in Juanita Martin’s name constituted res judicata and barred the recovery suit.

G.R. No. L-48322 (Spouses David)

• Good Faith and Torrens Protection: Whether the Court of Appeals erred in declaring the Davids buyers in bad faith and in ordering cancellation of titles and reconveyance, given that the property had been registered and they relied on the Torrens title.

G.R. No. L-49687 (Ramirezes)

• Good Faith of Buyer of Unregistered Land: Whether the Ramirezes were purchasers in good faith for value and whether their purchases could be invalidated insofar as they affected respondents’ shares.
• Estoppel and Laches: Whether respondents were barred by estoppel or laches from seeking reconveyance.
• Source of Recovery: Whether reconveyance should instead be satisfied from the remaining portions held by the heirs of Candida.

G.R. No. L-49712 (Magno de la Cruz)

• Nullification of Sale of Registered Land: Whether the sale and Torrens title in favor of Magno de la Cruz could be annulled on the ground that the vendors’ title was tainted by an unpartitioned co-ownership.

G.R. No. L-49716

• Prescription and Laches: The defense was correctly rejected. Under the Civil Code, prescription does not run in favor of a co-heir or co-owner as long as he expressly or impliedly recognizes the co-ownership. The evidence showed that Candida Ramos delivered shares of the harvest to the plaintiffs, thereby continuously recognizing their rights. Even if an implied trust prescribes in ten years, the rule does not apply where a fiduciary relation exists and the trustee acknowledges the trust. No repudiation of the co-ownership was proved during Candida’s lifetime. Moreover, respondents sent a demand in April 1963 and filed suit in June 1963, approximately eight years after Candida’s death — a period not indicative of negligence or laches. The Court of Appeals committed no reversible error in sustaining the trial court’s findings.
• Res Judicata: The doctrine did not apply because respondents were not parties to the land registration case that gave rise to OCT No. 8916. The purpose of the Land Registration Act is to confirm and register an existing title, not to create or vest a new one. A decree of registration cannot bind a person who was not a party to the proceeding, and here it could not bar the co-owners from asserting their unregistered right. Both the trial court and the Court of Appeals correctly overruled the res judicata argument.

G.R. No. L-48322

• Good Faith and Torrens Protection: The Court of Appeals did not err. The Davids bought the 15,000 sq m portion from the Venturanzas on January 21, 1965, at a time when the Laong property was still unregistered. Torrens title (OCT No. 8916) was issued to Juanita Martin only on July 1, 1971. The defense of being a purchaser in good faith based on a clean title is available exclusively to a buyer of registered land who relied upon the certificate of title of the registered owner. One who purchases unregistered land buys at his own risk; no amount of good faith will protect him if the seller did not actually own the property. The subsequent registration could not retroactively cure the invalid sale of the two-thirds share belonging to respondents. Consequently, the cancellation of the derivative titles and the order to reconvey were proper.

G.R. No. L-49687

• Good Faith of Buyer of Unregistered Land: The Ramirezes’ purchases in 1948 and 1949 from Rufino Miranda involved unregistered parcels. The question of good faith or bad faith is material only where registered land is purchased from the registered owner. Since the properties were unregistered, the buyers assumed the risk that the seller lacked full ownership. The appellate court’s finding that they did not conduct diligent inquiry and relied merely on tax declarations was not disturbed. Their claim of good faith afforded them no protection.
• Estoppel and Laches: The contention was without merit for the same reasons set forth in G.R. No. L-49716; respondents were not negligent and no repudiation barred their claim.
• Source of Recovery: The suggestion that reconveyance be taken exclusively from the remaining holdings of Candida’s heirs was rejected. Respondents have a right to recover their pro indiviso share from any portion of the property unlawfully disposed of; they are not compelled to seek recovery only from unsold remnants still in the hands of the original heirs.

G.R. No. L-49712

• Nullification of Sale of Registered Land: The petition was meritorious. Unlike the other petitioners, Magno de la Cruz bought portions of Lots 5 and 6 from Victoria and Maximina Martin when those lots were already covered by Original Certificates of Title (OCT Nos. 3706 and 3707) issued under the Torrens system. In the absence of proof that he had actual notice of any defect in the vendors’ title or that he was a buyer in bad faith, the deed of sale in his favor and the corresponding Transfer Certificate of Title (TCT No. 116450) could not be nullified. The sale remained valid; the remedy of the respondents was to recover from Victoria and Maximina the value of their two-thirds share in the sold portions. The appealed decision was modified accordingly.

• Prescription among Co-owners — Under Article 494 of the new Civil Code (Article 400 of the old Civil Code), prescription generally does not run in favor of a co-heir or co-owner as long as the co-ownership is expressly or implicitly recognized. While an implied or constructive trust prescribes in ten years, the rule is inapplicable where a fiduciary relation exists and the trustee acknowledges the trust. Repudiation must be clear and unequivocal for prescription to commence against co-owners. Applied here because Candida continuously delivered shares of the fruits to the other heirs, thereby recognizing their rights, and no repudiation was shown.

• Land Registration Confirms, Does Not Create, Title — A decree of registration under the Land Registration Act does not vest or create title; it merely confirms and records a title already existing in the applicant. A prospective buyer of unregistered land cannot later invoke a Torrens title obtained by the seller after the sale to cure the original lack of authority to sell the co-owned share. Applied to reject the res judicata and good-faith arguments of the Davids and the heirs of Candida.

• Doctrine of Purchaser of Unregistered Land at Peril — A person who purchases unregistered land does so at his own risk. His claim of good faith does not protect him if it is later established that the seller did not hold absolute title to the property. The defense of being a purchaser in good faith for value is available only where the land is registered under the Torrens system and the buyer relied on the clean certificate of title of the registered owner. Applied uniformly to the Davids and the Ramirezes, whose purchases of unregistered lands were invalidated as to the co-owners’ shares.

• Good Faith Purchaser of Registered Land — A buyer of registered land who acquires the property in good faith, for value, and without actual notice of a defect in the vendor’s title is protected by law. His deed of sale and the resulting certificate of title cannot be nullified. The proper recourse of the prejudiced party is to seek the monetary value of the lost share from the vendor. Applied to uphold Magno de la Cruz’s purchase of registered lots even though the vendors’ ownership was tainted by the unpartitioned estate.

• “One who purchases an unregistered land does so at his peril. His claim of having bought the land in good faith, i.e. without notice that some other person has a right to, or interest in, the property, would not protect him if it turns out that the seller does not actually own the property.”

• “The purpose of the Land Registration Act is not to create or vest title, but to confirm and register title already vested and existing in the applicant for a title.”

• “Under Article 494 of the new Civil Code (Article 400 of the old Civil Code), prescription generally does not run in favor of a co-heir or co-owner as long as he expressly or impliedly recognizes the co-ownership.”

• Cui and Joven vs. Henson, 51 Phil. 612 — Controlling authority for the rule that the defense of good faith purchaser for value applies only to registered land; cited to support the invalidation of sales of unregistered parcels.
• Angeles vs. Samia, 66 Phil. 444 — Established the principle that land registration does not vest title but merely confirms it; applied to reject the res judicata argument based on a prior registration decree.
• De Buencamino vs. De Matias, 16 SCRA 849; Heirs of Candelaria vs. Romero, 109 Phil. 500 — Both decisions support the rule that prescription does not run in favor of a co-owner who recognizes the co-ownership, especially in a fiduciary context.

• Article 494, New Civil Code (Article 400, Old Civil Code) — Prescribes that prescription does not run in favor of a co-heir or co-owner who expressly or impliedly recognizes the co-ownership. Applied to hold that the respondents’ right to recover was not barred because Candida Ramos never repudiated the co-ownership.
• Land Registration Act (Act No. 496) — The Court invoked its settled interpretation that registration confirms rather than creates title, and that a decree cannot bind non-parties. Used to defeat the arguments of res judicata and the claims of the Davids that the subsequent Torrens title retroactively protected their purchase.

Justices Narvasa, Melencio-Herrera, Cruz, Feliciano, and Sarmiento concurred. Justice Gancayco took no part.