Diaz-Duarte v. Ong
REITERATIONFacts
1. The Antecedents: The underlying dispute concerns the ownership of Lot 1208 of the Tacloban Cadastre. The lot was originally adjudicated to Macario Diaz married to Cristina Pedrosa in 1932. Macario Diaz died in 1941, and Cristina Pedrosa died in 1962. Their daughter, Rogelia Diaz-Duarte, executed an Affidavit of Adjudication and Sale of Lot 1208 in favor of Wilfredo Corregidor in 1979. Subsequently, Corregidor sold the lot back to Diaz-Duarte. Later, Corregidor sold the same lot to respondents Sps. Ben and Ethyl Ong in 1981. 2. Procedural History: The heirs of Trinidad Diaz-Arteche, daughter of Macario Diaz from his first marriage, filed a civil case in 1983 to recover Lot 1208 against Rogelia Diaz-Duarte, Wilfredo Corregidor, Sps. Ben and Ethyl Ong, and others. The Regional Trial Court ruled in favor of the Arteche heirs, declaring Diaz-Duarte's affidavit of adjudication and sale void and ordering the cancellation of titles, including that of Sps. Ong. The Sps. Ong appealed to the Court of Appeals, which reversed the trial court's decision, awarding Lot 1208 to them, finding them to be buyers in good faith and for value. The heirs of Trinidad Diaz-Arteche did not appeal the Court of Appeals' decision. 3. The Petition: Rogelia Diaz-Duarte filed this petition for review on certiorari under Rule 45 of the Revised Rules of Court, seeking to set aside the decision of the Court of Appeals. She contends that the appellate court gravely abused its discretion in holding that the Sps. Ong were innocent purchasers for value and in good faith, in disregarding the trial court's finding of bad faith against the Ongs, in disregarding the wrongful cancellation of her adverse claim, and in finding that she lost her rights over the property. The core issue is who between petitioner Diaz-Duarte and respondent Sps. Ong has a better right over Lot 1208, hinging on the validity of the cancellation of Diaz-Duarte's adverse claim.
Issue(s)
Whether the Spouses Ong were innocent purchasers for value and in good faith. Whether the cancellation of petitioner's adverse claim was lawful and effective. Whether petitioner Rogelia Diaz-Duarte has lost her rights over Lot 1208.
Ruling
The Supreme Court reversed the decision of the Court of Appeals and reinstated the decision of the trial court. It found that the Spouses Ong were not innocent purchasers for value and in good faith because the cancellation of the adverse claim was unlawful. The Court held that the adverse claim remained valid and subsisting, thus putting the Spouses Ong on notice of petitioner's interest in the property.
Ratio Decidendi
On the issue of whether the Spouses Ong were innocent purchasers for value and in good faith: The Court found for the petitioner, holding that the Spouses Ong were not innocent purchasers for value and in good faith. The good faith of the Spouses Ong hinged on the validity of the cancellation of the notice of adverse claim on Lot 1208. The Court reiterated its ruling in Sajonas v. Court of Appeals that an annotation of an adverse claim remains valid even after the lapse of the thirty-day period provided by Section 70 of P.D. No. 1529. On the issue of whether the cancellation of petitioner's adverse claim was lawful and effective: The law explicitly states that after the lapse of the period, the annotation may be cancelled upon filing of a verified petition therefor by the party in interest. This implies that a hearing must be conducted to afford the parties an opportunity to prove the propriety or impropriety of the adverse claim. The automatic cancellation by the Registrar of Deeds without a petition and hearing was unlawful and ineffective. Therefore, the adverse claim subsisted when Corregidor sold the property to the respondents Ong on February 28, 1981. On the issue of whether petitioner Rogelia Diaz-Duarte has lost her rights over Lot 1208: The adverse claim of petitioner Rogelia Diaz-Duarte was annotated on Corregidor's title as early as October 17, 1979, and it was existing when Corregidor sold the property to respondents Ong. Consequently, the respondent spouses cannot be considered innocent purchasers for value and in good faith. Their claim over Lot 1208 must yield to the lien in favor of the petitioner. The negligence of their retained lawyer, Atty. Rufino Reyes, who failed to verify the status of the land from the Register of Deeds and discover the adverse claim, also binds the Spouses Ong. Had he done so, he would have discovered the adverse claim and the fact that its cancellation was not based on a petition.
Main Doctrine
An annotation of an adverse claim on a certificate of title remains valid even after the lapse of the thirty-day period provided by Section 70 of P.D. No. 1529, as it can only be cancelled upon filing of a verified petition and after a hearing, affording the parties an opportunity to prove the propriety or impropriety of the adverse claim. The automatic cancellation of an adverse claim without a petition and hearing is unlawful and ineffective.