Tormes v. Llanes
REITERATIONFacts
The Antecedents: Salvador Motos was the registered owner of a parcel of land covered by TCT No. 3381 (21879). He mortgaged the property to DBP and subsequently obtained a loan from respondent Alfredo L. Llanes, also secured by a real estate mortgage over the same land. The loan from Llanes was intended to discharge Motos's DBP indebtedness. It was agreed that Llanes would pay taxes on the land while using it as collateral. The title was delivered to Llanes. Motos's indebtedness to Llanes became due on July 30, 1984, and remained unpaid. Gaudioso M. Borja, a deputy sheriff, induced Llanes to release TCT No. 3381 to Motos without Llanes's knowledge. On May 21, 1986, Llanes annotated his adverse claim on the Register of Deeds due to Borja's failure to return the title. On May 26, 1986, Llanes filed a petition for extrajudicial foreclosure. The land was foreclosed and sold at public auction to Llanes on September 8, 1986, but the sale could not be registered because the mortgage was not registered. Meanwhile, TCT No. RT-3381 was cancelled and replaced by TCT No. 11349 in favor of petitioner Manuel N. Tormes, based on a Deed of Absolute Sale registered on July 21, 1986. Procedural History: Aggrieved, Llanes filed a criminal complaint for estafa against Motos and a civil case for sum of money, damages, and reconveyance against Motos, Borja, and Tormes. The cases were consolidated. The RTC-Br. 32, Pili, Camarines Sur, rendered a joint decision on July 24, 1996, finding Llanes's testimony credible. The RTC found no proof of payment by Motos, disbelieved Borja's denial, and concluded Tormes was not a buyer in good faith because he had notice of Llanes's adverse claim at the time of registration. The RTC convicted Motos of swindling, ordered Motos to pay Llanes the loan amount with damages, ordered Tormes to surrender TCT No. 11349 for annotation of Llanes's mortgage, and ordered Motos and Borja to pay moral damages. The defendants appealed. The Court of Appeals (CA) affirmed the RTC's ruling on October 31, 2000, finding Motos and Borja's appeals unmeritorious and affirming that Tormes was not a buyer in good faith due to the annotated adverse claim. The CA held Tormes was a successor-in-interest bound by the judgment against Motos. Tormes's motion for reconsideration was denied. The Petition: Petitioner Tormes assails the CA's decision, arguing that the adverse claim had been cancelled when he registered the deed of sale on July 21, 1986, thus clearing the title. He also claims the order to surrender the title is moot since Motos was ordered to pay the obligation. Tormes asserts he had a vested right as the Deed of Sale was executed on March 25, 1986, and registered on July 21, 1986, while Llanes's complaint was filed on November 7, 1986. He further argues the mortgage should not affect his rights as he was not part of it.
Issue(s)
Whether petitioner Manuel N. Tormes was a buyer in good faith and for value. Whether the order for petitioner Tormes to surrender TCT No. 11349 for annotation of the mortgage is valid and not moot. Whether the Court of Appeals erred in affirming the trial court's decision regarding petitioner Tormes's status as a buyer in good faith and the subsequent order.
Ruling
The petition is DENIED. The Decision of the Court of Appeals is AFFIRMED.
Ratio Decidendi
On the issue of whether petitioner Manuel N. Tormes was a buyer in good faith and for value: The Supreme Court found no merit in the petition, holding that the issue of whether petitioner was a buyer in good faith was a question of fact already passed upon by the trial court and affirmed by the appellate court. The Court reiterated that it would not calibrate evidence anew in a petition for review on certiorari under Rule 45, absent any misappreciation of facts or abuse of discretion. Petitioner's assertion that the adverse claim was cancelled at the time of his purchase and registration invited the Court to re-examine evidence and make new factual determinations, which is improper. The Court emphasized that the registration of the Deed of Absolute Sale in favor of Tormes on July 21, 1986, occurred after Llanes's adverse claim had been duly annotated on May 21, 1986. This annotation served as notice to Tormes of Llanes's claim, negating his claim of good faith. The Court also noted that the findings of the lower courts regarding the subsistence of the real estate mortgage executed by Motos in favor of Llanes, which Motos later sold to Tormes, were final and would not be disturbed. The Court found Tormes's argument that the Deed of Sale was executed before Llanes's complaint was filed misleading, as the critical point was the registration of the sale in relation to the annotation of the adverse claim. On the issue of whether the order for petitioner Tormes to surrender TCT No. 11349 for annotation of the mortgage is valid and not moot: The Supreme Court affirmed the order, explaining that a monetary obligation secured by a mortgage requires the mortgage to subsist pending payment or satisfaction. Therefore, the order for Motos to pay his obligation did not render moot the order to Tormes to surrender the title for registration purposes. The mortgage remains valid until the debt is fully satisfied and is only discharged upon payment. The Court also pointed out that the appealed decision of the Court of Appeals was already final and executory with respect to the main defendants, Salvador Motos and Gaudioso M. Borja. Consequently, the findings of the trial court, which had bearing on Tormes's position, including the subsistence of the real estate mortgage, were also final and would not be disturbed. The Court expressed alarm at the apparent evasion of justice by petitioner and his co-defendant, noting that the situation was complicated by Tormes's subsequent sale of the property to a third party not involved in the case, which would likely entail further litigation for Llanes. On the issue of whether the Court of Appeals erred in affirming the trial court's decision regarding petitioner Tormes's status as a buyer in good faith and the subsequent order: The Supreme Court's decision on the first two issues effectively addresses whether the Court of Appeals erred. The affirmation of the trial court's decision regarding Tormes's status as not being a buyer in good faith, and the validity of the order to surrender the TCT for mortgage annotation, means the Court of Appeals did not err in its judgment. The Supreme Court's upholding of the lower courts' findings solidifies this point.
Main Doctrine
A buyer who registers a deed of sale at a time when an adverse claim has already been annotated on the title is deemed to have notice of the adverse claim and is therefore not a buyer in good faith. The subsequent cancellation of the adverse claim, if not properly established and proven, does not automatically clear the title from prior encumbrances or vested rights, especially when the buyer's registration occurred after the adverse claim's annotation.