Spouses Dimaculangan v. Romasanta
REITERATIONFacts
The Antecedents: Roman Aquino and Valentina Bernardo owned a 75-hectare land. On November 11, 1954, they executed a Deed of Absolute Sale over the land in favor of spouses Juan and Esperanza Fabella for P17,500.00, but the real agreement was a mortgage to secure a loan. Juan Fabella registered the land in his name. Subsequently, Juan Fabella sold the land to the Liwanag group for P40,000.00, and a new title was issued in their name. Valentina, on behalf of her deceased husband's estate, filed a complaint for reformation of the Deed of Absolute Sale to Deed of Mortgage, cancellation of titles, and damages against the Fabellas, and annotated a notice of lis pendens on the Liwanag group's title. The Liwanag group intervened in the case. The Fabellas filed a Manifestation confirming the agreement was a mortgage, not a sale. Valentina filed a motion to render judgment, but the case was dismissed for failure to appear. After reconsideration, the case was again dismissed for failure to prosecute on November 13, 1976. Valentina died on August 24, 1972. The Liwanag group offered to sell the property to petitioners (spouses Dimaculangan, et al.). Petitioners conditioned the purchase on the cancellation of the notice of lis pendens. A certification dated January 27, 1977, from a Special Deputy Clerk of Court stated that the dismissal order of November 13, 1976, was final and executory. This was annotated on the Liwanag group's title. A certification from the Registry of Deeds on June 1, 1978, stated there were no liens or encumbrances. The Liwanag group sold the land to petitioners on August 10, 1978, and a new title was issued in their name. Procedural History: On February 16, 1983, the heirs of Valentina filed a motion to set aside the November 13, 1976 dismissal order, arguing Valentina had already prosecuted her case and died before the conference. The motion was initially denied but later granted by the RTC, which deemed the November 13, 1976 order of dismissal as not final and reconsidered it, finding that the plaintiffs did not fail to prosecute. On October 4, 1988, the RTC declared the contract an equitable mortgage and ordered the cancellation of titles and issuance of new ones in the names of Roman and Valentina Aquino, ordering them to pay the Liwanag group reimbursement, damages, and attorney's fees. No appeal was taken. The heirs of Valentina filed a new complaint (Civil Case No. 534-M-92) against petitioners and the Liwanag group for revocation and annulment of title and reconveyance, alleging bad faith. Petitioners claimed to be innocent purchasers for value, free from liens and encumbrances at the time of purchase. The Liwanag group moved to dismiss based on res judicata. Petitioners also moved to dismiss, asserting they were innocent purchasers and the action had prescribed. The heirs of Valentina filed an amended complaint, alleging the certification of finality was illegal. The RTC initially dismissed the complaint against petitioners as innocent purchasers for value but later partially reconsidered, holding the Liwanag group liable for damages. The Court of Appeals modified the RTC decision, declaring the title of petitioners null and void and ordering the issuance of a new title to Royal Moluccan Realty Holdings, Inc. (who purchased the rights of the heirs of Valentina), and reduced the damages. Petitioners (Dimaculangan et al.) filed the present petition for review on certiorari. The Petition: Petitioners seek to set aside the Court of Appeals' decision, arguing they are innocent purchasers for value, that the action had prescribed, and that the doctrine of conclusiveness of judgment was misapplied.
Issue(s)
Whether petitioners are innocent purchasers for value. Whether the action for reconveyance has prescribed. Whether the doctrine of conclusiveness of judgment was correctly applied.
Ruling
The petition is denied. The Court of Appeals' decision is affirmed, declaring the title of petitioners null and void and ordering the issuance of a new title to Royal Moluccan Realty Holdings, Inc., with a reduction in damages.
Ratio Decidendi
On the issue of whether petitioners are innocent purchasers for value: The Court held that petitioners are not innocent purchasers for value. While they presented a certification from a Special Deputy Clerk of Court stating the dismissal order was final and executory, and a certification from the Registry of Deeds showing no liens or encumbrances at the time of purchase, these were insufficient to establish good faith. The Court emphasized that the notice of lis pendens, though eventually cancelled, was annotated on the title and carried over to subsequent titles, including that of the Liwanag group. This annotation should have put petitioners on guard regarding the pending litigation. Furthermore, Atty. Florentino Reyes, Jr., one of the petitioners and a lawyer, was involved in the transaction as a broker and lawyer for both the sellers and buyers. His knowledge of the pending case, Civil Case No. 1376-M, and the fact that the dismissal order was not a judgment on the merits, should have prompted him to conduct a more thorough investigation into the title's validity. The Court reiterated the principle that a purchaser who neglects to make necessary inquiries and closes their eyes to facts that should put a reasonable person on guard cannot claim to be a purchaser in good faith. The Court found that the cancellation of the Fabellas' title while litigation was pending did not nullify the notice of lis pendens, as it was carried over to subsequent titles, and any transfer of the property before 1988 would be subject to the notice. On the issue of prescription: The Court ruled that the action for reconveyance had not prescribed. The Court of Appeals correctly determined that the prescriptive period could not be reckoned from the registration of petitioners' title on August 11, 1978, because Civil Case No. 1376-M was still pending at that time, as evidenced by the Ligot-Telan Order. The final decision in Civil Case No. 1376-M was rendered only on October 4, 1989. The instant suit was filed on August 14, 1992, only three years after the final decision in the original case. Therefore, the action was filed within the prescriptive period. The Court also noted that the heirs of Valentina discovered the sale to petitioners only when they tried to execute the final judgment in Civil Case No. 1376-M, negating the application of the four-year prescriptive period for fraud or the ten-year period for constructive trust from the time of discovery or creation. The Court emphasized that rules on prescription and constructive notice are intended to prevent injustice, not to cause it. On the issue of the doctrine of conclusiveness of judgment: While not explicitly addressed as a separate issue in the Court of Appeals' ruling, the underlying principle of res judicata and conclusiveness of judgment was implicitly considered. The Court of Appeals' decision effectively overturned the earlier dismissal order and proceeded to rule on the merits of the case, declaring the contract an equitable mortgage and the subsequent sale to petitioners invalid. This implies that the dismissal for failure to prosecute was not considered a final adjudication on the merits that would bar the subsequent action for reconveyance, especially given the circumstances of Valentina's death and the subsequent proceedings that led to the declaration of equitable mortgage. The Court's affirmation of the heirs' right to pursue reconveyance indicates that the prior dismissal did not preclude a determination of the true nature of the contract and the rights of the parties.
Main Doctrine
A purchaser who has knowledge of facts that should put them on inquiry and investigation as to possible defects in the vendor's title, and fails to make such inquiry, cannot claim to be a purchaser in good faith. The annotation of a notice of lis pendens, even if subsequently cancelled by a certification of finality of dismissal, should put a buyer on guard, especially when the buyer is a lawyer who is expected to exercise due diligence.