Kings Properties v. Galido
REITERATIONFacts
The Antecedents: This case concerns the ownership of four parcels of land in Antipolo, Rizal, originally awarded via Homestead Patent No. 112947 to the heirs of Domingo Eniceo. The patent, issued on April 18, 1966, under Original Certificate of Title (OCT) No. 535, contained conditions restricting alienation and encumbration for specified periods. On September 10, 1973, Rufina Eniceo and Maria Eniceo, as vendors, executed a deed of sale for the Antipolo property to respondent Canuto A. Galido for P250,000, and delivered the owner's duplicate copy of OCT No. 535. Procedural History: Following the alleged sale, the heirs of Domingo Eniceo (Eniceo heirs) registered a notice of loss for the owner's duplicate copy of OCT No. 535 and obtained a new copy from the Regional Trial Court (RTC) in 1989. Respondent Galido, aware of these proceedings, filed a criminal case for false testimony against Rufina Eniceo and Leonila Bolinas. In February 1995, petitioner Kings Properties Corporation (petitioner) learned of the property's availability and, after verification, purchased lots 3 and 4 from the Eniceo heirs on March 20, 1995, obtaining Transfer Certificates of Title (TCT) Nos. 277120 and 277747. Subsequently, on April 5, 1995, petitioner purchased lots 1 and 5, securing TCT No. 278588. Crucially, respondent Galido had annotated an adverse claim on OCT No. 535 on March 14, 1995. On January 16, 1996, respondent filed a civil complaint seeking cancellation of petitioner's titles and registration of his deed of sale. The RTC dismissed the complaint, but the Court of Appeals (CA) reversed this decision, leading to the present petition. The Petition: Petitioner Kings Properties Corporation filed this Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the CA's decision and resolution. The core issues raised are whether respondent's adverse claim should be barred by laches, and whether the deed of sale to respondent should be presumed an equitable mortgage under Articles 1602(2) and 1604 of the Civil Code. Petitioner argues that respondent slept on his rights by not registering the sale promptly and that the circumstances surrounding the sale suggest it was intended as security for a debt rather than an absolute sale, particularly given the continued possession by the Eniceo heirs and the delayed approval by the DENR Secretary.
Issue(s)
Whether the adverse claim of respondent over the Antipolo property should be barred by laches; and whether petitioner was a buyer in good faith. Whether the deed of sale delivered to respondent should be presumed an equitable mortgage pursuant to Article 1602(2) and 1604 of the Civil Code; and the validity of the deed of sale between the Eniceo heirs and respondent.
Ruling
The Supreme Court denied the petition and affirmed the decision of the Court of Appeals. It held that the deed of sale in favor of respondent was valid and that petitioner was not a buyer in good faith because it purchased the property after respondent had annotated an adverse claim on the title. The Court also found that respondent was not guilty of laches.
Ratio Decidendi
On the issue of laches and petitioner's status as a buyer in good faith: The Court ruled that respondent was not guilty of laches, noting the steps taken to protect his rights, including filing a criminal case and annotating an adverse claim. Unrecorded sales are effective between the parties, and registration protects innocent third persons. Petitioner was not an innocent purchaser for value due to the annotated adverse claim, making the unrecorded sale to respondent binding. The Court also found petitioner to be a buyer in bad faith because it purchased the property after respondent had registered an adverse claim, serving as constructive notice. Therefore, petitioner could not claim to be a purchaser in good faith. On the issue of equitable mortgage and the validity of the deed of sale: The Court found no merit in petitioner's contention that the deed of sale was an equitable mortgage, as there was no sufficient proof of an intention to secure an existing debt. The defense of equitable mortgage was not raised by the Eniceo heirs, and petitioner could not espouse a contrary theory. The CA's ruling that the contract was a sale had become final as to the Eniceo heirs. The Court affirmed the CA's ruling that the deed of sale between the Eniceo heirs and respondent was a perfected and consummated contract of sale, evidenced by the notarized deed and delivery of the owner's duplicate copy. The allegation of forgery was unsubstantiated. The DENR Secretary's approval, for sales made after five years but before twenty-five years from the issuance of the homestead patent, is directory and its absence does not invalidate the sale.
Main Doctrine
A subsequent buyer who registers their purchase after an adverse claim has been annotated on the title is deemed to have constructive notice of the prior claim and cannot be considered a buyer in good faith. The registration of an adverse claim serves as constructive notice to the whole world, binding subsequent purchasers.