Rotairo v. Alcantara
REITERATIONFacts
The Antecedents: Rovira Alcantara (Rovira) filed a complaint for recovery of possession of a 2,777 square meter parcel of land in Cainta, Rizal, originally titled under TCT No. 481018. The property was co-owned by Victor C. Alcantara (Alcantara) and Alfredo C. Ignacio (Ignacio), who mortgaged it to Pilipinas Bank in 1968. Subsequently, Alcantara and Ignacio, through their firm Ignacio & Co., parcelled out and sold portions of the land. Ambrosio Rotairo (Rotairo) purchased a 200-square meter portion on installment basis, constructing his house thereon. After full payment, a Deed of Absolute Sale was executed in his favor by Ignacio & Co. in 1979. Meanwhile, Alcantara and Ignacio defaulted on their loan, leading to the foreclosure of the mortgage by Pilipinas Bank. Title was consolidated in the bank's name, which then sold the property to Rovira, Alcantara's daughter, in 1975. Procedural History: The Regional Trial Court (RTC) dismissed Rovira's complaint, ruling that Presidential Decree (P.D.) No. 957 was applicable and that Rovira, as successor-in-interest, was aware of Rotairo's existing house on the property. The RTC ordered the issuance of a transfer certificate of title to Rotairo. The Court of Appeals (CA) set aside the RTC decision, ordering the turnover of possession to Rovira and the return of the purchase price to Rotairo's heirs. The CA held P.D. No. 957 inapplicable and that Rovira's prior registered mortgage and subsequent purchase gave her a better right. The Petition: Petitioners, heirs of Ambrosio Rotairo, sought review of the CA decision, arguing for the applicability of P.D. No. 957 and that Rotairo was a buyer and builder in good faith, while Victor Alcantara acted in bad faith.
Issue(s)
Whether Presidential Decree No. 957 is applicable to the transaction. Whether Rovira Alcantara is a buyer in good faith. Whether petitioners, as heirs of Ambrosio Rotairo, have a better right to the property than Rovira Alcantara.
Ruling
The petition is GRANTED. The Decision dated July 21, 2005 and Resolution dated July 7, 2006 of the Court of Appeals in CA-G.R. CV No. 58455 are SET ASIDE. The Decision dated December 27, 1996 of the Regional Trial Court of Antipolo, Rizal, Branch 71, dismissing Civil Case No. 672 is REINSTATED.
Ratio Decidendi
On the applicability of P.D. No. 957: The Court held that P.D. No. No. 957 is applicable even to transactions entered into prior to its enactment in 1976, citing the ruling in Eugenio v. Exec. Sec. Drilon. Section 21 of P.D. No. 957 mandates that owners or developers must complete their obligations within two years from the decree's effectivity, providing an opportunity for buyers to be notified of mortgages and exercise their option to pay directly to the mortgagee. However, in this case, the mortgage had already been foreclosed by Pilipinas Bank in 1974, prior to the enactment of P.D. No. 957, meaning there was no existing mortgage for Rotairo to be notified of. Despite this, the Court found P.D. No. 957 applicable to the underlying sale contract between Rotairo and Ignacio & Co. On whether Rovira Alcantara is a buyer in good faith: The Court found that Rovira could not claim a better right as she was not a buyer in good faith. While the general rule is that a registered transaction prevails over an unregistered right, this rule has exceptions. Rovira, being the daughter and heir of Victor C. Alcantara, one of the original sellers, was privy to the contract to sell executed in favor of Rotairo. This privity charged her with constructive knowledge of prior dispositions. Furthermore, Rovira had actual knowledge of Rotairo's possession and the structures he built on the property, as she lived only fifty meters away. Her claim that she did not inquire further because the bank assured her of its title was insufficient, as a purchaser is obligated to investigate the rights of those in possession when the vendor is not in possession. Her failure to do so negated her claim of being a buyer in good faith. On who has a better right to the property: The Court reinstated the RTC decision in favor of Rotairo's heirs. Although the registered mortgage and Rovira's subsequent purchase would ordinarily prevail over Rotairo's unregistered claim, Rovira's status as a buyer in good faith was undermined by her privity with her father and her actual knowledge of Rotairo's possession and claim over the property. The Land Registration Act protects holders in good faith and cannot be used as a shield for fraud. Therefore, Rovira's acquisition could not be upheld against the rights of Rotairo and his heirs.
Main Doctrine
A buyer who has actual knowledge of prior dispositions or encumbrances affecting the property, or who has knowledge of facts that would impel a reasonably cautious person to inquire further, cannot claim to be a buyer in good faith, even if their title is registered or their transaction is prior in registration. Privity with the original seller also imputes constructive knowledge of prior dispositions.