Manalese v. Estate of Ferreras
MODIFICATIONFacts
The Antecedents: The subject are two parcels in Sta. Teresita, Angeles City covered by TCT Nos. 69711 and 69712 registered in the name of the late Spouses Narciso and Ofelia Ferreras. Ofelia died on September 4, 1992 and Narciso died on August 22, 2005. Danilo Ferreras was appointed special administrator of their estate by RTC order dated December 13, 2007. Defendant Carina Pinpin allegedly procured TCT Nos. 181052 and 181053 in her name based on a purported Deed of Absolute Sale dated May 11, 2009 despite the deaths of the Spouses Ferreras; Pinpin thereafter purportedly sold the properties to petitioners Eloisa and Aries Manalese via deed dated September 20, 2010 and titles in petitioners' names (TCT Nos. 198220 and 198221) were later issued. The estate alleges that Pinpin procured "another" owner's duplicate copies or replacement titles by fraud, that owner's duplicate copies of TCT Nos. 69711 and 69712 remained in Danilo's possession, and that annotations (affidavits of loss and a purported RTC decision) appearing in the Ferreras TCTs were not carried over to the Pinpin/Manalese TCTs, effectively "laundering" the titles. Procedural History: A complaint for ejectment with damages against Pinpin was filed in MTC Civil Case No. 11-859 and the MTC rendered decision in favor of the estate on March 4, 2011; a writ of execution issued April 18, 2011. Spouses Manalese and Aries filed an injunction action (SCA Case No. 11-368) in the RTC, Branch 58 seeking to enjoin execution; RTC denied TRO/preliminary injunction by order dated January 24, 2012. The estate filed Civil Case No. 14778 (annulment of titles and declaration of nullity of sale) on November 3, 2011. RTC, Branch 57 rendered judgment on September 13, 2017 declaring Pinpin's and petitioners' titles null and void and ordering reinstatement of the Ferreras TCTs and awarding moral, exemplary damages and attorney's fees. Petitioners appealed; on February 18, 2020 the Court of Appeals affirmed the bad faith finding but deleted awards of moral and exemplary damages and attorney's fees; its October 15, 2020 Resolution denied petitioners' motion for reconsideration. Petitioners filed a Rule 45 petition for review on certiorari to the Supreme Court. The Petition: Petitioners (Spouses Orencio and Eloisa Manalese and Aries Manalese) invoked Rule 45 and argued they are buyers in good faith and for value, relying on the face of the TCTs issued in Pinpin's name and subsequently in their names; they asserted they purchased the properties, were in possession, paid consideration (allegedly PHP 750,000 in cash), and had no notice of any defect. They challenged the factual findings that they failed to exercise due diligence and contended that jurisprudence permits reliance upon the certificate of title without going behind it. The Court was asked to reverse the CA decision insofar as it affirmed their bad faith and to reinstate their titles and awards, where applicable.
Issue(s)
Issue 1: Whether petitioners are buyers in good faith and for value entitled to protection under the Torrens system despite the alleged fraudulent procurement and subsequent registrations of titles. Issue 2: Whether the deletion by the Court of Appeals of the RTC awards of moral damages, exemplary damages and attorney's fees should be disturbed.
Ruling
The Petition is DENIED. The Supreme Court affirmed the Court of Appeals' finding that petitioners are not innocent purchasers for value and are buyers in bad faith. The Supreme Court also affirmed the CA's modification deleting awards of moral damages, exemplary damages and attorney's fees for lack of factual basis. The Integrated Bar of the Philippines was directed to investigate any possible violation of the Code of Professional Responsibility and Accountability by Atty. Bayani A. Maniquis.
Ratio Decidendi
On Issue 1: The Court held that petitioners are not buyers in good faith because the totality of intrinsic and extrinsic circumstances put them on inquiry and they failed to exercise the diligence of a reasonably prudent person. The Court emphasized that reconstituted or replacement owner's duplicate titles are "subsequent" copies and, under Garcia and related jurisprudence, anyone dealing with such subsequent copies is put on notice to be extra-careful. Here the Ferreras TCTs bore annotations (affidavits of loss, an RTC decision) which, if examined in the Registry of Deeds primary entry/registration books, would have revealed suspicious, almost-simultaneous transactions and the apparent "laundering" of annotations that were not carried over to the Pinpin TCTs. The Court applied the constructive notice rule (PD 1529, sec. 52) and reiterated that a person dealing with registered land is charged with notice of all registrations in the register and primary entry book; petitioners' alleged limited inquiry at the RD was insufficient where the records showed indicia of fraud. The undervaluation in the deed (gross disparity of considerations) and the peculiar chronology of transactions further negated any claim of good faith. The Court therefore concluded that petitioners failed to prove by clear and convincing evidence that they paid full and fair value or that they lacked knowledge of facts that should have put a reasonably prudent person on inquiry. On Issue 2: The Court agreed with the Court of Appeals that the award of moral and exemplary damages and attorney's fees lacked factual and legal foundation. The SC noted that while the RTC awarded such damages, the CA properly deleted them because the record did not sustain the elements for exemplary or moral damages nor a basis for attorney's fees. The SC declined to disturb the CA's factual assessments (as a Rule 45 petition is limited to questions of law) and endorsed the narrower remedy that the estate's recourse is to proceed against the fraudulent party (Pinpin) and, as applicable, to the Assurance Fund remedies prescribed in PD 1529; it also observed that a reconstituted or replacement title obtained by fraud is void ab initio (RA 6732, sec. 11) and that registrars or public officers who assist in such fraud may be criminally liable (RA 6732, sec. 12).
Main Doctrine
Where a certificate of title (including reconstituted or replacement owner's duplicate titles) bears intrinsic annotations or where almost-simultaneous transactions and other circumstances arouse suspicion, a purchaser dealing with registered land must exercise the diligence of a reasonably prudent person by examining the register and related records; mere reliance on the face of a "clean" subsequent title is insufficient and a transferee who ignores such indicia of fraud is not an innocent purchaser for value. A reconstituted or replacement title obtained by fraud is void ab initio and subsequent registrations procured by forged duplicates or instruments are null and void.