Better rights

This is the case of conflicting claims over two parcels of land in a subdivision more particularly designated as Lots 20 and 21.

The first claimant here is Mariel who bought said lots under contracts to sell with the subdivision developer (SLR) sometime in July, 1979. She first took possession and occupied Lot 20 after making an advance payment thereon. Later on in 1981 she also took possession of lot 21 and obtained tax declarations thereon in her name and paid its realty taxes. Subsequently, she mortgaged Lot 21 to a bank and used the proceeds of the loan to pay in full the purchase price of Lot 20.

Upon full payment of the purchase price for Lot 20, SLR executed a duly notarized “Deed of Absolute Sale” in favor of Mariel and delivered to her the owner’s duplicate copy of the TCT (No. S-39849). However, she was not able to register and transfer the title in her name because the developer allegedly failed to have the lot formally subdivided. But eventually she was able to obtain title (TCT No. 36777) although she only presented the contract to sell. 

But it turned out that said lots were among those levied upon by Arthur, the former Board Chairman and CEO of SLR by virtue of a Court judgment he obtained for recovery of benefits, privileges and various allowances that SLR failed to pay him as Chairman. These lots were sold at public auction with Arthur emerging as highest bidder for which TCT Nos. 44797 (Lot 20) and 44796 (Lot 21) were issued in his name. Subsequently, Arthur mortgaged said lots to Dona, and when Arthur defaulted in paying her the obligation secured by said mortgage, the lots were awarded to her at an Extra-Judicial Foreclosure Sale.

When Mariel learned about Dona’s titles, she filed a complaint in the Regional Trial Court against Dona claiming she is a buyer in bad faith because Arthur’s titles from which she derived her titles were acquired in bad faith. She pointed out that as an officer of SLR, Arthur should have known that Lots 20 and 21 were already sold to her. To prove her claim, she presented (1) the copies of the contracts to sell on the two lots; (2) the Deed of Absolute Sale over Lot 20; (3) the Real Estate Mortgage Agreement with the bank over Lot 21; (4) original Official Receipts issued by SLR for installment payments of the purchase price of the lots; (5) owner’s duplicate copy of TCT No. 36777 in her name; and, (6) tax declarations and receipts.

In answer, Dona alleged that she is a buyer in good faith because before entering into the mortgage agreement with Arthur, she verified with the Registry of Deeds that there were no annotations or encumbrances registered in the titles of Lots 20 and 21. Further, she was assured by Arthur that Mariel was merely a tenant of the lots and not the owner.

After trial, the RTC declared that Dona has better right over Lots 20 and 21. It ruled that the “Deed of Absolute Sale” over Lot 20 was never annotated in TCT No. S-39849.  It is clear that the TCTs in the hands of Dona were the ones which cancelled the titles of SLR over the lots and not the TCT presented by Mariel. It also found that the issuance of TCT No. 36777 was questionable because there was no proof that the purchase price was already paid since only the “Contract to Sell” was available. In fact the Registry of Deeds itself certified that TCT No. 36777 is presumed not to be validly issued.  So, Mariel only had an inchoate right over the property, said the RTC. This decision was affirmed by the Court of Appeals (CA). Were the RTC and CA correct?

Yes. The evidence proves that Dona lawfully acquired her title over the lots. Arthur cannot be considered to be in bad faith because he was not the one who executed and signed the Deed of Absolute Sale in favor of Mariel. Bad faith cannot be presumed and there was no clear and convincing proof that Arthur had knowledge of such transaction. Besides, the “Deed of Absolute Sale” for Lot 20 was never annotated and registered in the original title. Under the Land Registration Law, without the registration and the annotation of the deed, the title is considered clean and third parties can rely on the face of the duly issued titles.

As to the tax declarations and real property tax payments made by Mariel for Lot 21 the same are of no moment. It has been held that tax declarations are not conclusive proofs of ownership. At best, they are merely ‘indicia of a claim of ownership.’ However, with Dona presenting convincing evidence of the basis and validity of her acquisition of Lots 20 and 21, such “indicia” in favor of Mariel had been effectively impugned or refuted. (Sps. Bernadette and Rodulfo Vilbar vs. Angelito L. Opinion, G.R. No. 176043, January 15, 2014).

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