In good faith

Favoritism sometimes cannot be avoided in a family. And because of it, the other family members may be prejudiced, like what happened in this case of Pacing’s family.

Pacing is a widow with one son and five daughters who owns a land with an area of 1.8 hectares located in her hometown and registered in her name under TCT No T-14585. Erected on the land is a flea market (talipapa) with 50 or so vendors who pay daily stall rentals to Pacing.

Realizing that she may not be able to properly administer the property due to advancing age, Pacing chose his only son Paco to take over and manage the property. For this purpose, she executed a Deed of Sale whereby for and in consideration of P21,000, she conveyed said parcel of land in favor of Paco.  Thereafter, the Register of Deeds issued a new TCT No. T-34723 in Paco’s name.. Paco also declared the said land in his name for taxation purposes and paid the realty taxes due thereon although it was Pacing who continued collecting the rentals.

Unfortunately Paco later on used the land to his advantage by mortgaging it to secure a total loan of P125,000. He also took over collection of the rentals when Pacing fell ill and had to be hospitalized. After Pacing recovered and wanted to resume collecting the rentals, Paco requested her that he continues collecting the rentals as he had no means of income at that time.

However since Paco could not also pay the loan, he offered to sell the land to the spouses, Pablo and Linda Gonzales. Pacing was shocked when she learned of Paco’s move and sent one of her daughters, Mila, to warn the spouses that she (Pacing) was the real owner of the property.

But the Gonzales couple did not heed the warning considering that the title of the land was in the name of Paco. They still proceeded to buy the land but placed it in the name of their two children David and Clara. So, by means of a duly notarized Kasulatan ng Bilihang Patuluyuan, Paco sold the land to David and Clara for the price of P58,000 although the actual amount paid by their father Pablo was P600,000. On the same day, the sale was registered with the Register of Deeds, leading to the cancellation of Paco’s TCT (No T-34723), and the issuance of a new TCT (No. T-10112), in the names of David and Clara.

Immediately thereafter, Pacing instituted an action in the Regional Trial Court (RTC) against Paco and the Gonzales couple for re-conveyance of the property. Subsequently their children David and Clara were also included in the suit. She alleged among others that David and Clara are not buyers in good faith because they are aware of the defect in the title. She claimed that their parents, particularly their father, Pablo was the actual buyer of the property and was aware of the defect in the title of Paco. So she argued that neither of his children-David and Clara — qualify and be deemed as buyers in good faith, since Pablo only caused the registration of the property in their names.

After trial however, the RTC rendered judgment dismissing the case and declaring David and Clara as the lawful owners of the property. This ruling was affirmed by the Court of Appeals (CA). Were the RTC and the CA correct?

Yes. When Paco executed the Kasulatan in favor of David and Clara, his name appears in the title as the registered owner of the land. This document was duly executed and acknowledged before a notary public. At the time of the execution, there was no annotation on Paco’s certificate of title to indicate any adverse claim of any third person. Only two cautionary entries regarding the liability of said property to creditors, heirs or other persons for a full period of two years under Section 4, Rule 74 of the Rules of Court appear thereon. Nothing more substantial appears in the Certificate of Title to indicate a scintilla of flaw or defect in Paco’s ownership. Hence in relying on said Certificate of Title, the Gonzaleses cannot be fairly considered as in bad faith.

A person dealing with registered land may safely rely upon the correctness of the certificate of title issued for said land and the law will not obliged him to go behind the certificate to determine the condition of the property. The law considers said person as an innocent purchaser for value. An innocent purchaser for value is one who buys the property of another, without notice that some other person has a right or interest in such property and pays its full price at the time of such purchase or before he has notice of the claims or interest of some other persons in the property.

Hence there is no doubt that the Gonzaleses were purchasers in good faith and for value. (Dela Cruz vs. Dela Cruz, G.R. 146222, January 15, 2004, 419 SCRA 648).