.

EMILIO CALMA,  vs. ATTY. JOSE M. LACHICA, JR. that Ceferino had already passed away, while ricardo could not be found. He
also found Pablo to have been placed in possession of the 5,000-square meter
G.R. No. 222031 portion of the subject property by the Tolentinos sometime in 1986.

Upon checking with the Office of the Register of Deeds, he discovered that the
Facts:Respondent Atty. Jose M. Lachica, Jr. filed a complaint for Annulment of same was transferred under the name of Ricardo, which had been later on
Void Deeds of Sale, Annulment of Titles, Reconveyance, and Damages originally transferred to the petitioner Calma upon Ricardo's sale thereof to the latter.
against Ricardo Tolentino (Ricardo) and petitioner Emilio Calma, and Pablo
Tumale (Pablo). Subject of the said complaint was a 20,000-square meter parcel
of land situated in Sumacabeste, Cabanatuan City. Respondent argued that the sale between Ceferino and Ricardo was null and
void for being executed with fraud, deceit, breach of trust, and also for lack of
Lachica alleged that he was the absolute owner and actual physical possessor lawful consideration. Respondent emphasized that not only was Ricardo in full
of the subject property, having acquired the same sometime in 1974 for knowledge of the sale of the subject property to him by Ceferino, but also his
PhP15,000 through sale from Ricardo's parents , Ceferino Tolentino (Ceferino) adverse claim was evidently annotated in the latter's title and carried over to
and Victoria Calderon. The subject property's title was delivered to respondent Ricardo's title. Respondent also alleged that petitioner is an alien, a full-
also in 1974. Allegedly, he and his tenant/helper Oscar Justo (Oscar) has been blooded Chinese citizen, hence, not qualified to own lands in the Philippines,
in actual physical possession and cultivation of the said land continuously since and is likewise a buyer in bad faith.
its acquisition up to present.
Respondent, thus, prayed for the annulment of the Deed of Sale between
The 1974 Deed of Sale was allegedly lost. Hence, sometime in 1979, respondent Ceferino and Ricardo, as well as the Deed of Sale between Ricardo and
and Ceferino agreed to execute another deed of sale. Spouses Tolentino petitioner. Respondent further prayed for the ejectment of Pablo from the
allegedly took advantage of the situation and added PhP15,000 to the purchase 5,000-square meter portion of the subject property and the reconveyance of
price. Thus, in the new Deed of Sale executed on April 29, 1979, the the entire property to him.
consideration for the sale of the subject property was increased to PhP30,000.
To prove his case, respondent presented his testimony, the testimonies of
After the notarization of the 1979 Deed of Sale on April 29, 1986, respondent Oscar Justo and HerminianoTinio, Sr., and documentary evidence comprising of
requested Spouses Tolentino to execute an Affidavit of Non-Tenancy and other the title with the annotation of his Notice of Adverse Claim dated May 25,
documents. Again, taking advantage of the situation, Ceferino and his son 1981, the April 29, 1979 Deed of Sale, with the annotation of the same Notice
Ricardo allegedly requested respondent to allow them to cultivate the 5,000- of Adverse Claim and an entry regarding the cancellation thereof.
square meter portion of the subject land. The father and son allegedly offered
to process the transfer of the title to respondent's name to persuade the latter For their part, defendants averred that petitioner Calma is a buyer in good faith
to grant their request. Lachica agreed and entrusted the notarized Deed of Sale and for value, having acquired the subject property on July 10, 1998 through
and the other documents on hand for the transfer of the title to his name and sale from Ricardo. They argued that petitioner, despite merely relying on the
waited for the Tolentinos to make good on their promise. All while he was in correctness of Ricardo's TCT, is duly protected by the law. It was stated in
the actual possession of the subject lot. Ricardo's title that respondent's adverse claim had already been cancelled
more than four years before the sale or on April 26, 1994. Thus, defendants
Respondent lachica had the tittle annotated to protect his rights. Due to argued that petitioner had no notice of any defect in Ricardo's title before
respondent's employment that required him to constantly travel and also purchase of the subject property.
because of an illness, he lost contact with the Tolentinos.
Petitioner presented the July 10, 1998 Deed of Absolute Sale, TCT No. T-68769
Sometime in March 2001, respondent returned to Cabanatuan City and learned with the annotation of the cancellation of respondent's adverse claim, TCT No.
T-96168, to prove good faith in the acquisition of the subject property, and a The CA explained that petitioner should not have just relied on the face of the
copy of his passport, Marriage Certificate, and Certificate of Live Birth to prove title as the notice of adverse claim annotated on Ceferino's title carried over to
his Filipino citizenship, contrary to respondent's allegation. Ricardo's title for a total of 13 years before its cancellation should have alerted
him to conduct an actual inspection of the title. If only petitioner had
conducted an actual inspection of the property, the CA opined, petitioner
The RTC: Ruled that petitioner is an innocent purchaser for value and that he would have readily found that Oscar, respondent's alleged tenant, had been
had already acquired his indefeasible rights over the title. According to the trial occupying and tilling the land. Thus, despite the fact that petitioner registered
court, while it may be true that respondent's adverse claim was annotated in his acquisition of the subject property, since he was considered to be in bad
Ricardo's title, the same title also shows that such adverse claim had already faith, such registration did not confer any right upon him. Applying the rule on
been cancelled more than four years before he bought the property. Moreover, double sale under Article 1544of the Civil Code, as his registration is deemed to
the RTC ruled that respondent's cause of action had already prescribed. The be no registration at all because of his bad faith, the buyer who took prior
trial court also noted that respondent failed to present any evidence on the possession of the property in good faith shall be preferred.
alleged fraud in the transfer of the title of subject property to petitioner.
Issue: Who between the petitioner and the respondent has better right over
Ricardo was, however, held liable for the value of the property, damages, and the subject property.
attorney's fees in favor of respondent as, according to the RTC, Ricardo cannot
claim good faith because of the existence of the adverse claim. Ruling: THe S.C. rules for the petitioner Calma.

Lastly, the RTC ruled that respondent has no recourse against Pablo, who is Both the petitioner and the respondent claim ownership over the subject
liable to petitioner as the lawful owner. property by virtue of acquisition through sale. To resolve the present
controversy, thus, it is necessary to look into the basis of each party's claimed
rights.

The CA: The CA reversed the RTC's ruling, finding that both Ricardo and Sale from Ricardo to petitioner
petitioner were in bad faith in their respective acquisitions of the subject
property. Hence, both their titles should be annulled. While upholding the Petitioner's claimed right over the subject property, on the other hand, is
RTC's finding that the registration of title in Ricardo's name was null and void as grounded upon his acquisition of the same from Ricardo by sale. Unlike the sale
he had prior knowledge of the sale between his father and respondent, the CA from Ceferino to respondent, the Deed of Sale in petitioner's favor was
added that because of such bad faith, Ricardo's title must be annulled. registered with the Registry of Deeds, giving rise to the issuance of a new
Consequently, as Ricardo had no valid title to the subject property, he had certificate of title in the name of the petitioner.
nothing to convey to petitioner.
However, in ruling that respondent is the rightful owner of the subject
The CA then proceeded to discuss its finding of bad faith against petitioner. The property, the CA ruled that no right was conferred upon the petitioner by such
appellate court concluded that the investigation conducted by petitioner on the sale primarily due to his predecessor's bad faith in the acquisition of the subject
title of the subject property before purchase was not sufficient to consider him property. The CA also found that petitioner, like his predecessor, cannot be
to be a buyer in good faith. The CA noted petitioner's knowledge of the considered as a buyer in good faith. These findings are grounded on the fact
annotation of an adverse claim on Ricardo's title and that his act of asking that respondent's Notice of Adverse Claim appears in Ceferino's title and
assurance from Ricardo, the Register of Deeds, and the bank where the subject carried over to Ricardo's title, which according to the CA is sufficient notice to
property was mortgaged prior to the sale to petitioner cannot be considered as both Ricardo and the petitioner of respondent's interests over the subject
diligent efforts to protect his rights as a buyer. property. The CA opined that such adverse claim should have alerted petitioner
to conduct an actual inspection of the property, otherwise, he cannot be
considered to be a buyer in good faith. the Registry of Deeds, Cabanatuan City on December 22, 1998 as evidenced by
TCT No. T-96168; (3) petitioner made inquiries with the Register of Deeds and
We do not agree. the bank where the subject property was mortgaged by Ricardo as regards the
authenticity and the status of Ricardo's title before proceeding with the
The Torrens system was adopted to “obviate possible conflicts of title by giving purchase thereof; and (4) petitioner was able to ascertain that Ricardo's title
the public the right to rely upon the face of the Torrens certificate and to was clean and free from any lien and encumbrance as the said title, together
dispense, as a rule, with the necessity of inquiring further.” From this sprung with his inquiries, showed that the only annotations in the said title were
the doctrinal rule that every person dealing with registered land may safely rely respondent's 1981 adverse claim and its cancellation in 1994.
on the correctness of the certificate of title issued therefor and is in no way
obliged to go beyond the certificate to determine the condition of the From the foregoing factual backdrop, there was no indicia that could have
property. To be sure, this Court is not unaware of the recognized exceptions to aroused questions in the petitioner's mind regarding the title of the subject
this rule, to wit: (1.) when the party has actual knowledge of facts and property. Hence, We apply the general rule allowing the petitioner to rely on
circumstances that would impel a reasonably cautious man to make further the face of the title.
inquiry; (2.) when the buyer has knowledge of a defect or the lack of title in his
vendor; or (3.) when the buyer/mortgagee is a bank or an institution of similar Petitioner was never remiss in his duty of ensuring that the property that he
nature as they are enjoined to exert a. higher degree of diligence, care, and was going to purchase had a clean title. Despite Ricardo's title being clean on its
prudence than individuals in handling real estate transactions.[39] face, petitioner still conducted an investigation of his own by proceeding to the
Register of Deeds, as well as to the bank where said title was mortgaged, to
Complementing this doctrinal rule is the concept of an innocent purchaser for check on the authenticity and the status of the title. Thus, petitioner was
value, which refers to someone who buys the property of another without proven to be in good faith when he dealt with Ricardo and relied on the title
notice that some other person has a right to or interest in it, and who pays in presented and authenticated to him by the Register of Deeds and confirmed by
full and fair the price at the time of the purchase or without receiving any the mortgagee-bank. Respondent, on the other hand, failed to proffer evidence
notice of another person's claim. to prove otherwise.

Section 44 of Presidential Decree No. 1529 or the Property Registration Notably, the CA's conclusions to the contrary are merely based on assumptions
Decree[41] recognizes innocent purchasers for value and their right to rely on a and conjectures, such as that the bank's advice for petitioner to buy the subject
clean title: property was meant only for the protection of the bank's interest; and that the
annotation of the adverse claim on Ceferino's title and carried over to Ricardo's
Section 44. Statutory liens affecting title. - Every registered owner receiving title for a total of 13 years before it was cancelled should have aroused
certificate of title in pursuance of a decree of registration, and every suspicion. These conclusions have no factual or legal basis. What is essential on
subsequent purchaser of registered land taking a certificate of title for value the matter of petitioner's good faith in the acquisition of the subject property is
and good faith, shall hold the same free from all encumbrances except those the cancellation of such adverse claim, which clearly appears on the face of
noted in said certificate and any of the following encumbrances which may be Ricardo's title.
subsisting, namely:
What matters is that the petitioner had no knowledge of any defect in the
-xxx- title of the property that he was going to purchase and that the same was
clean and free of any lien and encumbrance on its face by virtue of the entry
on the cancellation of adverse claim therein. Thus, petitioner may safely rely
The following facts are clear and undisputed: (1) petitioner acquired the subject on the correctness of the entries in the title.
property through sale from Ricardo as evidenced by a Deed of Absolute Sale
dated July 10, 1998, duly notarized on even date; (2) said sale was registered in Even the defect in Ricardo's title due to his bad faith in the acquisition of the
subject property, as found by both the RTC and the CA, should not affect
petitioner's rights as an innocent purchaser for value. The CA patently erred in
ruling that since Ricardo had no valid title on the subject property due to his
bad faith, he had nothing to convey to the petitioner. It is settled that a
defective title may still be the source of a completely legal and valid title in the
hands of an innocent purchaser for value.

Petitioner has a better right of ownership over the subject property

Applying now the rule on double sale under Article 1544 of the Civil Code,
petitioner's right as an innocent purchaser for value who was able to register
his acquisition of the subject property should prevail over the unregistered sale
of the same to the respondent. Article 1544 states:

If the same thing should have been sold to different vendees, the ownership
shall be transferred to the person who may have first taken possession thereof
in good faith, if it should be movable property.

Should it be immovable property, the ownership shall belong to the person

Should there be no inscription, the ownership shall pertain to the person who
in good faith was first in the possession; and, in the absence thereof, to the
person who presents the oldest title, provided there is good faith.