GR 160898; (June, 2008) (Digest)
G.R. No. 160898 ; June 27, 2008
DAVID SIA TIO and ROBERT SIA TIO, petitioners, vs. LORENZO ABAYATA, et al., respondents.
FACTS
The respondents, heirs of Celedonio Abayata, filed an action for annulment of mortgage, foreclosure sale, and subsequent titles over a parcel of land in Lapu-Lapu City. They claimed absolute ownership by virtue of a final 1986 RTC decision in their favor (Civil Case No. 620-L). They alleged that Benjamin Lasola, through machinations, registered the land in his name, mortgaged it to the Community Rural Bank of Tabogon, which later foreclosed and sold it at auction to petitioners David and Robert Sia Tio. The petitioners and the bank asserted they were innocent purchasers for value.
The Regional Trial Court ruled for the respondents, declaring all transactions and titles from Lasola onward null and void, and reinstating the respondents as absolute owners. The Court of Appeals affirmed this decision. Petitioners elevated the case to the Supreme Court, raising issues of good faith, prescription, laches, and equal protection.
ISSUE
The core issue is whether the petitioners were innocent purchasers for value, which would protect their title despite the prior final judgment declaring the respondents as the true owners.
RULING
The Supreme Court denied the petition and affirmed the lower courts’ decisions. The legal logic rests on the principle that a forged or fraudulent title voids all subsequent transfers, and the defense of being an innocent purchaser for value cannot prevail against the true owner established by a final judgment. The Court found that the petitioners failed to exercise the requisite diligence of a prudent buyer. The property was sold to them for only P100,000 despite being appraised at P800,000, a gross undervaluation that excites suspicion and negates good faith. Furthermore, the prior final judgment in Civil Case No. 620-L, which was a claim adverse to Lasola’s title, had already attained finality and constituted res judicata, making Lasola’s title void from the start. Since Lasola had no valid title to mortgage or sell, the bank acquired nothing, and the petitioners, as successors, acquired no better right. The Court also held that the action, being one for annulment of void contracts, does not prescribe. The failure to implicate other defendants was deemed a formal flaw that did not prejudice the resolution of the substantive rights between the immediate parties.