GR 156973; (June, 2004) (Digest)
G.R. No. 156973 ; June 4, 2004
SPOUSES TOMAS OCCEÑA and SILVINA OCCEÑA, petitioners, vs. LYDIA MORALES OBSIANA ESPONILLA, ELSA MORALES OBSIANA SALAZAR and DARFROSA OBSIANA SALAZAR ESPONILLA, respondents.
FACTS
The property in dispute is a 748-square meter portion of Lot No. 265, originally owned by the Tordesillas spouses. In 1954, heirs Arnold and Lilia de la Flor sold their shares in this portion to Alberta Morales by a Deed of Definite Sale. Alberta took possession, built a house, and appointed a caretaker. In 1956, Arnold borrowed the owner’s duplicate certificate of title from Alberta under a trust agreement to return it. Instead, in 1966, Arnold and another heir executed a Deed of Extrajudicial Settlement, fraudulently excluding Alberta’s interest, and later consolidated title in his name alone. After Alberta’s death, her heirs (respondents) succeeded her. In 1990, Arnold sold the land, including the portion sold to Alberta, to petitioners Spouses Occeña, who obtained new transfer certificates of title.
ISSUE
Whether the petitioners are buyers in good faith and for value, and whether the respondents’ action to annul the sale and titles is barred by laches or prescription.
RULING
The Supreme Court ruled in favor of the respondents, declaring the petitioners as buyers in bad faith. The legal logic centers on the principle that registration of property under the Torrens system does not vest title if the buyer acts in bad faith. Petitioners failed to exercise the diligence required of a prudent buyer. Before the sale, the caretaker expressly warned Tomas Occeña that the land had already been sold to Alberta Morales and that her house stood on it. Despite this actual notice and the visible, notorious possession by the respondents’ predecessor-in-interest, petitioners chose to rely solely on the clean title presented by Arnold and his self-serving claim that the occupants were mere squatters. A purchaser cannot close his eyes to facts that should put a reasonable man on guard.
Furthermore, the action is not barred by laches or prescription. The respondents’ predecessor was in open and continuous possession, and the respondents themselves only discovered Arnold’s fraudulent registration and subsequent sale after his death in 1993 when they faced ejectment. They filed the annulment case in 1994 without delay. Moreover, Arnold’s act of reacquiring title through fraud created a constructive trust in favor of Morales and her heirs. An action to enforce such a trust and recover property held by the trustee, especially when the beneficiaries are in possession, is imprescriptible. Therefore, the defense of a registered title cannot prevail against the respondents’ superior right founded on prior possession and a valid sale, which petitioners had actual knowledge of at the time of their purchase.