G.R. No. 195825 & 195871; February 27, 2013
SPOUSES ALFONSO AND MARIA ANGELES CUSI and RAMONA LIZA L. DE VERA, Petitioners, vs. LILIA V. DOMINGO, Respondent.

FACTS

Respondent Lilia V. Domingo was the registered owner of a vacant lot in Quezon City under TCT No. N-165606. In 1999, she discovered unauthorized construction on her property. An investigation revealed a series of fraudulent transactions. In 1997, Radelia Sy petitioned the RTC for a new owner’s duplicate copy of Domingo’s title, attaching a forged deed of absolute sale and a false affidavit of loss. The court granted the petition. Using the fraudulently reissued title, Sy obtained TCT No. 186142 in her name. She then subdivided and sold the lot via contracts to sell to petitioners Spouses Cusi and Ramona Liza De Vera for a total of ₱2,000,000, a fraction of its ₱14,000,000 market value. These contracts were annotated, and later, deeds of sale led to the issuance of separate titles to the petitioners. Domingo, who retained her original title, filed an action for annulment of titles and damages.

ISSUE

Whether petitioners Spouses Cusi and De Vera are innocent purchasers for value, whose titles would prevail over that of the original registered owner, Domingo.

RULING

No, the petitioners are not innocent purchasers for value. The Supreme Court affirmed the rulings of the CA and the RTC, which cancelled the petitioners’ titles and reinstated Domingo’s. The legal logic rests on the principles of the Torrens system and the requisites for being an innocent purchaser for value. While the system aims to protect titleholders, this protection extends to a transferee only if they purchase the property in good faith and for valuable consideration, after exercising the diligence of a prudent person. The Court found petitioners lacking on both counts. First, they failed to exercise due diligence. They bought the property covered by a recently reissued title without verifying the circumstances of its reissuance or the seller’s capacity with the Registry of Deeds. Their reliance on the clean title alone was insufficient. Second, the gross inadequacy of the purchase price—₱2,000,000 for a property worth at least ₱14,000,000—was a clear badge of bad faith. It was so disproportionate as to shock the conscience and put a reasonable buyer on inquiry. Consequently, they cannot claim the status of innocent purchasers for value. The fraudulent transactions emanating from Sy’s forged documents were void and produced no legal effect. Domingo, as the innocent registered owner who never parted with her title, rightfully retained ownership. The Court upheld the award of damages against Sy.