G.R. No. 183448 & 183464; June 30, 2014
SPOUSES DOMINADOR PERALTA AND OFELIA PERALTA, Petitioners, vs. HEIRS OF BERNARDINA ABALON, represented by MANSUETO ABALON, Respondents. ( G.R. No. 183448 )

HEIRS OF BERNARDINA ABALON, represented by MANSUETO ABALON, Petitioners, vs. MARISSA ANDAL, LEONIL ANDAL, ARNEL ANDAL, SPOUSES DOMINADOR PERALTA AND OFELIA PERALTA, and HEIRS of RESTITUTO RELLAMA, represented by his children ALEX, IMMANUEL, JULIUS and SYLVIA, all surnamed RELLAMA. (G.R. No. 183464)

FACTS

The subject property is Lot 1679, Cadastral Survey of Legaspi, originally covered by OCT No. (O) 16 in the name of Bernardina Abalon. A Deed of Absolute Sale dated June 10, 1975, purportedly executed by Abalon in favor of Restituto Rellama, led to the cancellation of OCT No. (O) 16 and the issuance of TCT No. 42108 in Rellama’s name. Rellama subdivided the lot into three portions. Lot 1679-A was sold to Spouses Dominador and Ofelia Peralta (TCT No. 42254). Lot 1679-B was first sold to Eduardo Lotivio, who then sold it to Marissa, Leonil, and Arnel Andal (TCT No. 42482). The Andals also acquired Lot 1679-C (TCT No. 42821).
The heirs of Bernardina Abalon (Mansueto and Amelia Abalon, her nephew and niece) filed a complaint against Rellama, the Spouses Peralta, and the Andals. They alleged that the Deed of Absolute Sale in favor of Rellama was a forgery, that the owner’s duplicate of OCT No. (O) 16 was never lost and remained in their possession, and that Abalon and, after her death, they themselves had always been in possession of the land through tenants. They claimed Rellama fraudulently procured a second owner’s duplicate copy via Miscellaneous Cadastral Case No. 10648. They sought to nullify the subsequent titles and recover the property.
Rellama claimed the deed was genuine. The Spouses Peralta and the Andals claimed they were buyers in good faith and for value. The RTC ruled in favor of the Abalon heirs, declaring the deed a forgery, ordering the restoration of OCT No. (O) 16, the cancellation of all subsequent titles, and the surrender of the property. The Court of Appeals reversed the RTC. The CA found badges of fraud in Rellama’s acquisition, noting Abalon executed a leasehold agreement over the property in 1976, Rellama never exercised dominion, and he took nearly 20 years to seek reconstitution of the allegedly lost title. The CA declared the Spouses Peralta buyers in bad faith for relying on a mere photocopy of TCT No. 42108, but accorded the Andals the presumption of good faith. It upheld the titles of the Andals but ordered the Spouses Peralta and the Heirs of Rellama to reconvey the portions they held to the Abalon heirs.

ISSUE

The core issue is whether the Spouses Peralta and the Andals are protected as innocent purchasers for value, which hinges on the validity of the title (TCT No. 42108) from which their titles were derived.

RULING

The Supreme Court granted the petition of the Spouses Peralta and denied the petition of the Abalon heirs. The Court reversed the CA decision and reinstated the RTC decision with modification regarding damages.
1. The Spouses Peralta and the Andals are innocent purchasers for value. The Court held that both the Spouses Peralta and the Andals are entitled to the protection afforded to innocent purchasers for value under the Property Registration Decree. A purchaser in good faith and for value is one who buys the property without notice that some other person has a right to or interest in it, and pays a full and fair price. Both sets of buyers relied on the face of TCT No. 42108 in the name of Rellama, which was clean and free from any lien or encumbrance. There was no annotation of any adverse claim, notice of lis pendens, or any defect visible on the title. The fact that the Spouses Peralta saw only a photocopy of the title during the sale does not constitute bad faith, as the original was presented for annotation of the sale to the Register of Deeds. The buyers were not required to look beyond the certificate of title or investigate the history of the vendor’s title.
2. The principle of indefeasibility of a Torrens title protects the buyers. Once a certificate of title is registered, the owner may rest secure in the possession of the property. The title becomes indefeasible and imprescriptible. A person dealing with registered land is not required to go behind the register to determine the condition of the property. He is only charged with notice of the burdens on the property noted on the face of the title. Since TCT No. 42108 appeared valid, the subsequent titles derived from it (TCT Nos. 42254, 42482, 42821) are likewise valid.
3. The alleged fraud in Rellama’s acquisition does not affect the buyers’ titles. The Court emphasized that the defense of an innocent purchaser for value is effective against the original owner of a property that has been fraudulently registered in another’s name. Even assuming Rellama acquired the title through a forged deed, the titles of the Spouses Peralta and the Andals, who were innocent purchasers for value, remain valid. The remedy of the true owner (Abalon’s heirs) is to bring an action for damages against the person who caused the fraud (Rellama or his heirs).
4. The Abalon heirs failed to overcome the presumption of good faith. The burden of proving bad faith rests on the party alleging it. The Abalon heirs failed to present clear and convincing evidence that the buyers had knowledge of any flaw in Rellama’s title or of the heirs’ own claim at the time of purchase.
Dispositive Portion: The petition in G.R. No. 183448 is GRANTED. The petition in G.R. No. 183464 is DENIED. The CA Decision is REVERSED and SET ASIDE. The RTC Decision is REINSTATED with MODIFICATION deleting the award of litigation expenses. The Heirs of Bernardina Abalon may pursue their claim for damages against the Heirs of Restituto Rellama in a separate action.