AC 213; (May, 1949) (Digest)
G.R. No. L-213 May 24, 1949
GENEROSA A. DIA, petitioner-appellant, vs. FINANCE & MINING INVESTMENT CORPORATION, ET AL., oppositors-appellees; NAZARIO G. CRUZ, receiver-appellee.
FACTS
In the voluntary insolvency proceedings of Monico A. Dia, the court-authorized assignee sold several lots to Generosa A. Dia, the insolvent’s sister. The sale was later disapproved after a creditor, Finance and Mining Investment Corporation, offered a higher price. The court then authorized the assignee to sell the lots to the Corporation. The Corporation, however, did not pay cash, claiming it would deduct the price from its credit against the insolvent. The assignee also failed to return Generosa’s initial payment as ordered by the court. The Corporation obtained titles to the lots and later sold them to Dr. Vicente Valencia, who in turn sold them to Valentin Manguerra, Ramon Bartolazo, and Constancia Coronel. When these subsequent purchasers sought possession, Generosa refused, invoking Article 1308 of the Civil Code and claiming a right to retain possession until her payment was refunded.
ISSUE
Whether Generosa A. Dia can retain possession of the lots sold to innocent third parties under the Torrens system based on her unpaid claim against the assignee.
RULING
No. The Supreme Court affirmed the lower court’s orders granting possession to the registered owners. While Generosa’s claim against the Finance and Mining Investment Corporation might have been valid, as the Corporation purchased with knowledge and without actual cash payment, the rights of innocent purchasers for value (Dr. Valencia, Manguerra, Bartolazo, and Coronel) who subsequently acquired the lots and obtained Torrens titles are protected under the Torrens system. Article 1308 of the Civil Code, which provides for mutual restitution between contracting parties, does not apply to prejudice such innocent third parties. Generosa’s remedy lies against the assignee for the unreturned payment, not against the innocent purchasers. The Court also noted an indication that Generosa’s possession predated the sale and was merely in a managerial capacity for her brother.
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